Tel: Faxfaanmortgageadmin.com/wp-content/uploads/2018/11/Motion-Recor… · 19/11/2018 · court...

Court File No. CV-18-596204-00CL

OntarioSUPERIOR COURT OF JUSTICE

(COMMERCTAL LrST)

THE SUPERINTENDENT OF FINANCIAL SERVICES

Applicant

-and-

BUILDING & DEVELOPMENT MORTGAGES CANADA INC

Respondent

APPLICATION UNDER SECTION 37 OF'THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,

c.29 and SECTION 101 OF THE COURTS OX'JUSTICE ACT, R.S.O. 1990 c. C.43

MOTION RECORD OX'FAAI\ MORTGAGE ADMTNISTRATORS INC.,IN ITSCAPACITY AS COURT-APPOINTED TRUSTEE

November 19,2018 osLE& HOSKTN & HARCOURT LLPP.O. Box 50, I First Canadian PlaceToronto, ON M5X lB8

Michael De Lellis (LSUC# 48038U)Jeremy Dacks (LSUC# 41851R)Patrick Riesterer (LSUC# 60258G)

Tel: 416.362.2111Fax: 416.862.6666

Lawyers for FAAN Mortgage AdministratorsInc., in its capacity as Court-appointed Trustee ofBuilding & Development Mortgages Canada Inc.

a

TO: SERVICE LIST

Court File No. CV-18-596204-00CLOntario

SUPERIOR COURT OF JUSTICECOMMERCIAL LIST

THE SUPERINTENDENT OF FINANCIAL SERVICESApplicant

-and-

BUILDING & DEVELOPMENT MORTGAGES CANADA INC.Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT,2006, S.O. 2006, c. 29

and SECTION 101 OF THE COURTS OF JaSTICE ACT, R.S.O. 1990 c. C.43

SERVICE LIST

TO OSLERO IIOSKIN & HARCOURT LLP100 King Street West1 First Canadian PlaceSuite 6200, P.O.Box 50Toronto, ON M5X 188

Michael De LellisTel. +1.416.862.5997Jeremy DacksTel. +1.416.862.4923Patrick RiestererTel. +1.416.862.5947

[email protected][email protected]

.com

Counsel for the Trustee

F'AAN MORTGAGEADMINISTRATORS INC.20 Adelaide Street EastSuite 920Torontci, ON M5C 2T6

Naveed ManzoorTel. +1.416.258.6415Daniel SobelTel. +1.647.272.8383Lana BeznerTel. +1.416.966.7646

naveed@faanmortsa geadmin. comdaniel@faanmortga geadmin. comlana@faanmort gageadmin. com

Trustee

ANDTO:

ANDTO:

ANDTO:

ANDTO:

AIRD & BERLIS LLPBrookfield Place181 Bay Street, Suite 1800Toronto, ON M5J 2T9

Steven L. GraffTel. +1.416.865.7726Ian AversaTel. +1.416.865.3082Miranda SpenceTel. +416.865.6414

s grafl(@ airdberl is. comiaversa@airdberl is. [email protected]

Counsel for the Superintendent of FinancialServices

HER MAJESTY THE QUEEN INRIGHT OF THE PROVINCE OFONTARIO AS REPRESENTED BYTHE MINISTER OF' FINANCEP.O. Box 62033 King Street West, 6th FloorOshawa, ON LlH 8E9

Kevin O'HaraTel: +1.905.433.6934Fax: +1.905.436.4510

kevin. ohara@ontario. ca

F'INANCIAL SERVICESCOMMISSION OF'ONTARIO("FSCO")5160 Yonge Street, 16th FloorToronto, Ontario M2N 6L9

Mark BaileyTel: +1.416.250.7250Brendan ForbesTel: +1.416.250.7250Fax: +1.416.590 .7070

mark.bailey@f sco. gov. on.caBrendan. Forbes@fsco. gov.on. ca

CHAITONS LLP5000 Yonge Street, 10th FloorToronto, Ontario M2N 7E9

Harvey ChaitonTel. +t.416.218.1129George BenchetritTel. +1.4t6.218.1141

[email protected](@shaitons.com

Court-Appointed Representative Counsel forInvestors

NORTON ROSE FULBRIGHT CANADALLPRoyal Bank Plaza, South Tower200Bay Street, Suite 3800, P.O.Box 84Toronto, Ontario lll/.sJ 224

ANDTO:

ANDTO:

Jennifer TeskeyTel: +L416.216.2303Jeremy DevereuxTel: +1.416.216.4073

Fax: +1.416.216.3930

Jennifer.teskey@nortonro sefulbri sht. com

AND BRAUTI THORNING ZIBARRAS LLPTO: 161 Bay Street, Suite 2900,

Toronto, ON M5J 2S1

Jay NasterTel. +1.416.507.2442

[email protected]

Counsel to Building and DevelopmentMortgages Canada Inc., CanadianDevelopment Capital & Mortgage ServicesInc. and Ildina Galati

2

TO:AND BUILDING AND DEVELOPMENT

MORTGAGES CANADA INC.("BDMC")25 Brodie Drive, Unit 8Richmond Hill, ONL4B 3K7

Ildina Galati

[email protected]

AND ROBINS APPLEBY LLP120 Adelaide Street WestSuite 2600Toronto, ON M5H 1T1

David TaubTel. +1.416.360.3354John FoxTel. +1.416.360.3349

[email protected]@robaoo.com

Counsel to Fortress Real DevelopmentsInc.

AND BLANEY MCMURTRY LLP2 Queen Street East, Suite 1500Toronto, Ontario M5C 3G5

David UllmannTel. +1.416.596.4289

[email protected]

AND NOBLETON SOUTH HOLDINGS INC.TO: 56 The Esplanade, Suite 206

Toronto, Ontario M5E 1A7

Domenic Fazari

[email protected]

Borrower

CANADIAN DEVELOPMENT CAPITAL& MORTGAGE SERVICES INC.(,'cDcM")25 Brodie Drive, Unit 7Richmond Hill, ONL4B 3K7

Julie Galati

[email protected]

FORTRESS REAL DEVELOPMENTSINC.25 Brodie Drive, Unit IRichmond Hill, ON L4B 3K7

vince@ fortressrdi. com

i awad@fortressrdi. com

PAUL BATES BARRISTER100 Lombard St., Suite 302Toronto, ON M5C 1M3

ANDTO:

ANDTO:TO

TOANDTO:

Paul Bates

pbates@bates bamisters.com

AND NOBLETON NORTH HOLDING INCTO: 368 Four Valley Drive

Concord, Ontario L4K 5ZI

Giuseppe Valela

[email protected]

3

Borrower

TOAND

ANDTO:

AND

AND

AND

BROOKHILL HOLDINGS INC.56 The Esplanade, Suite 206Toronto, ON M5E 1A7

Giuseppe Valela

[email protected]

Borrower for Bowmanville

OWENS WRIGHT20 Holly Street, Suite 300Toronto, Ontario M4S 3Bl

David Forgione

dfbr gi one@ owenswri ght. corn

Counsel to numerous Borrowers

WELLINGTON HOUSE INC.778 King Street WestToronto, Ontario M5V 1N6

Brad Lamb

iliana(@.lambdevcorp. com

Borrower

O'CONNOR MACLEOD HANNA LLP700 Kerr StreetOakville, ON L6K 3W5

Orie Niedzvieckiniedzviecki@on:rh.ca

Counsel to JW Roberts Enterprises Inc.

FDS BROKER SERVICES INC.160 Traders Blvd, Suite 202Mississauga, ON L4Z3K7

Zafar Khawaja

[email protected]

SOUTH WEST QUEENSVILLEHOLDINGS INC.56 The Esplanade, Suite 206Toronto, Ontario M5E lA7

Giuseppe Valela

[email protected]

Borrower for Highlands of York

MILLER THOMSON LLP40 King Street West, Suite 5800Toronto, ON MsH 3S1

Craig Mitls

crnills@

Counsel to Brookhill Holdings Inc

GOLDMAN, SLOAN, NASH & HARBERLLP480 University Avenue, Suite 1600Toronto, ON M5G 1V2

David [email protected]

Counsel to Wellington House Inc.

ANDTO:

ANDTO:

ANDTO:

ANDTO:

TO

TOAND FFM CAPITAL INC.TO: 35 Silton Road

Woodbridge, ON L4L7Z8

Tony NlazzoliKrish Kochhar

trnazzoli @ffmcapi tal. comkkochhar@ffmcapital. com

ROSEN GOLDBERG INC.5255 Yonge Street, Suite 804Toronto, ON, M2N 6P4

Info @rosen goldbelg, cotn

Trustee to FDS Broker Services Inc.

4

TO

TOAND

ANDTO:

AND

ANDTO:

ROYAL CANADIAN MOUNTEDPOLICEIntegrated Market Enforcement Team20 Queen Street West, 15th FloorToronto, ON M5H 3R3

Sgt. Dominic Milotte

Dominic.Milotte@rcmp-grc. gc.ca

COMPUTERSHARE TRUSTCOMPANY OF CANADA100 University Avenue12th Floor, South TowerToronto, ON M5J 2Yl

David KerrDavid.Kerr@computershare. com

Robert ArmstrongRobert.Arm stron g@ cornputershare. com

DUNSTRE (LANDSDOWN) rNC.203 A-465 Phillip StreetWaterloo, Ontario N2L 6C7

Shawn Keeper

shawn. keeper@dunsire. com

Borrower

LAMB BAUHAUS INC.778 King Street WestToronto, ON M5V 1N6

Brad Lamb

iliana@lambdevcorp. com

Borrower

AND TSUNAMI TECHNOLOGY GROUP INC.TO: 215 Truders Blvd. East, Suite 16

Mississauga, ON L4Z3K5

Don Tanner

dontanner@technolo gy. ca

AND OLYMPIA TRUST COMPANYTO: 200,125-9 Avenue SE

Calgary, AB T2G 0P6

Jonathan BahnuikJohnny Luong

BahnuikJ@olyrnpiatrust. comLuon gJ@,olympiatrust. com

TOANDTO:

ANDTO:

RSM CANADA LIMITEI)11 King Street WestSuite 700, PO Box 27Toronto, Ontario i|;lI.SH 4C7

Jeffrey Berger

J eff. b er ger @r smcanada. c orn

Court-appointed Receiver of Dunsire(Landsdown) Inc.

BEL CALGARY INC.778King Street WestToronto, ON M5V 1N6

Brad Lamb

iliana@ lambdevcorp. com

Borrower

5

TO

ANDTO:

AND

ANDTO:

ANDTO:

SUNRISE ACQUISITIONS (BONDHEAD) rNC.50 West Wilmot Street, Suite 100

Richmond Hill, ON L4B lM5

Sajjad Hussain

shussai n (@sunrisehome s. ca

Borrower

FORTRE,SS BROOKDALE INC.| -25 Brodie DriveRichmond Hill, ON L4B 3K7

Jawad RathoreVincenzo Petrozza

j awad@ forlressrdi. comvinc e @ fortres srdi. com

Borrower

MEYER, WASSENAAR & BANACHLLPRoyal Bank Bldg. 301-5001 Yonge St.

North York, Ontario M2N 6P6

Joseph [email protected]

Counsel to Private Receiver of BrookdaleProject

AVERTON (RUTHERFORD) rNC.101 Riele Drive, Suite 310St. Alberta, Alberta T8N 3X4

Paul Lanni

[email protected]

BRAESTONE DEVELOPMENTCORPORATION85 Bayfield Street, Suite 500Barrie, ON L4M 3A7

J. David BunstonJames Massey

dbunston@ geor gianinternational. com

Borrower

RSM CANADA LIMITEDl l King Street West, Suite 700Toronto, ON M5H 4C7

Arif Dhananiari f. dhanani @rsmcanada. com

Private Receiver of Brookdale

EMERALD CASTLE DEVELOPMENTSINC.361 Connie Crescent, Suite 200Concord, ON L4K 5R2

Desi Auciello

ramsey@cachetdeveloprnents. com

Borrower

CARLYLE COMMUNITIES(CRESTVTEW) rNC.20 Rivermede Road, Suite 204Concord, ON

Naram Mansour

naram.mansour@ carl )rlecommunities. com

ANDTO:

ANDTO:

ANDTO:

ANDTO:

6

Borrower Borrower

AND LAMBEDMONTONCORP.TO: 778 King Street West

Toronto, ON M5V 1N6

Brad Lamb

il [email protected]

Borrower

AND AVERTON HOMES (PRESCOTT) rNC.TO: 101 Riele Drive, Suite 310

St. Alberta, AB T8N 3X4

Paul Lanni

[email protected]

Borrower

ANDTO:

ANDTO:

AND

THE HARLOWE INC.778 King Street WestToronto, ON M5V 1N6

Brad Lamb

il i ana(@ I am bd evco rp. co m

Borrower

THICKSON ROAD 407, WHITBYLIMITED9000 Keele Street, Unit 4Concord, Ontario L4K 0B3

Mario Bottero

mario @) ro sewater gro up. com

Borrower

2309918 ONTARIO INC.30 Wertheim Court, Unit 3, Building A,Richmond Hill, Ontario L4B 189

Dino Sciavilla

sales(g)pacedev.ca

Eden Borrower

GOLDMAN SLOAN NASH & HARBERLLP480 University Avenue Suite 1600Toronto, ON M5G 1V2

Robert [email protected]

Counsel to The Harlowe Inc.

HARRIS, SHEAFFER LLP4100 Yonge Street, Suite 610Toronto, ON M2P 285

Raz Nicolaernicolae@harri s- sheaffer. com

Counsel to Whitby Borrower

DAVID CHONG1370 Don Mills RoadDon Mills, ON M3B 3N7

David ChongTel. +1.416.510.2233

[email protected]

Counsel to 2309918 Ontario Inc.

ANDTO:

ANDTO:

ANDTO:TO:

7

TOAND

ANDTO:

AND

ANDTO:

23OII32 ONTARIO INC.11025 Lakeridge RoadPort Perry, Ontario LgL lV7

Brian Tilley

catalinadevelopments@,gmail. com

Borrower

DLA PIPERI First Canadian Place100 King Street West, Suite 6000Toronto, ON M5X 1E2

Edmund LamekEdmond. lamek@dlapiper. com

Danny Nunesdanny. nunes @dlapiper. com

Counsel to2301132 Ontario Inc. and2309840 Ontario Inc.

BENNETT JONES LLPI First Canadian Place100 King Street West, Suite 3400Toronto, ON M5X lA4

Sean Zweig

zwe i g s @)bgung1li sggs. cslq

Counsel to Georgetown Proposal Trustee

BEL-EDMONTON INC.778King Street WestToronto, Ontario M5V 1N6

Brad Lamb

[email protected]

Borrower

2309840 ONTARIO INC.11025 Lakeridge RoadPort Perry, Ontario L9L lV7

ANDTO:

ANDTO:

ANDTO:

Brian Tilley

catalinadevelopments@ smail.com

Borrower

AND KSV KOf,'MAN INC.TO: 150 King Street Westm Suite 2308

Toronto, ON M5H lJ9

TO

Bobby Kofmanbko fman (a).k svadvi s ory. c om

Jonathan Joffeil .com

Proposal Trustee for Georgetown Borrower

WORTHINGTON HOMES(HUMBERTON) rNC.164 Nelson StreetOakville, Ontario L6L 3J2

Daniel Marion

dan@kinqridgedeveloprnents. ca

Borrower

KING SQUARE LTD.50 AcadiaAvenue, Suite 310Markham, Ontario L3R 0B3

Wen Yi Wang

[email protected]

Borrower

AND KINGRIDGE DEVELOPMENT AND WORTHINGTON HOMES TO: CORPORATION TO: (HUMBERTON) INC.

