Harmony Village Sheppard Site in Limbo As Fortress Appeals The Sale Of The Property

June 26th, 2017 · Tell Me What You Really Think Here · Property Management

A few people seem to think that Fortress has financial problems and can’t follow through and close deals and build buildings.

Show me the money for St Regis development.

Sky City Center Development Investors Not Getting Paid.

The following quotes are sourced from the bankruptcy filings of the Harmony Village Developments.

Stalking Horse Bid was predicated upon Fortress assuming the Debtor’s agreements of purchase and sale with the Purchasers. It was also,in part,a credit bid. Although DSFI was to have been paid in full on closing, the purchaser was to have assumed the existing debt secured under the second and third charges.

On the afternoon of April 6, 2017, the Receiver was advised that Fortress would not complete the purchase of the Property pursuant to the Stalking Horse Bid, as it no longer wished to assume the Purchasers’ agreements of purchase and sale.

    As such, the Receiver reported that as a next step it would contact those parties who had expressed an interest in the Property during the Stalking Horse Process to invite them to submit offers.

The deposit paid by Fortress thereunder of $350,000 forfeited to the Receiver.

Receiver Actually Refers to “Lift”

Fortress planned to assign its rights under the Stalking Horse Bid to a builder/developer with whom the Receiver had not had prior dealings. Upon learning of this, the Receiver obtained assurance from counsel to Fortress that the assignment would not result in Fortress receiving a financial “lift” that would otherwise flow into the Debtor’s estate if the Property were sold directly to the assignee.

It seems like the receiver is concerned that Fortress is trying to make money as the middleman in the transaction between the Receiver and the Buyer.

Put On Your Big Boy Pants

Given Fortress’s repudiation of the Stalking Horse Bid and its prior plan to assign its rights as purchaser (which suggested that Fortress’s control over completing a transaction may be limited), the Receiver, through its counsel, advised Fortress’s counsel that a substantially larger deposit, in the range of 10% of the purchase price for the Property, would be required and the Receiver would need to be satisfied of Fortress’s financial ability to close.

Boom

In the email, the Receiver’s request for an increased deposit was rejected.

Boom Boom

On April 20, 2017, the Receiver was notified that Fortress’s first mortgage financing commitment to purchase the Property had expired.

On April 24 and 25, 2017, counsel for Fortress and the Receiver exchanged emails in which it became apparent that Fortress did not have the requisite financing in place.

On April 27, 2017, the Receiver’s counsel again requested evidence of Fortress’s financial ability to complete the Fortress Offer. No such evidence was provided to the Receiver.

Another Offer Appears

Fortress wrote a letter to the Receiver accusing them of malfeasance because the buyer decided to cut them out of the deal. So this is the Receiver’s reply.

The Receiver vigorously denies your allegations that it has acted in a manner which is inappropriate. There is no existing contract between the Receiver and your client. Following your client’s termination of the Stalking Horse Bid, the Receiver informed the Court and all stakeholders at it would continue marketing the property for sale.

In re-marketing the property, the Receiver has not breached any of its duties. The Receiver has been taking reasonable steps to market the property to all potential purchasers. Your client’s second offer, which was submitted following its repudiation of the stalking horse bid, has not been accepted by the Receiver and the Receiver is at liberty to continue marketing the property for sale.

Len Gangbar counsel for (redacted) contacted David Preger on an unsolicited basis and advised that (redacted) was making an offer on its own. Mr. Preger suggested that (redacted) work with Fortress.

The Receiver, through its counsel, has repeatedly informed you that it requires your client to provide evidence of its ability to close a sale transaction. Notwithstanding those requests, the Receiver has not been provided with evidence of your client’s financial ability to close.

The Receiver has continued to market the property, as it disclosed it would and would have been breaching its duty if it had not. The Receiver was and is prepared to consider all offers submitted.

The Sale is Approved

No one knows what the final purchase price is, we only know that the sale amount from the Developer (Pinnacle) is less than the existing mortgages on the property. How much is not yet revealed. No one knows except the receiver and the courts what the losses are.

The Sale is Appealed

Then Fortress decided to appeal the sale. Ok then.

The learned motion’s judge made palpable and overriding errors of fact and law resulting in the occurrence of a substantial wrong or miscarriage of justice.

The learned motion’s judge erred in accepting that the Receiver’s recommendation that offer to purchase the Property from Pinnacle International Sheppard Lands Inc. (“Pinnacle Offer”) be approved as it was the best offer to purchase the Property from the point of view of the majority of stakeholders.

Sorrenti, as trustee for the investors in the syndicated third mortgagee, will incur a loss in excess of $10,000 should the Property be sold to Pinnacle pursuant to the Vesting Order. If the Sorrenti Motion had been granted and the Fortress Offer accepted, the investors in the syndicated third mortgagee would not incur a loss on the sale of the Property.

So there you have it, the appeal.

More to come…

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