235 Speers Road 164 Nelson Street Oakville, Ontario L6K 2E8 Oakville, Ontario L6L 312

Daniel Marion Daniel Marion

[email protected] [email protected]

Borrower Borrower

AND DUNSIRE (1041 LAKESHORE) INC. AND DUNSIRE (1407 LAKESHORE) INC. TO: 203A-465 Phillip Street TO: 203A-465 Phillip Street

Waterloo, Ontario N2L 6C7 Waterloo, Ontario N2L 6C7

Shawn Keeper Shawn Keeper

[email protected] [email protected]

Borrower Borrower AND KINGRIDGE (OAKVILLE EAST) INC. AND L RICHMOND CORP. TO: 1660 North Service Road East, Suite 109B TO: 778 King Street West

Oakville, Ontario N6H 703 Toronto, Ontario M5V 1N6

Daniel Marion Brad Lamb

[email protected] iliana(m,lambdevcorp.com

Borrower Borrower

AND 2382917 ONTARIO INC. AND MILLER THOMSON LLP TO: 500 Hanlon Creek Blvd TO: 40 King Street West, Suite 5800

Guelph, Ontario NlC 0Al Toronto, ON M5H 3Sl

Lee Piccolo Kyle Hampson

info(cv,fusionhomes.com [email protected]

Borrower Counsel to 2382917 Ontario Inc

AND 1177 DANFORTH A VENUE LTD. AND GORDIN & TARR LLP

TO: 156 Duncan Mill Road, Suite 23A TO: 1 Director Court, Suite 105 Toronto, Ontario M3B 3N2 Woodbridge, ON L4L 4S5

Jessica Tarr

itarr(a),gtlawyers.ca

Morris Kansun

[email protected]

Borrower Counsel to 1177 Danforth Borrower

9

TOAND

ANDTO:

ANDTO

ANDTO:

Mike Petrovski

mike@enginedevelopments. ca

Borrower

AND TENENBAUM & SOLOMON LLPTO: 7181 Woodbine Avenue

Markham, ON L3R 1A3

Samantha [email protected]

Counsel to Borrower to Halo and Smygine

LAMB CALGARY INC.778 King Street WestToronto, Ontario M5V 1N6

Brad Lamb

ili ana@lambdevcorp. com

Borrower

SMYGINE (LAKEEAST) INC.6021 Yonge Street, Suite 229Toronto, Ontario M2M 3W2

UNION WATERFRONT INC.1-25 Brodie DriveRichmond Hill, Ontario L4B 3K7

Vincenzo Petrozza

vince@ fortressrdi. com

Borrower

LEVINE SHERKIN BOUSSIDANBARRISTERS23 Lesmill Road, Suite 300Toronto, ON M3B 3P6

ANDTO:

ANDTO:

ANDTO:

ANDTO:

AND MCAP INC.TO: 400-200 King Street West

Toronto, ON M5H 3T4

Mark [email protected]

TORIilN MANES LLP151 Yonge Street, Suite 1500Toronto, ON M5C 2W7

Michael TamblynTel. +1.416.777.5366

rntamblyn@torkinmanes. com

HALO TOWNHOMES INC.229-6021Yonge StreetToronto, Ontario M2M 3W2

Mike PetrovskiSayf HassanKonstantine Simionopoulos

[email protected]

Borrower

AMADON.WESTWATER PROJE CTSLTD.4268 William StreetVictoria, British Columbia V9A 3Y9

Max Tomaszewski

mtomaszewski @,amadongroup. com

Borrower

MSI SPERGELmsi Spergel Inc.21 King Street West, Suite 1602Hamilton, Ontario, L8P 4W7

[email protected]

Court Appointed Receiver of Union Waterfront

Kevin Sherkin

10

TO

AND WESTGATE PROPERTIES LTD.TO: I -25 Brodie Drive

Richmond Hill, ON L4B 3K7

Jawad Rathore

Vincenzo Petrozza

j awad@ forlre ssrdi. [email protected]

Borrower

AND

Tel: +1.416.224.2400 ext. 120Mitchell WineTel: +1.416.224.2400 ext. 116

kevin([email protected]

Counsel for certain proposed representativeplaintiffs in class action proceedingsagainst BDMC and other parties

FORTRESS COLLIER CENTRE LTD.1 - 25 Brodie DriveRichmond Hill, ON L4B 3K7

Jawad Rathore

Vincenzo Petrozza

i aw ad(dfortre s srdi. comv" inc-e @ fbrtre s srdi. com

Borrower

6566074 MANITOBA LTD.l-25 Brodie DriveRichmond Hill, OntarioL4B 3K7

Jawad RathoreVincenzo Petrozza

i awad@ fo-rtres srdi. comvinc e (@fbrlre s srdi. co m

Phitip FrankPhilip. Frank@mcap. com

Bruno IacovettaBruno. Iacovetta(@mcap. com

AND F'ORTRESS CHARLOTTE 2014INC.TO: I -25 Brodie Drive


Jawad Rathore

j awad@fortressrdi. com

Borrower

ANDTO:

ANDTO:

FORTRESS CARLYLE PETER STREETINC.20 Rivermede Road, Suite 204Concord, Ontario L4K 3N3

Naram MansourJawad Rathore

j awad@fortressrdi. com

Borrower

FORTRESS KEMPENFELTBAYDEVELOPMENTS INC.1-25 Brodie DriveRichmond Hill, OntarioL4B 3K7

Jawad Rathore

Vincenzo Petrozza

j awad@tbrtressrdi. comvince@fortressrdi. com

ANDTO:

Borrower

11

ANDTO:

AND

OLD MARI(ET LANE INC.1-25 Brodie DriveRichmond Hill, Ontario L4B 3K7

Vincenzo Petrozza

vince@).lbrtressrdi. com

Borrower

2221563 ONTARIO INC.l-25 Brodie DriveRichmond Hill, Ontario L4B 3K7

Vincenzo Petrozza

vi n ce (@fortre ssrd i. com

Borrower

Borrower

F'ORTRESS TRIPLE CREEK INC.1-25 Brodie DriveRichmond Hill, Ontario L4B 3K7

Vincenzo Petrozza

vi nce@ fbrtressrdi. com

Borrower

2283020 ONTARIO INC.FORTRESS PORT PLACE (2014) rNC.| -25 Brodie DriveRichmond Hill, ON L4B 3K7

Jawad Rathore

Vincenzo Petrozza

j awad@fortressrdi. comvi nc e@fortre s srd i. c om

Borrower

ANDTO:

ANDTO:TO:

12

Email List:

[email protected]: [email protected]; rlriesterer(@osler.corn; [email protected];[email protected]; [email protected]: [email protected];

lis.com [email protected]; [email protected]; [email protected]; [email protected];dullmann(@blaney.com; harve)[email protected]; [email protected]: mark.bailey@fsco. gov.on. ca;[email protected]; [email protected]; [email protected];j awad@fo*ressrdi.com; [email protected]; Luon [email protected];[email protected]:[email protected]; [email protected]; dfazari@,cityzen.ca:[email protected]; [email protected]; [email protected];[email protected]; [email protected]; [email protected];[email protected]; [email protected]; infb@f usionhomes.com;[email protected]; [email protected]: [email protected];

naram ramsey@cachetdevelopments. com;shussain@jiunri sehomes.ca; [email protected];[email protected]; [email protected]; Jeff [email protected];[email protected]; [email protected]: [email protected]; [email protected];[email protected]; [email protected]; [email protected]; [email protected];

[email protected]; [email protected]; [email protected]: [email protected];[email protected]; [email protected]; [email protected];[email protected]; [email protected]; [email protected];samantha(g)tsklaw.ca; [email protected]; [email protected]; [email protected];[email protected]; [email protected]; [email protected]:

13

Tab

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INDEX

Document

Notice of Motion dated November 19,2018

Third Report of the Trustee dated November 19,2018

Draft Braestone Settlement Approval Order

Page No.

1

l3

232

1


OntarioSUPERIOR COURT OF JUSTICE

COMMERCIAL LIST


Applicant

-and-

BUILDING & DEVELOPMENT MORTGAGES CANADA INC.

Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006,5.0. 2006,

c.29 and SECTION 101 OF TH.E COaRTS OF JaSTICE ACT, R.S.O. 1990 c. C.43

NOTICE OF MOTION(Motion for Approval of Braestone Settlement)

FAAN Mortgage Administrators Inc., in its capacity as Court-appointed trustee

("Trustee") of all of the assets, undertakings and properties of Building & Development

Mortgages Canada Inc. ("BDMC") pursuant to section 37 of the Mortgage Brokerages, Lenders

and Administrators Act, 2006, S.O. 2006, c.29, as amended, ("MBT,AA") and section 101 of the

Courts of Justicelcr, R.S.O . 1990, c. C.43, as amended, will make a motion before a judge of the

Ontario Superior Court of Justice (Commercial List) on November 28, 2018 at 10:00 a.m., or as

soon after that time as the motion can be heard, at 330 University Avenue, Toronto, Ontario.

PROPOSED METHOD OF HEARING: The motion is to be heard orally

THE MOTION IS FOR:

1. An Order (the "Braestone Settlement Approval Order") substantially in the form

attached to the Motion Record, inter alia:

a-L-

(a) if necessary, abridging the time for service of this Notice of Motion and the Motion

Record and dispensing with service on any person other than those served;

(b) approving the Settlement Agreement dated as of October 7'7,2018 (the "Braestone

Settlement Agreement") among Braestone Development Corporation

("Braestone"), the Trustee and Olympia Trust Company ("OTC"), with such minor

amendments as the parties to the Braestone Settlement Agreement may agree upon

to permit the completion of the transaction contemplated thereby;

(c) directing Braestone to pay $10 million forthwith to the Trustee in accordance with

the terms of the Braestone Settlement Agreement (such funds, the "Braestone

Realized Property");

(d) approving and ratifying the execution of the Braestone Settlement Agreement by the

Trustee and OTC and authorizingand directing the Trustee and OTC to comply with

all of their obligations under the Braestone Settlement Agreement;

(e) releasing, extinguishing, expunging and discharging all of the Braestone Loan

Obligations and the Loan Encumbrances (each as defined below) upon the delivery

of the Trustee's Certificate (as defined below), and ordering that none of the Trustee,

BDMC, OTC or any Braestone Individual Lenders (as defined below) have any

claim against Braestone in respect of the Braestone Loan Obligations or the Loan

Encumbrances; provided, however, that Braestone is not released from any

obligations under the Braestone Settlement Agreement;

(0 declaring that the Release Agreement be given to the Releasees (as defined below)

by Braestone on behalf of itself, its affiliates, and their respective shareholders,

agents, directors, officers, employees, and each of their respective successors and

assigns (collectively, the "Releasors") and shall be binding and effective on the

Releasors in favour of the Releasees upon the delivery of the Trustee's Certificate;

(g) authorizing the Trustee to make a further distribution to Investors of Realized

Property following the filing of the Trustee's Certificate with the Court in an amount

equal to lQo/o of the Realized Property held on April 20, 2018;

2

-J- 3

(h) amending the Realized Property Order upon delivery of the Trustee's Certificate to

require the Trustee to distribute 80% of all other Realized Property obtained,

including the Braestone Realized Property,pro rata to the Investors entitled to such

funds, whether received before or after the date of the proposed Braestone

Settlement Approval Order;

(i) approving the First Report, the Second Report, the Third Report, and all of the

actions, conduct and activities of the Trustee as set out therein;

0) approving the fees and disbursements of the Trustee and its counsel, as set out in the

Third Report, the affidavit of Naveed Manzoor sworn November 19, 2018 and

attached as Appendix 8 to the Third Report (the "Manzoor Affidavit"), and the

affidavit of Michael De Lellis sworn November 19, 2018 and attached as Appendix

9 to the Third Report (the "De Lellis Affidavit");

(k) sealing from the public record certain commercially-sensitive information and

documents (as described below); and

2. Such further and other relief as this Court may deem just.

THE GROUNDS FOR THE MOTION ARE:

Background

1. Pursuant to the Order of the Court in respect of BDMC dated April 20, 2018 (the

"Appointment Order"), FAAN Mortgage was appointed as the Trustee, without security, of all

of the assets, undertakings and properties of BDMC, including, without limitation, all of the assets

in the possession or under the control of BDMC, its counsel, agents and/or assignees but held on

behalf of any other party, including, but not limited to, Investors (as defined below), brokers, or

borrowers, in each case whether or not such property is held in trust or is required to be held in

trust;

2. The purpose of the Trustee's appointment is to protect the interests of the members of

the investing public who invested in syndicated mortgage loans made by BDMC in respect of

-4-

certain real estate developrnent projects secured by mortgages (typically third-ranking or lower

priority charges) registered on title to the applicable real property (the "Investors");

3. Concurrently with the filing of this notice of motion, the Trustee is filing the Third

Report of the Trustee dated November 19, 2018 (the "Third Report") with the Court, which

describes the Trustee's activities to date in carrying out its mandate under the Appointment Order.

Capitalized terms used but not defined herein have the meanings given in the Third Report;

4. The First Report of the Trustee dated June 19, 2018 (the "First Report") described the

need for certain interim stabilization measures, including, among other things, clarification related

to the use of certain funds held in BDMC's accounts, to allow the Trustee to discharge its

obligations pursuant to the Appointment Order, perform BDMC's administrative tasks, and to

commence an in-depth review of the real estate development projects that were funded in part

through the syndicated mortgage loans that were administered by BDMC;

4

5 The Interim Stabilization Order was issued on June 26,2018 and, among other things:

(a) appointed Chaitons LLP as representative counsel inrespect of the common interests

of all Investors in these proceedings unless and until an Investor opts out of such

representation ("Representative Counsel");

(b) authorized the Trustee to retain all of the funds held by BDMC on the date of the

Appointment Order, or paid or payable to BDMC or the Trustee thereafter, including

interest where principal is not repaid, other than Realized Property ("Estate

Properfy") and to use the Estate Property to fund certain matters in connection with

the administration of BDMC's estate;

(c) required the Trustee to hold, in a separate account, until further order of the Court

(I) all funds held or received by the Trustee as a result of a repayment (in whole or

in part) of principal on any loan or other indebtedness administered by BDMC on

behalf of Investors, whether or not (i) secured by any Real Property Charges in the

name of BDMC or an RRSP Trustee, (ii) received before or after the date of the

Appointment Order, or (iii) paid or payable in trust, plus (II) all interest paid or

payable to BDMC or the Trustee at the time such repayment (in whole or in part) of

5

principal is made (collectively, "Realized Property") other than 50% of the

Realized Property consisting of realizations on the Victoria Medical SML Loans;

directed the Trustee to pay 50% of the Realized Property consisting of realizations

on the Victoria Medical SML Loans pro rata to the Investors entitled to such funds;

and

5

(d)

(e) required the Trustee to report to the Court by October 31, 20T8 with a

recommendation regarding next steps with respect to the Realized Property,

including any potential distribution of Realized Property to the Investors;

6. The Second Report of the Trustee dated October 23, 2018 (the "Second Report")

provided a further comprehensive update on the Trustee's activities undertaken since the date of

the First Report, including a detailed description of the in-depth analysis the Trustee is conducting

with respect to each real estate development project and a status update for each of those projects.

The Second Report contained information in support of the Realized Property Order;

7. The Realized Property Order was issued on October 30, 2018 and, among other things

(a) required the Trustee to distribute (when aggregated withprevious distributions)7}oh

of the Realized Property (including funds originally obtained with respect to the

Victoria Medical SML Loans);

(b) required the Trustee to retain 30o/o of all Realized Property; and

(c) authorized the Trustee to use the retained Realized Property to aid the Trustee in

complying with the Appointment Order and in carrying out its mandate, as the

Trustee, in its sole discretion, considered necessary or desirable for the

administration of the estate, including in respect of those matters set out in paragraph

11 of the Interim Stabilization Order (collectively, the "Required Trustee

Activities");

-6-

Need for the Braestone Settlement Approval Order

8. The Trustee understands that Braestone faces significant environmental issues on certain

aspects of its real estate development project in Moonstone, Ontario (the "Braestone Project").

BDMC is party to a loan agreement with Braestone dated December l, 2012 (the "Loan

Agreement"). The Trustee understands that the environmental issues on the Braestone Project

would likely result in material delays in the progress of the Braestone Project;

9. Braestone has advised the Trustee that it does not expect to be able to pay the amounts

due under the Loan Agreement in full prior to July 2019, the extended maturity date under the

Loan Agreement, and that it may take 2 to 7 years to remedy the environmental conditions.

Braestone is seeking to refinance the Braestone Project to address the market and environmental

challenges, but has advised the Trustee that it must reduce its overall debt in order to do so.

Accordingly, Braestone is seeking to repay the debt owing to the individual lenders under the Loan

Agreement (the "Braestone Individual Lenders") at a discount to the total amount that would be

owing at the completion of the Braestone Project;

10. The Trustee's negotiations with Braestone in respect of a potential payout culminated

when, on October 17,2018, Braestone presented the Trustee with an offer to accept payment by

Braestone of $10 million in full satisfaction of the amounts due under the Loan Agreement, which

contained the proposed Braestone Settlement Agreement (the "Braestone Offer");

11. As described in the Third Report, the full amount due under the Braestone loan

(including interest and certain deferred lender fees) exceeds $16 million; however, when

previously paid interest of approximately $5.4 million is included, the proposed payout would

result in a full payment of the principal owing on the BDMC loan plus compensation of

approximately l5o/o on the principal amount of the BDMC loan;

12. The Braestone Offer is conditional upon the release and discharge of all of Braestone's

obligations to BDMC, OTC, and the Braestone Individual Lenders under the Braestone Loan

Agreement, the Security and the Lodn Documents (each as defined in the Braestone Loan

Agreement) (collectively, the "Braestone Loan Obligations") and all security interests granted

to BDMC, OTC or the Braestone Individual Lenders in and to the assets of Braestone to secure

the Braestone Loan Obligations (the "Loan Encumbrances") and provides that Braestone is to

6

-7 - 7

deliver a release agreement ("Release Agreement") to the Trustee, BDMC, OTC, and the

Braestone Individual Lenders, each of their respective officers, directors, agents, employees, and

each of their respective successors and assigns (collectively, the "Releasees"), which would

release such Releasees from all obligations under the Braestone Loan Documents;

13. The Trustee consulted extensively with Representative Counsel regarding the Braestone

Offer and has been informed by Representative Counsel that it also supports the acceptance of the

Braestone Offer;

14. The Trustee delivered a notice to the Braestone Individual Lenders on October 23,2078

advising the Braestone Individual Lenders of the Trustee's recommendation in support of

accepting the Braestone Offer and requesting the Braestone Individual Lenders to provide their

feedback, whether for or against the acceptance of the Braestone Offer, and any other general

feedback (the "Braestone Consent Request");

15. As described in the Third Report, the Trustee received 86 formal votes in response to

the Braestone Consent Request. Over 96Yo of the Braestone Individual Lenders that voted in

response to the Braestone Consent Request, representing over 99o/o in value of such loans, voted

in favour of the Trustee accepting the Braestone Offer; whereas less than 4o/o of voting Braestone

Individual Lenders, representing less thanlo/o in value of such loans, voted against the Braestone

Offer;

16. The rate of response to the Braestone Consent Request was much higher than the rate of

response to any other notice or request for consent that the Trustee has sent to date;

ll. Following receipt of feedback from the Braestone Individual Lenders and

Representative Counsel, the Trustee has accepted the Braestone Offer and the Trustee and OTC

executed the Braestone Settlement Agreement. However, the Braestone Settlement Agreement is

only binding on the Trustee, BDMC and OTC upon approval of the agreement by the Court. The

Trustee is therefore seeking the Braestone Settlement Approval Order from the Court;

18. If the Court issues the proposed Braestone Settlement Approval Order, then the

settlement set out therein would become effective upon the issuance by the Trustee of a Trustee's

-8-

certificate confirming, among other things, the Trustee's receipt of the $10 million payrnent (the

"Trusteets Certificate") ;

Need for Approval of Certain Realized Property Matters

19. Since the approval of the Realized Property Order, the Trustee has distributed (when

aggregated with previous distributions) 70% of the Realized Property and has retained the

remaining Realized Property as required by the Realized Property Order;

20. The Trustee has determined, based on its expectations regarding the ability to generate

further Realized Property in the next reporting period, that, should the $10 million in Braestone

Realized Property be received, it will be appropriate to further reduce the percentage of Realized

Property that it needs to retain to fund the Required Trustee Activities;

21. Therefore, the Trustee is seeking the Court's authorization to distribute an additional

amount equal to l\Yo of the Realized Property held by the Trustee on April 20,2018, such that

80% of the Realized Property received to date will have been distributed by the Trustee;

22. The Trustee is also, subject to the delivery of the Trustee's Certificate, seeking an

amendment to paragraph 3(b) of the Realized Property Order to authorize the Trustee to distribute

80% of any future Realized Property received by the Trustee after the date of the Braestone

Settlement Approval Order;

23. As described in the Second Report, the Trustee predicts that there will be a limited

number of projects that give rise to recoveries in the near term and that recoveries on many of the

syndicated mortgage loans are at risk. The Trustee understands that Representative Counsel agrees

with the proposed retention of 20%o of all Realized Property and the proposed distribution of all

other Realized Property in the circumstances;

Approval of Reports, Trustee's Activities, and Trustee's and its Counsel's Fees and

Disbursements

24. As part of the Braestone Settlernent Approval Order, the Trustee seeks this Court's

approval ofthe First Report, the Second Report and the Third Report and all of the actions, conduct

and activities of the Trustee as set out in therein, including the Trustee's and its counsel's fees and

8

-9-

disbursements incurred in respect of such activities, as more fully set out in the Manzoor Affidavit

(including the Confidential Manzoor Exhibit) and the De Lellis Affrdavit (including the

Confidential De Lellis Exhibit);

Sealing Order

25. The following two-part test applies when determining whether a sealing order should be

granted:

(a) Is the order necessary to prevent a serious risk to an important interest, including a

commercial interest, in the context of litigation because reasonably altemative

measures will not prevent the risk?

(b) Do the salutary effects of the order, including the effects on the right of civil litigants to

a fair trial, outweigh its deleterious effects, including the effects on the right to free

expression, which in this context includes the public interest in open and accessible

court proceedings?r;

26. The Confidential Manzoor Exhibit and the Confidential De Lellis Exhibit filed in

connection with this motion contain confidential, privileged and commercially sensitive

information regarding the projects and BDMC generally which, if made public, would be

materially prejudicial to the Trustee and BDMC and could have a material adverse effect on the

recoveries that may ultimately be available to Investors in these proceedings;

21. There are no reasonable measures available to protect this information as an altemative

to an Order sealing this information from the public record. However, to mitigate any detrimental

consequences of the sealing Order and to promote a fair and open proceeding, the Manzoor

Affidavit and the De Lellis Affidavit contain detailed summaries of the activities of the Trustee

and its counsel that are more fully reported in the Confidential Manzoor Exhibit and the

Confidential De Leliis Exhibit, as well as detailed information regarding the fees incurred to date;

and

9

I Sierra Club of Canads v Canada (Minister of Finance) ,2002 SCC 41 at para 53

-10-

28. The salutary effects of a sealing Order outweigh the deleterious effects, as the sealing

Order would protect the interests of the Investors and their potential recoveries in these

proceedings, while the deleterious effects are minimizedby the inclusion of detailed summaries of

the Trustee's and its counsel's activities in the Manzoor Affidavit and the De Lellis Affidavit;

General

29. The provisions of the MBLAA, including section 37 thereof;

30. The Appointment Order;

31. The Interim Stabilization Order;

32. The Realized Property Order;

33. Rules 1,04, 1.05,2.03,3.02, 16,37 and 4l of the Ontario Rules of Civil Procedure,

R.R.O. 7990, Reg. 194, as amended;

34. Sections 101 and 106 of the Ontario Courts of Justice lcf, R.S.O. 1990, c. C.43 as

amended;

35. The inherent and equitable jurisdiction of this Honourable Court; and

36. Such further and other grounds as counsel may advise and this Court may permit

THE FOLLOWING DOCUMENTARY EVIDENCE will be used at the hearing of this

motion:

10

1 The Appointment Order;

2.

J

The Interim Stabilization Order;

The Realized Property Order;

4.

5

The First Report;

The Second Report;

- 11-

The Third Report;

The Manzoor Affidavit, including the Confidential Manzoor Exhibit;

The De Lellis Affidavit, including the Confidential De Lellis Exhibit; and

9 Such further and other evidence as counsel may advise and this Court may permit.

November 19,2018 osLER, HOSKIN & HARCOURT LLPBox 50, 1 First Canadian PlaceToronto, ON M5X 1B8

Michael De Lellis (LSUC# 48038U)Jeremy Dacks (LSUC# 4185lR)Patrick Riesterer (LSUC# 60258G)

Tel: (416) 362-2111Fax: (416) 862-6666

Lawyers for FAAN Mortgage Administrators Inc.,in its capacity as Court-appointed Trustee

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Court File No. CV-18-596204-00C1

ONTARIOSUPERIOR COURT OF JUSTICE

(coMMERCTAL L|ST)

BETWEEN


Applicant

-and-


Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AA'D ADMINISTRATORS ACT, 2006, S.O. 2006, C.

29 and SECTION 101 OF THE COURIS OF JUSTICE ACI R.S.O. 1990 c. C.43

THIRD REPORT OF THE TRUSTEE

NOVEMBER 19,20{8

FAAN Mortgage Administrators lnc.Court-Appointed Trustee of the Respondent

{ NFAAilIORTOAOErBilrlilsTRAT0[S

T4

TABLE OF CONTENTS

INTRODUCTION

PURPOSE OF THE THIRD REPORT.......,.

SCOPE AND TERMS OF REFERENCE .....

BRAESTONE SETTLEMENT OFFER ........

NEGOTIATIONS REGARDING OTHER PAYOUTS.

RECOMMENDATION REGARDING REALIZED PROPERTY

APPROVAL OF THE TRUSTEE'S REPORTS, ACTIVITIES AND FEES

CONCLUSION AN D RECOM M EN DATION

.1

.4

.6

.713

15

16

T9

15

INDEX OF APPENDICES

Appendix 1

Appendix 2

Appendix 3

Appendix 4

Appendix 5

Appendix 6

Appendix 7

Appendix 8

Appendix 9

Appointment Order dated April 20, 2018

First Report of the Trustee dated June 19, 2018, without exhibits

Second Report of the Trustee dated October 23,2018, without

exhibits

Realized ProperW Order dated October 30, 2018

Braestone Updates

Braestone Offer and Braestone Settlement Agreement

Braestone Consent Request dated October 23,2018

Manzoor Fee Affidavit

De Lellis Fee Affidavit

16



(coMMERCTAL LIST)

BETWEEN


Applicant

-and-


Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS A'VD ADMINISTRATORS ACT, 2006, S.O. 2006, C.

29 and SECTION 101 OF THE COURIS OF JUSTICE ACI R.S.O. 1990 c. C.43

THIRD REPORT OF THE TRUSTEE

November 19, 2018

INTRODUCTION

On April 20,2018, pursuant to an order ("Appointment Orde/') of the Honourable Mr.

Justice Hainey of the Ontario Superior Court of Justice (Commercial List) ("Gourt'),

FAAN Mortgage Administrators lnc. ('FAAN Mortgage") was appointed as trustee

("Trustee") over all of the assets, undertakings and properties of Building &

Development Mortgages Canada lnc. ("BDMC") including, without limitation, all of the

assets in the possession or under the control of BDMC, its counsel, agents and/or

assignees but held on behalf of any other party, including, but not limited to, lenders

under syndicated mortgage loans ("lnvestors"), brokers, or borrowers, in each case

whether or not such property was or is held in trust or was or is required to be held in

trust (collectively, the "Property"). The Appointment Order was issued following an

application made by the Superintendent of Financial Services ("superintendent")

pursuant to section 37 of the Mortgage Brokerages, Lenders and Administrators Act,

2006 (Ontario), as amended, and section 101 of the Couds of Justice Acf (Ontario), as

1

T7

2

amended. A copy of the Appointment Order is attached as Appendix "1'

On June 19, 2018, the Trustee submitted its first report in these proceedings ("First

Report"). The First Report provided a comprehensive update on the Trustee's activities

during the first two months of these proceedings, including additional background

information regarding BDMC and its business and updated information on the status of

the real estate development projects in which the lnvestors hold syndicated mortgage

loans. A copy of the First Report, without exhibits, is attached as Appendix"2".

On October 23, 2018, the Trustee submitted its second report in these proceedings

("Second Report"). The Second Report provided a further comprehensive update on the

Trustee's activities undertaken since the date of the First Report, including a detailed

description of the in-depth analysis the Trustee is conducting with respect to each real

estate development project and a status update for each of those projects. The Second

Report also included information in support of the Realized Property Order (described

below). A copy of the Second Report, without exhibits, is attached as Appendix "3".

Capitalized terms not otherwise defined in this Report have the meanings ascribed to

them in the Second Report.

On October 30, 2018, this Court issued an Order ("Realized Property Order") that,

among other things,

(a) required the Trustee to distribute (when aggregated with previous distributions)

7Oo/o of (l) all funds held or received by the Trustee as a result of a repayment (in

whole or in part) of principal on any loan or other indebtedness administered by

BDMC on behalf of lnvestors (including funds originally obtained with respect to

the Victoria Medical SML Loans), whether or not (i) secured by any Real Property

Charges in the name of BDMC or an RRSP Trustee, (ii) received before or after

the date of the Appointment Order, or (iii) paid or payable in trust, plus (ll) all

interest paid or payable to BDMC or the Trustee at the time such repayment (in

whole or in part) of principal is made (collectively, "Realized Property");

(b) required the Trustee to retain 30% of all Realized Property; and

(c) authorized the Trustee to use the retained Realized Property to aid the Trustee in

complying with the Appointment Order and in carrying out its mandate, as the

3

4

2

18

5

6.

Trustee, in its sole discretion, considered necessary or desirable for the

administration of the estate, including in respect of those matters set out in

paragraph 17 of the lnterim Stabilization Order (collectively, the "Required

Trustee Activities").

A copy of the Realized Property Order is attached as Appendix'n4'

The Trustee indicated in the Second Report that it intended to return to Court in the near

term to seek this Court's approval of a settlement agreement with respect to the

obligations owing by Braestone Development Corporation ("Braestone") to BDMC under

the loan agreement dated December 1, 2012 ("Loan Agreement") relating to

Braestone's real estate development project in Moonstone, Ontario ("Braestone

Proiect"), and to seek a further distribution of Realized Property to lnvestors upon

receipt of the payment contemplated by that settlement.

At the time of the Second Report, the Trustee had recommended that the Braestone

lnvestors accept the Braestone settlement and was seeking feedback from the

Braestone lnvestors in that regard. This Third Report sets out the Trustee's

recommendation regarding the Braestone Project based on lnvestor feedback, and

supports the Trustee's motion for an Order, among other things, approving the

Settlement Agreement made as of October 17, 2018 (the "Braestone Settlement

Agreement") among Braestone, the Trustee and Olympia Trust Company ("OTC") that

provides for a payment to the Trustee of $10 million in full and final satisfaction of

Braestone's obligations under the Loan Agreement, as more fully described in this Third

Report.

Materials filed with the Court with respect to these proceedings (other than confidential

materials filed under seal), including the First Report, the Second Report, the affidavit of

Brendan Forbes, legal counsel at the Ministry of the Attorney General Civil Law Division,

Financial Services Commission of Ontario ("FSGO") branch, sworn on April 19,2018,

the Superintendent's application record, the Appointment Order, the Interim Stabilization

Order, the Realized Property Order and the endorsements issued by the Court, are

accessible on the Trustee's website at: unrvw.faanmortgageadmin.com ("Trustee's

Website"). The Trustee intends to maintain the Trustee's Website for the currency of

these proceedings and will be updating it as appropriate.

7

3

1,9

8.

PURPOSE OF THE THIRD REPORT

The purpose of this third report of the Trustee ("Third Report') is to provide the Court

and stakeholders with the Trustee's recommendation regarding the Braestone

Settlement and to support the Trustee's request for an Order (the "Braestone

Settlement Approval Order") that, among other things:

(a) approves the Braestone Settlement Agreement, with such minor amendments as

the Trustee and the other parties to the Braestone Settlement Agreement may

agree upon to permit the completion of the transaction contemplated thereby; (ii)

directs Braestone to pay $10 million forthwith to the Trustee in accordance with

the terms of the Braestone Settlement Agreement (such funds the "Braestone

Realized Property"); and (iii) approves and ratifies the execution of the

Braestone Settlement Agreement by the Trustee and OTC and authorizes and

directs the Trustee and OTC to comply with all of their obligations under the

Braestone Settlement Agreement;

(b) releases, extinguishes, expunges and discharges all of Braestone's obligations to

BDMC, OTC, and the individual lenders under the Braestone Loan Agreement

("Braestone lndividual Lenders"), the Security and the Loan Documents (each

as defined in the Braestone Loan Agreement) (collectively, the "Braestone Loan

Obligations") and all security interests granted to BDMC, OTC or the Braestone

lndividual Lenders in and to the assets of Braestone to secure the Braestone

Loan Obligations (the "Loan Encumbrances") upon the delivery of a Trustee's

certificate confirming, among other things, the Trustee's receipt of the $10 million

payment (the "Trustee's Gertificate"), and ordering that none of the Trustee,

BDMC, OTC or any Braestone lndividual Lender have any claim against

Braestone in respect of the Braestone Loan Obligations or the Loan

Encumbrances; provided, however, that Braestone is not released from any

obligations under the Braestone Settlement Agreement;

(c) declares that the release agreement ("Release Agreement') to be given to the

Trustee, BDMC, OTC, and each Braestone lndividual Lender who loaned funds

through BDMC or OTC to Braestone pursuant to the Loan Agreement and all

related Loan Documents, each of their respective officers, directors, agents,

4

20

I

employees, and each of their respective successors and assigns (collectively, the

"Releasees") by Braestone on behalf of itself, its affiliates, and their respective

shareholders, agents, directors, officers, employees, and each of their respective

successors and assigns (collectively, the "Releasors") shall be binding and

effective on the Releasors in favour of the Releasees upon the delivery of the

Trustee's Certificate;

(d) orders the Trustee to make a further distribution to lnvestors following the filing of

the Trustee's Certificate with the Court in an amount equal to 10% of the

Realized Property held on the date of the Appointment Order, including the

Realized Property obtained with respect to the Victoria Medical SML Loans, pro

rata lo the lnvestors entitled to such funds, such that, when combined with the

distribution made pursuant to the lnterim Stabilization Order and the Realized

Property Order, 80% of such funds shall have been distributed on a pro rata

basis to the lnvestors entitled to such funds; and

(e) amends paragraph 3(b) of the Realized Property Order upon the delivery of the

Trustee's Certificate to require the Trustee to distribute 80% of all other Realized

Property obtained, including the Braestone Realized Property, pro rafa to the

lnvestors entitled to such funds, whether received before or after the date of the

proposed Braestone Settlement Approval Order.

ln addition, the Trustee is seeking this Court's approval of the First Report, the Second

Report, the Third Report, the activities described in each of the Reports, and the

professional fees of the Trustee and its counsel for the period from the date of the

Appointment Order to September 30, 2018, as more fully described herein and in the fee

affidavits attached hereto.

ln support of the Trustee's request for the Braestone Settlement Approval Order, this

Third Report describes the following matters:

(a) The details of the Braestone Settlement Agreement;

(b) lnformation that supports the Trustee's recommendation that the BraestoneSettlement Agreement be approved;

(c) A summary of the Trustee's activities to date: and

10

5

21,

(d) lnformation regarding the Trustee's and its counsel's fees and disbursements

from the date of the Appointment Order through to September 30, 2018.

11 The Trustee is required under the Realized Property Order to report back to the Court by

no later than April 30, 2019 with a further comprehensive update regarding these

proceedings. The Trustee anticipates that it will likely be necessary to prepare shorter

project specific reports similar to this Third Report during the intervening period and to

attend before the Court to seek relief or advice and directions from the Court regarding

project specific issues, which may include the approval of settlement and repayment

arrangements for other real estate development projects.

SCOPE AND TERMS OF REFERENCE

ln preparing this Third Report, the Trustee has relied upon unaudited financial

information provided by, inter a/r,a, BDMC, Fortress, Canadian Development Capital &

Mortgage Services lnc. ("CDGM"), the mortgage brokerage who assumed the mortgage

brokerage duties of BDMC, Braestone and certain other individual borrowers who have

borrowed funds from BDMC under various syndicated mortgage loans administered by

BDMC. While the Trustee reviewed various documents provided by BDMC, CDCM, and

applicable borrowers (including, among other things, unaudited internal information,

appraisals and financial projections), the Trustee's review does not constitute an audit or

verification of such information for accuracy, completeness or compliance with Generally

Accepted Assurance Standards ("GAAS"), Generally Accepted Accounting Principles

("GAAP'), or lnternational Financial Reporting Standards ("lFRS"). Accordingly, the

Trustee expresses no opinion or other form of assurance pursuant to GAAS, GAAP or

IFRS, or any other guidelines, with respect to such information.

12

13 Some of the information used and relied upon in preparing this Third Report consists of

financial projections and other information received from various third parties, including

appraisals and project cost information. The Trustee cautions that the projections and

other information used and relied upon are generally based upon assumptions and

estimates about future events and/or market conditions that are not ascertainable or that

could change. As such, the information presented in this Third Report may vary from the

projections and information used to prepare this Third Report and the actual results may

differ both from the results projected therein and herein. Even if the assumptions relied

6

22

16.

upon therein or herein materialize, the variations from the projections could be

significant. The Trustee's review of the future oriented information used to prepare this

Third Report did not constitute an audit or review of such information under GAAS,

GAAP or IFRS or any other guidelines.

14 This Third Report has been prepared for the use of this Court and BDMC's stakeholders

as general information relating to BDMC and the Braestone Project and to assist the

Court with respect to the Trustee's request for the proposed Braestone Settlement

Approval Order. Accordingly, the reader is cautioned that this Third Report may not be

appropriate for any other purpose.

15. All references to dollars are in Canadian currency unless otherwise noted

BRAESTONE SETTLEMENT OFFER

As set out in the Second Report, the Trustee has been engaged in negotiations with

Braestone for some time regarding the payment of the amounts due to BDMC under the

Loan Agreement. These negotiations commenced after the Trustee was informed that

Braestone faces significant environmental issues on certain aspects of the Braestone

Project. The Trustee understands that these environmental issues will likely result in

material delays in the progress of the project and in the repayment of the BDMC loans

made to Braestone.

17 The Trustee has provided notices to lnvestors regarding certain matters related to the

Braestone Project, including through previous Reports and notices dated April 11,2018

and May 31, 2018 ("Braestone Updates"). Copies of the Braestone Updates are

attached hereto as Appendix "5".

18 On October 17, 2018, as part of the negotiations between the parties, Braestone

presented the Trustee with an irrevocable offerto accept payment by Braestone of $10

million in full satisfaction of the amounts due under the Loan Agreement and

incorporating other components negotiated by the Trustee ("Braestone Offe/'). The

Braestone Offer was open for acceptance until November 9, 2018. The Braestone Offer

was subsequently extended to November 16, 2018 by Braestone to permit OTC some

additional time to execute the Braestone Offer, subject to the terms of the Braestone

Settlement Approval Order.

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For the reasons set out below, the Trustee has accepted Braestone's offer and executed

the Braestone Settlement Agreement. The Braestone Settlement Agreement requires

the Trustee to use commercially reasonable efforts to seek the Braestone Settlement

Approval Order, but the remaining terms of the Braestone Settlement Agreement are

only binding on the Trustee, BDMC and OTC should the agreement be approved and

ratified by the Court.

The Braestone Offer and the Braestone Settlement Agreement provide for a lump sum

payment by Braestone of $10 million in respect of the outstanding principal balance

owing under the Loan Agreement of $13.35 million. The full amount due under the Loan

Agreement on project completion (including interest and certain deferred lender fees)

exceeds $16 million; however, when previously paid interest of approximately $5.4

million ("Paid lnterest") is factored into the analysis, the proposed payout plus the Paid

lnterest would result in the full repayment of the principal owing to the SMLs, plus a

further 15% above the outstandlng principal amount.

The Braestone Offer is conditional, among other things, upon the release and discharge

of all Braestone Loan Obligations and all Loan Encumbrances, and a Court order being

obtained providing that none of the Trustee, BDMC, OTC or any Braestone lndividual

Lenders have any claim against Braestone in respect of the Braestone Loan Obligations

or the Loan Encumbrances (though Braestone is not to be released from any obligations

under the Braestone Settlement Agreement) in consideration of the payment due under

the Braestone Settlement Agreement.

The Braestone Settlement Agreement also provides that Braestone is to deliver a

Release Agreement to the Trustee providing that Braestone, on behalf of itself and the

other Releasors, release all of the Releasees (namely, the Trustee, BDMC, OTC, and

each Braestone lndividual Lender who loaned funds through BDMC or OTC to

Braestone pursuant to the Loan Agreement and all related Loan Documents, each of

their respective officers, directors, agents, employees, and each of their respective

successors and assigns) from all obligations under the Braestone Loan Documents.

Braestone has also made certain customary representations and warranties and has

agreed to provide such further assurances as are necessary to effectuate the transaction

set out in the Braestone Offer.

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24 lf the Court issues the proposed Braestone Settlement Approval Order, then the

settlement set out therein will be effective upon the issuance by the Trustee of the

Trustee's Certificate certifying that the conditions precedent set out in the Braestone

Settlement Agreement are satisfied.

25. A copy of the Braestone Offer, including the executed Braestone Settlement Agreement

is attached as Appendix "6".

Overview of Current Status of Braestone Proiect

26. Braestone has developed Phase 1 of the Braestone Project, but is awaiting approvals to

complete Phase 2. Braestone has advised that it will be unable to complete the

Braestone Project prior to July 2019, being the end of the extended term as set out in

the Loan Agreement, due to unexpected delays and challenging market conditions.

Therefore, Braestone does not expect to be able to pay the amounts due under the Loan

Agreement in full on the extended maturity date.

27 The Trustee therefore engaged in discussions and negotiations with Braestone and

reviewed the information provided to it. On the basis of these discussions and

information, the Trustee understands that the market and other challenges affecting the

completion of the Braestone Project include, but are not limited to:

(a) the slowdown in the overall real estate market in the area, which has resulted in

slower than expected home sales; and

(b) unforeseen environmental issues that have stalled the environmental approvals

required for the development of Phase 2. The Trustee understands that the

delay in environmental approvals relate to the following outstanding issues:

i. Species at risk (specifically, brown bats);

ii. Forestry at risk (specifically, butternut trees);

iii. Fisheries;

Approval for a river crossing which accesses Phase 28; and

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v. A re-assessment of previously approved wetland boundaries.

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28.

Braestone has provided the Trustee with a copy of an environmental report dated May

11,2018 prepared by its environmental consultants.

Braestone has advised that there are no established guidelines to resolve certain of

these environmental issues, and therefore longer than usual delays may result.

Braestone further advised that it has sought advice from environmental consultants and

has been informed that it could take 2 to 7 years to remedy the environmental conditions

and prepare the lands to commence construction of Phase 2.

As a result of these developments, Braestone is seeking to refinance the Braestone

Project, but has advised that it must reduce its overall debt in order to do so.

Accordingly, Braestone is seeking to repay the debt owing to the Braestone lndividual

Lenders under the Loan Agreement at a discount to the total amount that would be

owing at the completion of the Braestone Project.

The Trustee has been engaged in negotiations with Braestone and its representatives

regarding the amount of any such discount and the other terms of a potential settlement

of the Braestone Loan Obligations. Braestone has advised that it is unable to repay the

full principal amount due under the Loan Agreement; however, given that BDMC

received the Paid lnterest when due (up to and including the July 15, 2018 interest

payment) of approximately $5.4 million, the payment of $10 million pursuant to the Offer

plus the Paid lnterest would result in full repayment of the principal amount advanced

and a net return of approximately 15o/o on that principal amount. The return is calculated

as follows:

$Principal outstanding (A) 13,350,100

29.

30.

Loan repaymentlnterest paidTotal payments (B)

Net recovery in excess of principal (B-A)

10,000,0005,455,870

15,455,870

2,105,770

Acceptance of the Braestone Offer by the Trustee would result in the lnvestors foregoing

the amounts set out in the table below, which would otherwise become due pursuant to

the Loan Agreement if the amounts due were repaid on or about October 15, 2018

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(assuming, with respect to the deferred lender fee, that the project had been completed

by October 15, 2018).

$3,350,100

267,000400,000

2 003 0006, 020,100

Remaining principalAccrued interest to October 15,2018Extension fees (incl. additional deferred lender fee)Project completion/deferred lender feeTotal potential foregone recoveries (before additional accrued interest)

However, Braestone anticipates that the Braestone Project will not be completed for

many years and there can be no assurance that Braestone will be able to repay all

amounts due under the Loan Agreement upon completion of the Braestone Project.

32 Additional interest has continued to accrue since October 15, 2018, and would be

payable on the date that the BDMC Loan was repaid. As of July 1 5, 2018, Braestone

ceased paying interest due under the Loan Agreement. Braestone has advised that it

will not make further interest payments in the event the Braestone Offer is not accepted

and the Loan Agreement continues in force.

Assessment of the Offer and Recommendation

33. Braestone has advised that the Braestone Project will not be completed by the time the

Loan Agreement matures in July 2019, and that Braestone is unlikely to obtain

replacement financing sufficient to repay the amounts due under the Loan Agreement in

full on the maturity date. Further, given the terms of the Loan Agreement and

Braestone's expressed need to refinance the Braestone Project, BDMC would likely be

required to postpone and standstill to additional priority loans to permit the Braestone

Project to continue towards completion, and the standstill agreement would likely remain

in effect until such time as the priority loans are repaid (which the Trustee understands

would not be until such time that the Braestone Project is completed). Accordingly, and

based on the estimates provided by Braestone, it is possible that the amounts due under

Loan Agreement may not be repaid until 2025 and there is a risk that it will not be repaid

in full at that time, or ever.

ln completing its assessment of the Braestone Offer, the Trustee engaged a real estate

appraiser to provide a current as-is appraised value of the property. Based on its review

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of the appraisal and taking into account the approximately $10 million of outstanding

debt ranking in priority to the BDMC Loan that would be required to be repaid prior to the

amounts due under the Loan Agreement, the Trustee is of the view that the Braestone

Offer is reasonable in the circumstances.

Given the environmental issues encountered by Braestone, the uncertainty as to the

timing by which they will be remedied and the general uncertainty as to the future of the

market, the Trustee is of the view that, although the Braestone Offer potentially provides

discounted returns to the Investors, there is value in the certainty provided by accepting

the Braestone Offer and crystalizing the outcome of the Loan Agreement. Further, as

noted above, the Braestone Offer does result in an overall net positive return of

approximately 15% on the principalamount advanced by BDMC.

Consultation with Representative Gounsel and lnvestors

The Trustee consulted extensively with Representative Counsel regarding the Braestone

Offer, and, following that consultation, delivered a notice to lnvestors in the Braestone

Project on October 23, 2Q18 advising the lnvestors of the Trustee's recommendation in

support of accepting the Braestone Offer and requesting lnvestors to provide their

feedback, whether for or against the acceptance of the Braestone Offer, and any other

general feedback ("Braestone Consent Request"). Further, the Trustee advised that it

would serve all lnvestors with its motion materials seeking approval of the Braestone

Settlement Agreement should the Braestone Offer be accepted. A copy of the Braestone

Consent Request is attached as Appendix"7".

37 Following the delivery of the Braestone Consent Request, the Trustee and

Representative Counsel received and responded to a number of inquiries regarding the

Offer and the Trustee's and Representative Counsel's views on the Braestone Offer,

including the impact of the Realized Property Order on the amounts immediately payable

to lnvestors.

38 As of November 13, 2018, the Trustee has received 86 formal votes in response to the

Braestone Consent Request. 83 lnvestors representing approximately $5,292,700 of the

$13,350,100 in principal outstanding under the Loan Agreement voted in favour of the

Trustee accepting the Braestone Offer. 3 votes (from 2 lnvestors), representing

approximately $49,500 in principal outstanding under the Loan Agreement voted against

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the Trustee accepting the Braestone Offer. ln summary, over 96% of lnvestors voting on

the Braestone Offer, representing over 99% of the value of such loans, voted in favour of

the Trustee accepting the Braestone Otfer. Less than 4o/o ol lnvestors voting on the

Braestone Offer, representing less than 1% in value of such loans, voted against the

Trustee accepting the Braestone Offer. The lnvestors voting in favour of the acceptance

of the Braestone Offer represent approximately 33% in number and 40o/o in value of all

lnvestors under the Loan Agreement, whereas lnvestors voting against the acceptance

of the Braestone Offer represent approximately 1o/o in number and less than 0.4% in

value of all lnvestors under the Loan Agreement.

The Trustee notes that the rate of response to the Braestone Consent Request

(approximately of 34% ol lnvestors) is much higher than the rate of response to any

other notice or request for consent that the Trustee has sent to date.

On the basis of the Trustee's analysis of the facts and circumstances surrounding the

Braestone Project and the overwhelming positive responses received from lnvestors, the

Trustee has determined that the Braestone Offer should be accepted. The Trustee has

been informed by Representative Counsel that it also supports the acceptance of the

Braestone Offer. While the Trustee recognizes that a small number of lnvestors have

voted against the acceptance of the Braestone Offer, the Trustee must act in the best

interests of all lnvestors who made loans to the Braestone Project notwithstanding the

views expressed by certain lnvestors. The Trustee has determined that it is in the best

interests of all lnvestors to accept the Braestone Offer.

The Trustee therefore executed the Braestone Settlement Agreement and has brought a

motion seeking this Court's approval of the Braestone Settlement Agreement and the

issuance of the Braestone Settlement Approval Order.

NEGOTIATIONS REGARDING OTHER PAYOUTS

Since the date of the Second Report, the Trustee has continued to engage in

negotiations with certain borrowers and with Fortress and CDCM on behalf of certain

borrowers regarding potential payouts of the applicable loans. As recoveries under

certain of the projects are uncertain, the Trustee has actively engaged in discussions

with respect to a number of payout opportunities. Many of the payout discussions remain

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43.

at early stages, but the Trustee is seeking to advance these discussions in

circumstances where the Trustee believes a payout would be in the best interest of

lnvestors.

Notably, the Trustee has engaged in negotiations with The Harlowe lnc. ("Harlowe

Borrowe/') regarding the amounts due to BDMC under the loan agreement dated June

10,2013 in respect of a real estate development project in Toronto, Ontario ("Harlowe

Project"). The Trustee understands that the Harlowe Borrower has sold over 80% of

available units for the Harlowe Project, and registration of the building is estimated to

occur in the summer ol 2019. Upon registration of the building, the sale of the units

subject to existing sale agreements will be completed, at which time the majority of the

sale proceeds will be used to repay the priority loans. However, the Harlowe Borrower

has advised the Trustee that it must enter into an inventory loan to fund costs associated

with holding and selling the remaining units. The Harlowe Borrower has advised that

significant changes in the marketplace since the project commenced, combined with the

negative publicity related to Fortress and BDMC, has made it difficult to obtain additional

financing. ln particular, the Harlowe Borrower advises that it cannot obtain an inventory

loan while any portion of the BDMC debt remains on title. The Harlowe Borrower has

also advised that the final sale of outstanding units of the Harlowe Project are unlikely to

be completed until spring of 2Q21

The Trustee has negotiated a settlement agreement with the Harlowe Borrower whereby

the Harlowe Borrower would pay approximately $15.5 million to the Trustee in full and

final satisfaction and compromise of allthe Harlowe Borrower's obligations to BDMC and

the individual lenders who loaned funds to the Harlowe Borrower under the applicable

loan agreement. The principal owing to BDMC under the Harlowe loan is approximately

$15.9 million. lf the Harlowe Project had been completed on October 15,2018, and

certain assumptions regarding profitability had been realized, the full amount due under

the Harlowe loan (including interest and certain deferred lender fees) is estimated to

exceed $20 million; however, when previously paid interest of approximately $2.7 million

is factored into the analysis, the proposed payout would result in a full payment of the

principal owing to the lnvestors plus a further 15% above the principal amount. The

Trustee has recommended that the settlement agreement proceed and is currently

seeking feedback from lnvestors. The Trustee anticipates that it will be returning to Court

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in the near term to seek the Court's approval of the proposed settlement. Full details of

the proposed settlement will be provided when Court approval is sought.

45 As noted in the Second Report, the Trustee intends to follow a similar approval process

with respect to the potential payout by the Harlowe Borrower and other future repayment

opportunities in order to give clarity on the process to lnvestors and borrowers.


The Trustee has determined, based on its expectations regarding the ability to generate

further Realized Property in the next reporting period, that should the $10 million in

Braestone Realized Property be received, it will be appropriate to further reduce the

percentage of Realized Property that it needs to retain to fund the Required Trustee

Activities.

The Trustee is therefore seeking this Court's authorization to distribute an additional

amount equal to 10o/o of the Realized Property held by the Trustee on on the date of the

Appointment Order, including the Realized Property received in respect of the Victoria

Medical SML Loans. Following this distribution, 80% of the Realized Property received to

date will have been distributed by the Trustee.

48 The Trustee is also seeking an amendment to the Realized Property Order to authorize

the Trustee to distribute 80% of any future Realized Property received by the Trustee

after the date of the Braestone Settlement Approval Order.

49 The Trustee has consulted with Representative Counsel regarding this recommendation,

and Representative Counsel agrees that the proposed retention of 20o/o of all Realized

Property and the proposed distribution of all other Realized Property is fair and

reasonable in the circumstances.

50. As noted in the Second Report, the Trustee currently predicts that there will be a limited

number of projects that give rise to recoveries in the near term and that recoveries on

many of the syndicated mortgage loans are at risk. As such, the Trustee is of the view

that it must retain 20o/o of the Realized Property at this time and utilize the retained

Realized Property to maximize the recovery of additional Realized Property in the future.

As more Realized Property is generated, the Trustee will continue to reevaluate the

appropriate percentage of Realized Property that needs to be retained.

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51 The Trustee understands that these proceedings may have a disproportionate impact on

lnvestors whose projects have generated or will generate Realized Property at earlier

dates than other projects. As more fully described in the Second Report, the Trustee will

provide the Court with a recommendation regarding an appropriate allocation of the

costs that will be borne by specific projects, including the Braestone Project, at a later

date to fairly and equitably allocate the use of Realized Property among lnvestors.

APPROVAL OF THE TRUSTEE'S REPORTS, ACTIVITIES AND FEES

52. The Trustee is seeking the approval of the First Report, the Second Report, this Third

Report, its activities as set out in the First Report, the Second Report, and this Third

Report, and its fees and its counsel's fees from the date of the Appointment Order to

September 30, 2018.

53 The Trustee's activities are described at length in the First Report, attached hereto as

Appendix 2, the Second Report, attached hereto as Appendix 3, and this Third Report.

ln summary, the Trustee's activities have included, among other things:

(a) attending the ordinary course administration duties required in connection with

BDMC's syndicated mortgage loans;

(b) communicating with lnvestors;

(c) sending 46 of notices to lnvestors as of November 13, 2018;

(d) holding meetings with certain lnvestors;

(e) communicating with borrowers, senior lenders and other lenders;

(f) responding to enforcement actions by senior lenders on distressed projects;

(g) negotiating with borrowers regarding potential payouts and settlement offers in

respect of certain BDMC loans;

(h) seeking to recover amounts advanced by lnvestors where standstill

arrangements do not prevent the Trustee from taking action;

(i) responding to requests for postponements and taking other actions to permit the

projects to continue and to prevent enforcement by senior lenders;

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54.

0) performing an in-depth review of each real estate development project, including

obtaining new appraisals;

(k) investigating the BDMC loan structure;

(l) preparing three Reports to the Court and attending hearings before the Court;

(m)distributing 70% of the Realized Property to the applicable lnvestors pro rata as

required by the lnterim Stabilization Order and the Realized Property Order;

(n) attending to partial discharges of BDMC's security interests to facilitate sales of

individual units or the development of properties;

(o) continuing to engage with other stakeholders of BDMC and related parties,

including Ms. lldina Galati, BDMC's shareholder, and her counsel, Fortress and

its counsel, and CDCM and its counsel, regarding refinancing efforts,

enforcement actions, regulatory matters and the funding of these proceedings;

(p) continuing to engage with borrowers and with CDCM, as broker to some of the

borrowers, regarding the postponements and enforcement matters noted above

and to obtain detailed updates on the progress on projects and associated

financial reporting;

(q) engaging with FSCO and its legal counsel;

(r) engaging with mortgage brokerage and administration licensing authorities

outside of Ontario to discuss the Trustee's mandate and the Appointment Order

and to address matters related to BDMC's licenses in such jurisdictions, including

regulators in Manitoba, Saskatchewan, Alberta and British Columbia; and

(s) supervising the day to day business activities of BDMC, including supervising the

payment of payroll, rent and related matters.

Pursuant to the terms of the Appointment Order, the Trustee and its legal counsel shall

be paid their reasonable fees and disbursements and shall pass their accounts from time

to time.

The Trustee and its legal counsel are tracking their time by project. For certain tasks that

affect all lnvestors, including general notices and the preparation of the First Report, the

Second Report and certain components of this Third Report and the related Court

materials, the time will be charged to a general account that will, at a later date once the

55.

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totality of realizations are more clear, be allocated to the various projects based on

appropriate considerations and in accordance with further Court orders.

56.

Trustee Fees

57

The fees (excluding HST) of FAAN Mortgage Administrators lnc., in its capacity as

Trustee for the period April 20, 2018 to September 30, 2018, total $734,428.20; and HST

applicable to such amounts totals $95,475.67, for an aggregate amount of $829,903.87.

lnvoices for the fees of the Trustee, including summaries of the activities of the Trustee

for the applicable period are provided in the affidavit of Naveed Manzoor ("Manzoor

Affidavit"), attached as Appendix "8".

Detailed docket information in respect of the fees and disbursements of the Trustee for

this period are included in the confidential exhibit to the Manzoor Affidavit that is being

filed separately with this Court ("Confidential Manzoor Exhibit"). The Trustee is

seeking a sealing order with respect to the Confidential Manzoor Exhibit due to the fact

that the information contained in the Trustee's detailed invoices includes privileged and

commercially sensitive information regarding the projects and BDMC generally, and the

disclosure of that privileged and/or commercially sensitive information could have a

material adverse effect on the recoveries that may ultimately be available to lnvestors in

these proceedings.

The average hourly rate for the Trustee over the referenced billing period was

approximately $350.48/hour.

Fees of the Trustee's Counsel

The fees (excluding disbursements and HST) of Osler, Hoskin & Harcourt LLP ("Osler")

as counsel to the Trustee for the period April 20, 2018 to September 30, 2018, total

$782,270.50; Osler incurred $6,288.38 disbursements during the period; and HST

applicable to such amounts totals $102,427.65, for an aggregate amount of

$890,986.53. lnvoices for the fees, reimbursable expenses and applicable taxes of

Osler, including summaries of Osler's the activities in respect of the invoices, are

provided in the affidavit of Michael De Lellis ("De Lellis Affidavit"), attached as

Appendix "9".

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60 Full accounts in respect of the fees and disbursements of Osler for this period are

included in the confidential exhibit to the De Lellis Affidavit that is being separately filed

with this Court ("Confidential De Lellis Exhibit"). The Trustee is seeking a sealing

order with respect to the Confidential De Lellis Exhibit due to the fact that the information

contained in Osler's detailed invoices includes privileged and commercially sensitive

information regarding the projects and BDMC generally, and the disclosure of that

privileged and/or commercially sensitive information could have a material adverse effect

on the recoveries that may ultimately be available to lnvestors in these proceedings.

61. The average hourly rate for Osler over the referenced billing period was $691.91/hour

The Trustee is of the view that the hourly rates charged by Osler are consistent with the

rates charged by major law firms practicing in the area of insolvency and restructuring in

the Toronto market, and that the fees charged are reasonable in the circumstances.

Fee Recoveries

To date, the Trustee and its counsel have recovered approximately $153,500 on account of

professional fee reimbursements in connection with postponements, refinancings and other

significant transactions. The Trustee has succeeded in negotiating these fee recoveries on a

case by case basis and continues to seek to recover fees when appropriate.

CONCLUSION AND RECOMMENDATION

The Trustee recommends that the proposed Braestone Settlement Approval Order be

granted by the Court. The Trustee has negotiated the Braestone Settlement Agreement

and has obtained an ovenrvhelming positive response from affected lnvestors with

respect to the execution and implementation of the terms of the Braestone Settlement

Agreement. The Braestone Settlement Agreement contemplates the payment (when

combined with Paid lnterest) of the full principal amount due under the Loan Agreement

plus a further 15% recovery on that principal. lf implemented, the Braestone Settlement

Agreement will result in $10 million of Braestone Realized Property in the near term,

which will permit the Trustee to make a further distribution of Realized Property pro rata

to lnvestors who are entitled to same and will also provide additional funding for these

proceedings to facilitate Required Trustee Activities. The Trustee is of the view that it is

in the best interests of lnvestors to obtain the Braestone Realized Property now rather

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than to wait for an uncertain result in the future. The Trustee also seeks approval of its

activities to date and the fees and disbursements of the Trustee and its legal counsel in

connection with those activities. The Trustee will continue to attend to all BDMC matters

in an effort to maximize recoveries to Investors.

ALL OF WHICH lS RESPECTFULLY SUBMITTED this 19th day of November,2018.

tra,an, Mm$ ag v A) mi*ri.*tratwv I nrz.

FAAN MORTGAGE ADMINISTRATORS INC.,SOLELY IN ITS CAPACITY ASCOURT.APPOINTED TRUSTEE OFBUILDING & DEVELOPMENT MORTGAGES CANADA INC.,

AND NOT IN ITS PERSONAL OR ANY OTHER CAPACITY

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Appendix 1:

Appointment Order dated April 20,2018

37


ONTARIOSUPERIOR COURT OF JUSTIGE

COMMERCIAL LIST

THE HONOURABLE MR

JUSTICE HAINEY

BETWEEN:

FRIDAY, THE 2OTH DAY

OF APRIL, 2018

t3 tQiiti;


-and-


Applicant

Respondent

s

a:i

{t

ittJ*Et:t+;. i

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AA/D ADMINISTRATORS ACT, 2006, S.O. 2006, C.

29 and SECTION 101 0F THE COURTS OF JUSTICE AC1, R.S.O. 1990 c. C.43

APPOINTMENT ORDER

THtS APPLICATION, made by The Superintendent of Financial Services (the

"superintendent"), for an Order, inter alia, pursuant to section 37 of the Moftgage Brokerages,

Lenders and Adminislrafors Act, 2006, S.O. 2006, c. 29, as amended (the "MBLAA"), and

section 101 of the Courts of Justice Acf, R,S.O. 1990, c, C'43, as amended (the "CJA"),

appointing FAAN Mortgage Administrators lnc, ("FAAN Mortgage") as trustee (in such capacity,

the "Trustee"), without security, of all of the assets, undertakings and properties of Building &

Development Mortgages Canada lnc. (the "Respondent"), was heard this day at 330 University

Avenue, Toronto, Ontario;

ON READING the affidavit of Brendan Forbes sworn April 19,2018 and the exhibits

thereto (the "supporting Affidavit") and the consent of FAAN Mortgage to act as the Trustee,

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and on hearing the submissions of counsel for the Superintendent, counsel for FAAN Modgage

and such other counsel as were present, no one appearing for any other person on the service

list, as appears from the affidavit of service of Miranda Spence sworn April 19, 2018, filed;

SERVICE

1. THIS COURT ORDERS that the time for service and filing of the notice of application

and the application record is hereby abridged and validated so that this application is properly

returnable today and hereby dispenses with further service thereof,

APPOINTMENT

2, THIS COURT ORDERS that pursuant to section 37 of the MBLM and section 101 of

the CJA, FAAN Mortgage is hereby appointed Trustee, without security, of all of the assets,

underlakings and propefties of the Respondent, including, withoul limitation, all of the assets in

the possession or under the control of the Respondent, its counsel, agents and/or assignees but

held on behalf of any other party, including, but not limited to, lenders under any syndicate

morlgage ("lnvestors"), brokers, or borrowers, in each case whether or not such property is

held in trust or is required to be held in trust (collectively, the "Property"), which Property, for

greater certainty, includes any and all real property charges in favour of the Respondent (the

"Real Property Charges"), including, without limitation, any and all monetary and non-monetary

entitlements in respect to the assets and values thereunder, the period of which appointment

shall run from 12:01 a,m, on the date hereof until such date that all assets under all syndicated

mortgage loans have been realized and all Property has been distributed to those entitled to it,

TRUSTEE'S POWERS

3. THIS COURT ORDERS that the Trustee is hereby empowered and authorized, but not

obligated, to act at once in respect of the Property and, without in any way limiting the generality

of the foregoing, the Trustee is hereby expressly empowered and authorized to do any of the

following where the Trustee considers it necessary or desirable:

(a) to take possession of and exercise control over the Properly and any and all

proceeds, receipts and disbursements arising out of or front the Propedy;

to receive, preserve, protect and maintain control of the Property, or any part or

parts thereof, including, but not limited to, the holding of mortgage security in(b)

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trust on behalf of lnvestors, the administering of the mortgages, the changing of

locks and security codes, the relocating of Property to safeguard it, the engaging

of independent security personnel, the taking of physical inventories and the

placement of such insurance coverage as may be necessary or desirable;

(c) to manage, operate, and carry on the business of the Respondent, including,

without limitation, the powers to enter into any agreements, incur any obligations

in the ordinary course of business, cease to carry on all or any part of the

business, or cease to perform any contracts of the Respondent;

(d) to engage consultants, appraisers, agents, expefis, auditors, accountants,

managers, counsel and such other persons from time to time and on whatever

basis, including on a temporary basis, to assist with the exercise of the Trustee's

powers and duties, including, without limitation, those conferred by this Order;

(e) to purchase or lease such machinery, equipment, inventories, supplies, premises

or other assets to continue the business of the Respondent or any part or parts

thereof;

to receive and collect all monies and accounts now owed or hereafter owing to

the Respondent and to exercise all remedies of the Respondent in collecting

such monies, including, without limitation, to enforce any security held by the

Respondent, including, without limitation, such security held on behalf of

lnvestors;

(g) to settle, extend or compromise any indebtedness owing to the Respondent;

(h) to execgte, assign, issue and endorse documents of whatever nature in respect

of any of the Property, whether in the Trustee's name or in the name and on

behalf of the Respondent for any purpose pursuant to this Order, including,

without limitation, any documents in connection with any registration, discharge,

partial discharge, transfer, assignment or similar dealings in respect of any

mortgage ("Land Title Document") and, for greater ceftainty, the applicable land

registry office, registrar or other official under the Land Registration Reform Act

(Ontario), lhe Land Titles Act (Alberta), or any other comparable legislation in any

other jurisdiction be and is hereby directed, upon being presented with a certified

(0

4A

0)

-4

true copy of this Order and such Land Title Document, to register, discharge,

parlially discharge, transfer or otherwise deal with such mortgage in accordance

with such Land Title Document without any obligation to inquire into the propriety

of the execution or effect of such Land Title Document;

(i) to initiate, prosecute and continue the prosecution of any and all proceedings and

to defend all proceedings now pending or hereafter instituted with respect to the

Respondent, the Properly or the Trustee, and to settle or compromise any such

proceedings, The authority hereby conveyed shall extend to such appeals or

applications for judicial review in respect of any order or judgment pronounced in

any such proceeding;

to market any or all of the Property, including advertising and soliciting offers in

respect of the Property or any part or pafis thereof and negotiating such terms

and conditions of sale as the Trustee in its discretion may deem appropriate;

(k) with the approval of this Court, to sell, convey, transfer, lease or assign the

Property or any pafi or pafts thereof out of the ordinary course of business, and

in such case notice under subsection 63(4) of the Ontario Personal Propefty

Security Aet or section 31 of the Ontario Mortgages Acf, as the case may be,

shall not be required;

(l) with the approval of this Court, to restructure the Property in a manner that the

Trustee considers reasonable, including, without limitation, the conversion, in

whole or in part, of the Property or any part or parts thereof, out of the ordinary

course of business, into an alternative or different interest in the capital structure

of the Property or any part or parts thereof, including, without limitation, an

ownership interest therein;

(m) to apply for any vesting order or other orders necessary to convey the Propefty

or any part or parts thereof to a purchaser or purchasers thereof, free and clear

of any liens or encumbrances affecting such Property;

to report to, meet with and discuss with such affected Persons (as defined below)

as the Trustee deems appropriate on all matters relating to the Property and the

(n)

4L

-5-

Trustee's mandate, and to share information, subject to such terms as to

confidentiality as the Trustee deems advisable;

(o) to register a copy of this Order and any other Orders in respect of the Property

against title to any of the Property;

(p) to apply for any permits, licences, approvals or permissions as may be required

by any governmental authority and any renewals thereof for and on behalf of

and, if thought desirable by the Trustee, in the name of the Respondent;

(q) to enter into agreements with any trustee in bankruptcy appointed in respect of

the Respondent, including, without limiting the generality of the foregoing, the

ability to enter into occupation agreements for any propefiy owned or leased by

the Respondent;

to exercise any shareholder, partnership, joint venture or other rights which the

Respondent may have; and

(s) to take any steps reasonably incidental to the exercise of these powers or the

performance of any statutory obligations,

and in each case where the Trustee takes any such actions or steps, it shall be exclusively

authorized and empowered to do so, to the exclusion of all other Persons (as defined below),

including the Respondent, without interference from any other Person and without regard to any

arrangement in existence as of the'date hereof between the Respondent and lnvestors as to

how and when such actions or steps are to be taken. For greater cedainty, the Trustee shall be

and is empowered to take such actions or steps without seeking instructions from lnvestors

where the Trustee determines, in its sole discretion, that it is necessary and appropriate to do so

(having regard for the interests of lnvestors), and in all other cases, the Trustee is specifically

authorized to continue to comply with the existing arrangements, including any deemed consent

provisions contained therein.

DUTY TO PROVIDE ACCESS AND CO.OPERATION TO THE TRUSTEE

4. THIS COURT ORDERS that: (i) the Respondent; (ii) all of its current and former

directors, officers, employees, agents, accountants, legal counsel and shareholders, and all

other persons acting on its instructions or behalf; (iii) all other individuals, firms, corporations,

(r)

fe n q drsl'

-6-fuv o I np ,"eo I faprld { ft ,, {1 ny -* r, .'*

\ n t. 1,, g-Depa -')

42

flfc \)d&

governmental bodies or agencies or other entities having notice of this Order, including, without

limitation, Tsunami TechnologY

direct or indirect affiliates, and

FRDI, the "Fortress Entities"),

roup lnc., Fortress Real Developments lnc. ("FRDI"), all of its

entity under common control with FRDI (collectively with

any entity that is a joint venture among a Fortress Entity and

another entity, and each director, officer, employee and agent of any Fortress Entity all of the

foregoing, collectively, being "Persons" and each being a "Person") shall forthwith advise the

tee of the existence of any Properly in such Person's possession or control, shall grant

immediate and continued access to the Property to the Trustee, and shall deliver all such

roperly to the Trustee uPon the Trustee's request.

S, TH;S COURT ORDERS that, pursuant to and without limiting the generality of paragraph

4 of this Order, all Persons shall, unless otherwise instructed by the Trustee: (i) deliver to the

Trustee (or, in the case of RRSP or other registered funds administered by Olympia Trust

Company ("OTC') or Computershare Trust Company of Canada ("Gomputershare"), not

release to any Person without further Order of this Courl) any and all monies held in trust that

are related to the Respondent or its business (collectively, the "Trust Funds"), which Trust

Funds, for greater certainty, include any and all monies in any OTC or Computershare account

that are purported to be held in trust for the lnvestors in or beneficiaries under any of the Real

property Charges, including, without limitation, all monies held by way of interest reserves to

satisfy interest payments to such lnvestors or beneficiaries, which Trust Funds are to be held or

used by the Trustee in accordance with the terms of this Order and any further Order of this

Court; and (ii) upon the Trustee's request, provide an accounting of all funds received from or

on behalf of the Respondent or its associated businesses'

6. THIS COURT ORDERS that all Persons shall forthwith advise the Trustee of the

existence of any books, emails, user accounts, documents, securities, contracts, orders,

corporate and accounting records, and any other papers, records and information of any kind

related to the business or affairs of the Respondent, and any computer programs, computer

tapes, computer disks, or other data storage media containing any such information, including

copies of any previously performed electronic back ups (the foregoing, collectively, the

,,Records") in that Person's possession or control, and shall provide to the Trustee or permit the

Trustee to make, retain and take away copies thereof and grant to the Trustee unfettered

access to and use of accounting, computer, software and physical facilities relating thereto,

provided however that nothing in this paragraph 6 or in paragraph 7 of this Order shall require

the delivery of Records, or the granting of access to Records, which may not be disclosed or

43

1

provided to the Trustee due to the privilege attaching to solicitor-client communication or due to

statutory provisions prohibiting such disclosure.

7, THIS COURT ORDERS that if any Records are stored or othenruise contained on a

computer or other electronic system of information storage, whether by independent service

provider or otherwise, all Persons in possession or control of such Records shall forthwith give

unfettered access to the Trustee for the putpose of allowing the Trustee to recover and fully

copy all of the information contained therein whether by way of printing the information onto

paper or making copies of computer disks or such other manner of retrieving and copying the

information as the Trustee in its discretion deems expedient, and shall not alter, erase or

c.lestroy any Records without the prior written consent of the Trustee. Further, for the purposes

of this paragraph, all Persons shall provide the Trustee with all such assistance in gaining

immediate access to the information in the Records as the Trustee may in its discretion require

including providing the Trustee with instructions on the use of any computer of other system and

providing the Trustee with any and all access codes, account names and account numbers that

may be required to gain access to the information. Paragraphs 6 and 7 of this Order do not

apply to any materials obtained by the Royal Canadian Mounted Police pursuant to any warrant

issued under the CriminalCode, R'S'C. 1985, c. C-46'

L THIS COURT ORDERS that the Trustee shall provide each of the relevant landlords

with notice of the Trustee's intention to remove any fixtures from any leased premises at least

seven (7) days prior to the date of the intended removal. The relevant landlord shall be entitled

to have a representative present in the leased premises to observe such removal and, if the

landlord disputes the Trustee's entitlement to remove any such fixture under the provisions of

the lease, such fixture shall remain on the premises and shall be dealt with as agreed between

any applicable secured creditors, such landlord and the Trustee, or by further Order of this

Court upon application by the Trustee on at least two (2) days' notice to such landlord and any

such secured creditors,

NO PROCEEDINGS AGAINST THE T'RUSTEE

g. THIS COURT ORDERS that no proceeding or enforcement process in any court or

tribunal (each, a "Proceeding"), shall be commenced or continued against the Trustee except

with tlre written consent of the Trustee or with leave of this court.

44

-8-

NO PROCEEDINGS AGAINST THE RESPONDENT OR THE PROPERTY

10. THIS COURT ORDERS that, with the exception of the Suspension and Penalty Orders

(as such term is defined in the Supporting Affidavit): (i) no Proceeding against or in respect of

any of the Respondent, the Property or the Superintendent (in the last case, with respect to any

matters arising from the Respondent or the Property) shall be cornmenced or continued except

with the written consent of the Trustee or with leave of this Court; and (ii) any and all

proceedings currently under way against or in respect of any of the Respondent or the Property

are hereby stayed and suspended pending further Order of this Court,

NO EXERCISE OF RIGHTS OR REMEDIES

11. THIS COURT ORDERS that, with the exception of the Suspension and Penalty Orders,

all rights and remedies against the Respondent, the Trustee, or affecting the Properly

(including, without limitation, pursuant to any arrangement in existence as of the date hereof

between the Respondent and lnvestors as to how and when the actions or steps contemplated

by paragraph 3 of this Order are to be taken), are hereby stayed and suspended except with the

written consent of the Trustee or leave of this Court, provided however that this stay and

suspension does not apply in respect of any "eligible financial contract" as defined in the

Bankruptcy and Insolvency Act, R,S,C. 1985, c. B-3, as amended (the "BlA"), and further

provided that nothing in this paragraph shall: (i) empower the Trustee or the Respondent to

carry on any business which the Respondent is not lawfully entitled to carry on; (ii) exempt the

Trustee or the Respondent from compliance with statutory or regulatory provisions relating to

health, safety or the environment; (iii) prevent the filing of any registration to preserve or perfect

a security interest; (iv) prevent the registration of a claim for lien; or (v) prevent the filing and

service of a statement of claim solely to permit the per-fection of a lien, provided that no further

proceedings on such statement of claim shall be permitted other than pursuant to paragraph 10'

NO INTERFERENCE WITH THE TRUSTEE

12. THIS COURT ORDERS that no Person shall discontinue, fail to honour, alter, interfere

with, repudiate, terminale or cease to perform any right, renewal right, contract, agreement,

licence or permit in favour of or held by the Respondent, without written consent of the Trustee

or leave of this Court, including, for greater certainty, any licenses granted to the Respondent to

act as an administrator of or lender under or administer syndicated modgage loans under the

MBLAA, The Mortgage Brokers Acf (Manitoba), Ihe Mortgage Brokerages and Morlgage

45

9-

Administrators Act (Saskatchewan), the Real Estate Acf (Alberta), lhe Mortgage Brokers Act

(British Columbia) or any other comparable legislation in any other jurisdiction where the

Respondent is currently licensed.

CONTINUATION OF SERVICES

'13, THIS COURT ORDERS that all Persons having oral or written agreements with the

Respondent, or statutory or regulatory mandates for the supply of goods and/or services,

including, without limitation, all computer software, communication and other data services

(including, for greater cedainty, all goods and/or services provided by Tsunami Technology

Group lnc. in respect of the Respondent), centralized banking services, payroll services,

insurance, transportation services, utility or other services to the Respondent are hereby

restrained until further Order of this Court from discontinuing, altering, interfering with or

terminating the supply of such goods or services as may be required by the Trustee, and that

the Trustee shall be entitled to the continued use of the Respondent's current telephone

numbers, facsimile numbers, internet addresses and domain names, provided in each case that

the normal prices or charges for all such goods or services received after the date of this Order

are paid by the Trustee in accordance with normal payment practices of the Respondent or

such other practices as may be agreed upon by the supplier or service provider and the

Trustee, or as may be ordered by this Court,

TRUSTEE TO HOLD FUNDS

14. THIS COURT ORDERS that allfunds, monies, cheques, instruments, and other forms of

payments received or collected by the Trustee from and after the making of this Order from any

source whatsoever, including, without limitation, the sale of all or any of the Property and the

collection of any accounts receivable in whole or in part, whether in existence on the date of this

Order or hereafter coming into existence, shall be deposited into one or more accounts

controlled by the Trustee or, if the Trustee determines it is advisable, new accounts to be

opened by the Trustee (the "Post Trusteeship Accounts") and the monies standing to the

credit of such Post Trusteeship Accounts from time to time, net of any disbursements provided

for herein, shall be held by the Trustee to be paid in accordance with the terms of this Order or

any further Order of this Court.

46

- 10-

EMPLOYEES

15. THIS COURT ORDERS that all employees of the Respondent shall remain the

employees of the Respondent until such time as the Trustee, on the Respondent's behalf, may

terminate the employment of such employees, The Trustee shall not be liable for any

employee-related liabilities, including any successor employer liabilities as provided for in

subsection 14,06(1.2) of the BlA, other than such amounts as the Trustee may specifically

agree in writing to pay, or in respect of its obligations under subsections 81.4(5) and 81.6(3) of

the BIA or under the Wage Earner Protection Program Act'

PIPEDA

16, THIS COURT ORDERS that, pursuant to clause 7(3Xc) of the Canada Personal

lnformation Protection and Electronic Documents Act and any other applicable privacy

legislation, the Trustee shall disclose personal information of identifiable individuals to

prospective purchasers or bidders for the Property and to their advisors, but only to the extent

desirable or required io negotiate and attempt to complete one or more sales of the Property

(each, a "Sale"), Each prospective purchaser or bidder to whom such personal information is

disclosed shall maintain and protect the privacy of such information and limit the use of such

information to its evaluation of the Sale, and if it does not complete a Sale, shall return all such

information to the Trustee, or in the alternative destroy atl such information, The purchaser of

any propedy shall be entitled to continue to use the personal information provided to it, and

related to the Property purchased, in a manner which is in all material respects identical to the

prior use of such information by the Respondent, and shall return all other personal information

to the Trustee, or ensure that all other personal information is destroyed.

LIMITATION ON ENVIRONMENTAL LIABILITIES

j7. THIS COURT ORDERS that nothing herein contained shall require the Trustee to

occupy or to take control, care, charge, possession or management (separately and/or

collectively, "Possession") of any of the Property that might be environmentally contaminated,

might be a pollutant or a contaminant, or might cause or contribute to a spill, discharge, release

or deposit of a substance contrary to any federal, provincial or other law respecting the

protection, conservation, enhancement, remediation or rehabilitation of the environment or

relating to the disposal of waste or other contamination including, without limitation, the

Canadian Environmentat Protection Act,lhe Ontario Environmental Protection Act,lhe Ontario

47

- ll -

Water Resources Act, or lhe Ontario Occupational Health and Safety Acf and regulations

thereunder (the "Environmental Legislation"), provided however that nothing herein shall

exempt the Trustee from any duty to report or make disclosure imposed by applicable

Environmental Legislation, The Trustee shall not, as a result of this Order or anything done in

pursuance of the Trustee's duties and powers under this Order, be deemed to be in Possession

of any of the Property within the meaning of any Environmental Legislation, unless it is actually

in possession.

LIMITATION ON THE TRUSTEE'S LIABILITY

18. THIS COURT ORDERS that the Trustee shall incur no liability or obligation as a result of

its appointment or the carrying out the provisions of this Order, save and except for any gross

negligehce or wilful misconduct on its part, or in respect of its obligations under subsections

81,4(5) or 81.6(3) of the BIA or under lhe Wage Earner Protection Program Acl. Nothing in this

Order shall derogate from the protections afforded the Trustee by section 14,06 of the BIA or by

any other applicable legislation.

TRUSTEE'S ACCOUNTS

19. THIS COURT ORDERS that the Trustee and counsel to the Trustee shall be paid their

reasonable fees and disbursements, in each case at their standard rates and charges unless

othenrvise ordered by the Court on the passing of accounts, which fees and disbursements shall

be added to the indebtedness secured by the Real Property Charges and that the Trustee and

counsel to the Trustee shall be entitled to and are hereby granted a charge (the "Trustee's

Charge") on the Property, as security for such fees and disbursements, both before and after

the making of this Order in respect of these proceedings, and that the Trustee's Charge shall

rm a first charge on the Property in priority to all security interests, trLlsts, liens, charges and

ncumbrances, statutory or otherwise, in favour of any Person, but subject to subsections

4.06(7), 81,4(4) and 81.6(2) of the BlA,

0, THIS COURT ORDERS that the Trustee and its legal counsel shall pass their accounts

m time to time, and for this purpose the accounts of the Trustee and its legal counsel are

ereby referred to a judge of the Commercial List of the Ontario Superior Court of Justice.

1. THIS COURT ORDERS that prior to the passing of its accounts, the Trustee shall be at

berty from time to time to apply reasonable amounts, out of the monies in its hands, against its

4B

-12-

fees and disbursements, including legal fees and disbursements, incurred at the standard rates

and charges of the Trustee or its counsel, and such amounts shall constitute advances against

its remuneration and disbursements when and as approved by this Court'

FUNDING OF TI-IE APPOINTMENT

22. TH|S COURT ORDERS that the Trustee be at liberty and it is hereby empowered to

borrow by way of a revolving credit or othenivise, such monies from time to time as it may

consider necessary or desirable, provided that the outstanding principal amount does not

exceed $1,000,000 (or such greater amount as this Court may by furlher Order authorize) at

any time; at such rate or rates of interest as it deems advisable for such period or periods of

time as it may arrange, for the purpose of funding the exercise of the powers and duties

conferred upon the Trustee by this Order, including interim expenditures. The whole of the

properly shall be and is hereby charged by way of a fixed and specific charge (the "Trustee's

Borrowings Charge") as security for the payment of the monies borrowed, together with

interest and charges thereon, in priority to all security interests, trusts, liens, charges and

encumbrances, statutory or othenvise, in favour of any Person, but subordinate in priority to the

Trustee's Charge and the charges as set out in subsections 14.06(7), 81'4(4) and 81'6(2)of the

BIA.

23. THIS COURT ORDERS that neither the Trustee's Borrowings charge nor any other

security granted by the Trustee in connection with its borrowings under this Order shall be

enforced without leave of this Court.

24. THIS COURT ORDERS that the Trustee is at liberty and authorized to issue certificates

substantially in the form annexed as Schedule "A" hereto (the "Trustee's Gertificates") for

any amount borrowed by it pursuant to this Order,

25. TH]S COURT ORDERS that the monies from time to time borrowed by the Trustee

pursuant to this order or any further order of this Court and any and all Trustee's Certificates

evidencing the same or any part thereof shall rank on a paripassu basis, unless otherwise

agreed to by the holders of any prior issued Trustee',s certificates,

SERVICE AND NOTICE

26. TH|S COURT ORDERS that the E-Service Protocol of ihe Commercial List (the

,,protocol,,) is approved and adopted by reference herein and, in these proceedings, the service

49

- lJ -

of documents made in accordance with the Protocol (which can be found on the Commercial

List website at http:/lwww.ontariocourts.ca/sci/practice/practice-directions/toronto/eservice-

commercial/) shall be valid and effective service, Subject to Rule 17.05 of the Rules of Civil

procedure (the "Rules"), this Order shall constitute an order for substituted service pursuant to

Rule 16.04 of the Rules. Subjectto Rule 3.01(d)of the Rules and paragraph 21 of the Protocol,

service of documents in accordance with the Protocol will be effective on transmission, This

Court furlher orders that a Case Website shall be established in accordance with the Protocol

with the following U RL: www, fa anmotgagead m in' com'

27, THIS COURT ORDERS that if the service or distribution of documents in accordance

with the Protocol is not practicable, the Trustee is at liberly to serve or distribute this Order, any

other materials and orders in these proceedings, any notices or other correspondence, by

forwarding true copies thereof by prepaid ordinary mail, courier, personal delivery or facsimile

transmission to the Respondent's creditors or other interested parties at their respective

addresses as last shown on the records of the Respondent and that any such service or

distribution by courier, personal delivery or facsimile transmission shall be deemed to be

received on the next business day following the date of forwarding thereof, or if sent by ordinary

mail, on the third business day after mailing'

GENERAL

Zg. THIS COURT ORDERS that the Trustee may from time to time apply to this Court for

advice and directions in the discharge of its powers and duties hereunder'

29, TH|S GOURT ORDERS that nothing in this Order shall prevent the Trustee from acting

as a trustee in bankruptcy of the Respondent'

30, TH1S COURT ORDERS that Confidential Exhibits (as defined in the Supporting Affidavit)

be and are hereby sealed until further Order of this Court.

31. THIS COURT HEREBY REQUESTS the aid and recognition of any coutl, tribunal,

regulatory or administrative body having jurisdiction in Canada or in the United States to give

effect to this Order and to assist the Trustee and its agenis in carrying out the terms of this

Order, All courts, tribunals, regulatory .and administrative bodies are hereby respectfully

requested to make such orders and to provide such assistance to the Trustee, as an officer of

50

-14-

this Court, as may be necessary or desirable to give effect to this Order or to assist the Trustee

and its agents in carrying out the terms of this Order,

32, TH|S COURT ORDERS that the Trustee be at liberly and is hereby authorized and

empowered to apply to any court, tr,ibunal, regulatory or administrative body, wherever located,

for the recognition of this Order and for assistance in carrying out the terms of this Order, and

that the Trustee is authorized and empowered to act as a representative in respect of the within

proceedings for the purpose of having these proceedings recognized in a jurisdiction outside

Canada.

33, THIS COURT ORDERS that any interested party may apply to this Court to vary or

amend this Order on not less than seven (7) days' notice, or such shorter period of time as the

Coufi may permit, to the Trustee and to any other party likely to be affected by the order sought

or upon such other notice, if any, as this Court may order\-

ENTERED AT /INSCRIT ATORONTO

lJ /#^t-tJt}?t o I sT B E No I

APR ? O ?O1O

{\ilPFEHI FAru

51

SCHEDULE "A''

TRUSTEE CERTIFICATE

CERTIFICATE NO

AMOUNT *

1. THIS lS TO CERTIFY that FAAN Morlgage Administrators lnc,, the Trustee (in such

capacity, the "Trustee") of all of the assets, undertakings and properties of Building &

Development Mortgages Canada lnc. (the "Respondent"), including, without limitation, all of the

assets in possession or under the control of the Respondent, its counsel, agents and/or

assignees but held on behalf of any other party, including, but not limited to, lenders under any

syndicate modgage ("lnvestors"), brokers, or borrowers, in each case whether or not such

property is held in trust or is required to be held in trust (collectively, the "Property") appointed

by Order of the Ontario Superior Courl of Justice (Commercial List) (the "Court") dated the 20th

day of April, 20'18 (the "Order") made in an application having Court file number CV-18-596204-

gOCL, has received as such Trustee from the holder of this certificate (ihe "Lender") the

principal sum of $i*.r,>;, Oeing part of the total principal sum of $,€"s# which the Trustee is

authorized to borrow under and pursuant to the Order.

2. The principal sum evidenced by this certificate is payable on demand by the Lender with

interest thereon calculated and compounded [daily][monthly not in advance on the 't1; day of

each monthl after the date hereof at a notional rate per annum equal to the rate of '*# per cent

above the prime commercial lending rate of Royal Bank of Canada from time to tirne.

3. Such principal sum with interest thereon is, by the terms of the Order, together with the

principal sums and interest thereon of all other certificates issued by the Trustee pursuant to the

Order or to any further order of the Court, a charge upon the whole of the Property (as defined

in the Order), in priority to the security interests of any other person, but subject to the priority of

the charges set out in the Order and in lhe Bankruptcy and lnsolvency Acf, and the right of the

Trustee to indemnify itself out of such Properly in respect of its remuneration and expenses.

4. All sums payable in respect of principal and interest under this certificate are payable at

the main office of the Lender at Toronto, Ontario.

S. Until all liability in respect of this certificate has been terminated, no certificates creating

charges ranking or purporting to rank in priority to this certificate shall be issued by the Trustee

52

a

to any person other than the holder of this certificate without the prior written eonsent of the

holder of this certificate.

6, The charge securing this certificate shall operate so as to permit the Trustee to deal with

the Properly (as defined in the Order) as authorized by the Order and as authorized by any

fufiher or other order of the Cou11,

7, The Trustee does not undertake, and it is not under any personal liability, to pay any

sum in respect of which it may issue certificates under the terms of the Order.

DATED the

-

day of 2018

FAAN MORTGAGE ADMINISTRATORS INC.,solely in its capacity as Trustee of the Property (as

defined in the Order), and not in its personalcapacity

Per:

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54

Appendix 2:

First Report of the Trustee dated June 20,2018, without exhibits

55



(coMMERCIAL LIST)

BETWEEN


Applicant

-and-


Respondent

APPLICATION UNDER SECTION 37 OF THE

MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006' C.

29 and sEcTloN 101 OF THE COURTS OF JUSTICE AC4 R.S.O. 1990 c. G'43

FIRST REPORT OF THE TRUSTEE

JUNE 19,2018

FAANMORIBAIDMiXISIRA


$tTORS

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TABLE OF CONTENTS

TNTRODUCTION........

PURPOSE OF THE FIRST REPORT...........".

SCOPE AND TERMS OF REFERENCE ..............

BACKG ROU N D.............

ACTIVITIES OF THE TRUSTEE TO DATE

FUNDING OF THESE PROCEEDINGS AND CASH FLOW PROJECTION

FUNDS HELD IN BDMC BANK ACCOUNTS.""....

FUNDS RECEIVED FROM BORROWERS SINCE THE TRUSTEE,S APPOINTMENT':.."..

REPRESENTATION FOR INVESTORS...........,


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INDEX OF APPENDICES

Appendix 1

Appendix 2

Appendix 3

Appendix 4

Appointment Order dated April 20,2018

Forbes Affidavit sworn on April 19,20'|'8, without exhibits

Project Status Ghart as of May 31,2018

Gash Flow Projection to October 31,2018

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(coMMERCIAL LIST)

BETWEEN


Applicant

-and-


Respondent


MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, C'

. 29 and SECTION 101 0F THE GOURTS OF JUSTICE ACT, R.S.O' 1990 c. C.43

FIRST REPORT OF THE TRUSTEE

JUNE 19,2018

INTRODUCTION

On April 20,2018, pursuant to an order ("Appointment Order") of the Honourable Mr.

Justice Hainey of the Ontario Superior Court of Justice (Commercial List) ("Court"), FAAN

Mortgage Administrators lnc. ('FAAN Mortgage") was appointed as trustee ("Trustee")

over all of the assets, undertakings and properties of Building & Development Mortgages

Canada lnc. ("BDMG") including, without limitation, all of the assets in the possession or

under the control of BDMC, its counsel, agents and/or assignees but held on behalf of any

other party, including, but not limited to, lenders under syndicated mortgage loans

("lnvestors"), brokers, or borrowers, in each case whether or not such property was or is

held in trust or was or is required to be held in trust (collectively, the "Property"). The

Appointment Order was issued following an application made by the Superintendent of

Financial services ("superintendent") pursuant to section 37 of the Mortgage

Brokerages, Lenders and Administrators Act, 2006 (Ontario), as amended ("MBLAA'),

and section 101 of the Courfs of Justice Acf (Ontario), as amended. A copy of the

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Appointment Order is attached as Appendixul'hereto'

The affidavit of Brendan Forbes, legal counsel at the Ministry of the Attorney General Civil

Law Division, Financial Services Commission of Ontario ('FSCO') branch, sworn on April

19,2O1B,was filed in connection with the Superintendent's application for the Appointment

Order ("Forbes Affidavit"). The Forbes Affidavit contains detailed background information

regarding BDMC, its business and affairs, the circumstances leading to the Trustee's

appointment, and the regulation of syndicated mortgage loans in Ontario generally.

Capitalized terms not othenruise defined in this Report have the meanings ascribed to them

in the Forbes Affidavit, a copy of which is attached as Appendix"2", without appendices.

Materials filed w1h the Court with respect to these proceedings (other than confidential

materials filed under seal), including the Forbes Affidavit, the Superintendent's application

record, motion materials, court reports and the Orders and endorsements issued by the

Court, are accessible on the Trustee's website at: www.faanmortgageadmin'com

("Trustee's Website").

4.

PURPOSE OF THE FIRST REPORT

5.

The purpose of this first report of the Trustee ("Report") is to provide stakeholders with an

update on the Trustee's activities since the date of the Appointment Order and to support

the Trustee's request for an order ("stabilization order"), inter alia:

(a) approving certain interim stabilization measures in connection with BDMC's estate,

including in respect of funds held by BDMC as at the date of the Trustee's

appointment and the funds received by the Trustee following its appointment;

(b) appointing representative counsel to represent lnvestors in respect of these

proceedings; and

(c) clarifying the Trustee's powers with respect to the registration, discharge, partial

discharge, postponement and subordination of any mortgages so as to address

any concerns of the applicable land titles offices.

ln support of the Trustee's request for the Stabilization Order, the Report describes the

following matters:

(a) background information concerning BDMC and its business;

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(b) the Trustee's activities to date;

(c) the need for certainty with respect to funding of these proceedings, including

BDMC's projected cash flow until October 31,2018 ("stabilization Period");

(d) details regarding funds held in bank accounts maintained by BDMC, including

funds received by the Trustee following its appointment, and the Trustee's

proposed use of such funds during the stabilization Period; and

(e) the need for collective representation for the lnvestors'

The Trustee is seeking the Stabilization Order, among other things, to clarify and confirm

the Trustee's rights and responsibilities under the Appointment Order in respect of certain

property that is subject to a Court-ordered priority charge to secure the payment of the

Trustee's and its legal counsel's fees, disbursements and other costs of these proceedings

(,,Trustee's Charge") and to put some temporary restrictions on the Trustee's rights with

respect to these funds during the Stabilization Period in order to give clarity to BDMC's

numerous stakeholders. During the Stabilization Period, the Trustee intends to continue

to analyze the remaining 43 projects that are subject to syndicated mortgage loans

administered by BDMC and develop a strategy to maximize recoveries for the members

of the investing public who have made loans through BDMC'

The Trustee will report back to the Court prior to the expiration of the Stabilization Period

to give the Court, lnvestors, borrowers, brokers and other stakeholders further information

regarding BDMC and its business and affairs, to seek further advice and directions from

the Court regarding the use of the funds held or received by the Trustee and subject to

the Trustee's Charge, and the proposed next steps in these proceedings.


ln preparing this Report, the Trustee has relied upon unaudited financial information

provided by, inter a/ra, BDMC, Fortress (defined below), Canadian Development Capital

& Mortgage Services lnc. ("CDCM"), the mortgage brokerage who assumed the mortgage

duties of BDMC (as explained further below), and certain of the individual borrowers who

have borrowed funds from BDMC under various syndicated mortgage loans administered

by BDMC. While the Trustee reviewed various documents provided by BDMC, CDCM,

and applicable borrowers (including, among other things, unaudited internal information,

appraisals and financial projections), the Trustee's review does not constitute an audit or

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verification of such information for accuracy, completeness or compliance with Generally

Accepted Assurance Standards ("GAAS'), Generally Accepted Accounting Principles

('GAAP"), or lnternational Financial Reporting Standards ("|FRS"). Accordingly, the

Trustee expresses no opinion or other form of assurance pursuant to GAAS, GAAP or

IFRS, or any other guidelines, with respect to such information-

Some of the information used and relied upon in preparing this Report consists of financial

projections. The Trustee cautions that these projections are based upon assumptions

about future events and conditions that are not ascertainable. The actual results may vary

from the projections, even if the assumptions set forth therein materialize, and the

variations from the projections could be significant. The Trustee's review of the future

oriented information used to prepare this Report did not constitute an audit or review of

such information under GAAS, GAAP or IFRS or any other guidelines'

10. This Report has been prepared for the use of this Court and BDMC's stakeholders as

general information relating to BDMC and to assist the Court with respect to the Trustee's

request for the proposed Stabilization Order. Accordingly, the reader is cautioned that this

Report may not be appropriate for any other purpose. The Trustee will not assume

responsibility or liability for losses incurred by the reader as a result of the circulation,

publication, reproduction or use of this Report contrary to the provisions of this paragraph.

11. All references to dollars are in Canadian currency unless othenryise noted.

BACKGROUND

BDMC is an Ontario corporation with its head office located at25 Brodie Drive, Unit #8,

Richmond Hill, Ontario. The Trustee understands that BDMC is wholly owned by lldina

Galati, who is also BDMC's sole director and officer. BDMC was formerly known by the

name Centro Mortgage lnc. and changed its name to BDMC in or around January 2016.

13. BDMC was the principal mortgage broker and administrator used by Fortress Real

Developments lnc. and certain related entities (collectively, "Fortress") to raise initial

financing or "equity" from the investing public for early stage real estate developments.

Fortress and its affiliates are development consultants or borrowers with respect to various

real property development projects. Often, the real property in question consisted of

vacant lands or of projects taken over from other developers, including, in some cases,

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projects that were facing financial difficulties. BDMC acted as lender (in trust for members

of the investing public), who made loans to borrowers through syndicated mortgage loan

agreements where BDMC acied as lender to the Borrower and administrator for the

lnvestors. Syndicated mortgage loans are regulated by FSCO and are more fully

described in the Forbes Affidavit.

The funds loaned through BDMC were generally advanced for the purpose of providing

financing for the early stages of a real estate development project. The use of proceeds

from these loans included repaying vendor take back mortgages and bridge loans,

obtaining initial planning consents, attending to zoning changes, funding various

consultants involved in conceiving and commencing a real estate development and other

"soft costs" associated with the development. Funds were also used to pay interest on

other loans made to the applicable borrower in question'

According to the Forbes Affidavit, significant portions of the sums advanced by lnvestors

through BDMC were used to pay "development consultant fees". The development

consultant fees were in an amount that generally appears to be equal to approximately

35% of the principal amount advanced under the applicable BDMC syndicated mortgage

loan. A portion of this fee (approximately 50%) would be paid to the lnvestors' brokers,

FMP Mortgage lnvestments lnc., FFM Capital lnc. and FSDS Broker Services lnc. (who

are generally referred to by BDMC and Fortress as the "F Brokers"); a portion would be

paid to BDMC (now CDCM) in its capacity as the borrowers' broker; and the balance, net

of any additional fees, would be paid to Fortress. As described in the Forbes Affidavit, the

portion of the fees paid to Fortress typically ranged between 2oh and 5% of project costs.

ln some instances, another portion of the funds advanced by lnvestors was retained by

BDMC to pay interest owing to those same lnvestors on the syndicated mortgage loan.

The funds held to pay interest on the BDMC loan were retained as an "interest reserve" in

a separate BDMC account established for that purpose ("lnterest Reserve Account").

Depending on the terms of the applicable loan agreement, interest reserve funds were

paid or to be paid to lnvestors periodically in accordance with the applicable loan

agreement until the reserve funds were exhausted or held until the time when the

syndicated mortgage loan is repaid. However, as more particularly described below in the

section "Funds Held in BDMC Bank Accounts", the Trustee has become aware that certain

of the funds held in the lnterest Reserve Account are held for the benefit of borrowers and

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have been historically deployed to or on behalf of borrowers for purposes unrelated to the

payment of interest to lnvestors, including paying interest amounts owing to priority

lenders and paying expenses incurred on projects.

Although the funds advanced by lnvestors were secured by mortgages held by BDMC on

the related real property, the lnvestors typically expressly agreed to subordinate their

mortgages to current or future lenders who agreed to provide construction financing.l ln

most cases, the BDMC mortgages rank third or lower in priority in respect of the specific

real property in issue, and behind the mortgages securing the sums owing to senior

lenders, in amounts that are often significant. Moreover, many lnvestors agreed to terms

that permit repayment "waterfalls" that, at least in some instances, appear to permit

owners of the real estate (including the borrowers and owners of the borrowers) to recover

some of the amounts they invested in the developments in priority to the amounts loaned

by the lnvestors. The Trustee is still in the process of investigating these complex priority

arrangements and notes that the priority arrangements vary from project to project.

Approximately $560 million is currently invested in syndicated mortgage loans

administered by BDMC by over 11,000 individual lnvestors. These funds have been

advanced in connection with 44 different projects that are in various stages of

development. The following table summarizes the status of the various projects

administered by BDMC, based on BDMC's records as of May 31,2O18:

Proiect Status Number of Proiects

BDMCSML Debt

($000s)

DevelopmentPre-constructionConstructionCompletedTotal

24b

122

260,06673,042

216,27410 905

$560,287

I Construction financing in very broadly construed in the syndicated mortgage loan documents and

generally includes all the funds needed to complete the project that are not financed by BDMC, includingfurther "mezzanine" debt. The Trustee has been advised by borrowers and others that the agreementsrequire BDMC to subordinate up to a certain maximum amount of construction financing specified in the

syndicated mortgage loan documents as being permitted to rank in priority to BDMC's mortgages.

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A detailed schedule of the status of the ongoing projects, based on BDMC's records as of

May 31 , 2018, is provided as Appendix "3".2 As discussed in more detail below, all

amounts owing on BDMC loans made to the Victoria Medical Borrower (defined below)

have been repaid, BDMC's security in respect of such loans has been discharged and the

Trustee is holding the amounts that have been repaid. Further, the Dunsire Project

(defined below) is subject to a receivership proceeding and an order authorizing the sale

of the property free and clear of the security in favour of BDMC was approved by the Court.

More details on these matters are described below.

As described in more detail in the Forbes Affidavit, FSCO had received numerous

complaints from lnvestors regarding BDMC's activities and the performance of their

investments in BDMC compared to the promises the lnvestors say were made to them at

the time they invested. These complaints prompted FSCO to engage in a lengthy

investigation of BDMC's business and activities. As a result of its investigations, FSCO

concluded that there were significant regulatory issues associated with BDMC's

syndicated mortgages activities.

FSCO's investigation into BDMC ultimately resulted in the Superintendent and BDMC

entering into a settlement agreement executed on January 31,2018 ("Settlement

Agreement"). Key conditions of the Settlement Agreement included: (i) that BDMC

consent to the revocation of its Ontario mortgage brokerage license; (ii) that BDMC retain

its Ontario mortgage administration license; (iii) that BDMC enter into and comply with a

management and administration agreement ("MAA") appointing FAAN Mortgage as the

arm's length, independent manager of BDMC's syndicated mortgage loan administration

business ("Administration Business"); and (iv) that BDMC agreed to pay an

administrative penalty of $400,000 by no later than July 31,2019'

On February 1,2018, FSCO revoked BDMC's Ontario mortgage brokerage license with

BDMC's consent pursuant to the Settlement Agreement. However, CDCM, an entity also

owned by BDMC's principal, has received a mortgage brokerage license from FSCO and

has assumed the functions as brokerage for the borrowers that were previously carried

out by BDMC on many existing projects. A relative of the owner of BDMC is the principal

broker of CDCM. Many of BDMC's former employees are now employed by CDCM'

2 Although funds have only been advanced in respect of 44 projects, the chart includes a 45th project, 189 Dundas,

for completeness because BDMC has had some involvement with the 189 Dundas project.

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CDCM is often the pdncipal entity facilitating contact between BDMC and the borrowers;

however, the Trustee is working, with the assistance of CDCM, on establishing direct

communications with all borrowers.

On February 7,2018, the MAA was executed and FAAN Mortgage assumed the role of

arm's length, independent manager of the Administration Business. As noted in the Forbes

Affidavit, the Settlement Agreement expressly provides that its terms and any related

documents, information or records are to remain confidential and subject to settlement

privilege, except in certain limited circumstances. As such, the specific terms of the MAA

cannot be disclosed.

During the period from February 7,2018 to the date of the Appointment Order, FAAN

Mortgage acted as the independent manager of the Administration Business. During this

period, FMN Mortgage was presented with a number of urgent demands for

postponements of security granted to BDMC (in trust for lnvestors) to new loans. CDCM

and certain borrowers advised FAAN Mortgage that new loans were needed either to

prevent enforcement action by senior lenders and the immediate failure of a project or to

fund critical steps necessary for projects to continue. ln addition, FAAN Mortgage

responded to a number of enforcement steps that were taken by senior lenders.

On April 20, 2018, as a result of events that were detailed extensively in the Forbes

Affidavit, including the RCMP's execution of a search warrant at BDMC's premises on

April 13,2018, the Superintendent brought an application to Court seeking the

Appointment Order to appoint FAAN Mortgage as Trustee. Among other things, there had

been a number of defaults under the MAA, including access to documents and other

information and failure to make mandatory payments, each as more particularly described

in the Forbes Affidavit. As a result, FAAN Mortgage was operating with insufficient

information regarding BDMC's arrangements and the status of the various projects where

BDMC was lender to respond effectively to the urgent requests described above.

Since its formal appointment as Trustee, the flow of information from Fortress and CDCM

has improved significantly, but BDMC's mortgage loans remain under considerable stress.

As noted above and as described in more detail in the Forbes Affidavit, BDMC's security

is often in third place or lower and, in many cases, BDMC is required under the applicable

loan agreements to subordinate its security to facilitate further advances by senior lenders

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under existing loans or the advancement of funds under new loans. The Trustee has been

advised that many of the projects need further funding to permit developments to continue

and that such funding is only available if the security interests granted to BDMC are further

postponed and subordinated to new financing.

As discussed in more detail under "Activities of the Trustee to Date", the Trustee continues

to face many urgent demands to execute postponements and subordinations to new

lenders and to address various types of enforcement activities by senior lenders. ln

addition, the Trustee has received demands to turn over certain funds held by BDMC for

borrowers, lnvestors and others'

Under the Appointment Order, the Trustee was granted the Trustee's Charge over all of

the amounts held by BDMC and to be received by BDMC or the Trustee on its behalf going

forward. Among other things, the Trustee is seeking the Stabilization Order to clarify the

status of these proceedings, set expectations around the use of the funds subject to the

Trustee's Charge and to put certain temporary limits on the Trustee's ability to use those

funds during the Stabilization Period-

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ACTIVITIES OF THE TRUSTEE TO DATE

29.

To date, the Trustee has been principally engaged in three broad types of activities: (i)

responding to enforcement actions by senior lenders on distressed projects; (ii)

responding to urgent requests for postponements and other actions to prevent

enforcement by senior lenders and to permit the projects in question to continue; and (iii)

responding to a multitude of borrower and lnvestor inquiries'

The Trustee has also been working to obtain recovery for lnvestors whenever possible.

For example, and as discussed in more detail below, the Trustee was able to obtain

payment in full from the Victoria Medical Borrower notwithstanding initial indications that

a portion of the debt in question would be compromised'

ln addition, in the short time since its appointment, the Trustee has familiarized itself with

certain of the distressed projects and engaged with stakeholders regarding the lnvestor's

interests. For example, on the Dunsire Project, it initially appeared that there would be no

recoveries for the lnvestors, but the Trustee has since learned that some recovery should

be available.

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Enforcement Matters:

A number of BDMC's borrowers face enforcement actions taken by one or more senior

lenders as a result of borrower defaults under the senior loans. The Trustee is responding

to these enforcement actions in an effort to obtain the best possible result for the lnvestors

in the circumstances, but in some cases, the lnvestors' interests have already been

severely compromised and, in other cases, the lnvestors' interests are at risk of being

severely compromised. lt is critical that the Trustee take an active role in any enforcement

process, including reviewing and negotiating any proposed enforcement steps and

working with other creditors and stakeholders to ensure that any process that is

undertaken protects the lnvestors to the maximum extent possible. A summary of certain

projects currently facing material enforcement actions and the Trustee's efforts in respect

of these actions follows.

Brookdale Proiect: A real estate development project in midtown Toronto ("Brookdale

project"), with over $20 million of subordinate syndicated mortgage loan debt

administered by BDMC and approximately $4.7 million of "mezzanine" syndicated

mortgage loan debt also administered by BDMC.3 The lnvestors rank in 4th and Sth position

on this project. ln addition, the Brookdale Project is subject to two separate enforcement

processes by the senior lender: (i) a receivership application brought by Firm Capital

Mortgage Fund lnc. ("Firm") in respect of construction financing that has matured; and (ii)

a notice of sale under mortgage proceeding also brought by Firm in respect of the same

debt. The Trustee understands that the receivership application was put into abeyance to

permit the negotiation of a settlement agreement among a number of stakeholders who

have asserted claims on the Brookdale Project, including a number of construction lien

claimants and certain bondholders. A notice of sale was issued to preserve Firm's rights

while a settlement was negotiated. The settlement negotiations have stalled and Firm is

seeking to sell the Brookdale Project pursuant to its notice of sale under Firm's mortgage

enforcement proceeding. FAAN Mortgage has been involved in discussions with the

various stakeholders both before and after its appointment as Trustee and continues to

seek to maximize value for the lnvestors in loans made by BDMC to the Brookdale Project.

3 A mezzanine syndicated mortgage loan debt is a BDMC syndicated mortgage loan debt that is in priority

to other BDMC syndicated mortgage loan debt but still subordinate to debt owed to senior lenders. Typically,

BDMC mezzanine syndicated mortgage loan agreements contain the same mandatory subordination

provisions as are found in other BDMC syndicated mortgage loan agreements'

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FAAN Mortgage has invested a significant amount of time in reviewing and commenting

on multiple proposed settlement arrangements that it has been presented in an attempt to

protect the lnvestors' interests in the Brookdale Project, including engaging in extensive

communications with lnvestors. FAAN Mortgage is now in the process of engaging directly

with counsel to Firm in order to better understand the steps it is taking in its mortgage

enforcement proceeding to help ensure that steps are not taken that would be to the

detriment of the lnvestors and the Trustee has contacted the private receiver to offer its

assistance in developing a process to maximize value for all stakeholders, including the

lnvestors. At this time, it is unclear what the outcome for the Brookdale Project will be due

to the existing defaults under senior loans in excess of $23 million and the numerous

additional construction liens that have been asseded. The Trustee notes that a sale of the

property could result in significant losses to the lnvestors.

Bowmanville Proiect: a real estate development project in Clarington, Ontario

("Bowmanville Project"), consisting of three separate parcels of land that secure

approximately $5.a million of syndicated mortgage loan debt administered by BDMC. Each

parcel has a separate first priority mortgage holder and all three mortgage holders have

sought to enforce their rights to sell or foreclose on the portion of the Bowmanville Project

that is subject to their mortgages. FAAN Mortgage has been involved in discussions with

the borrower and the lenders both before and after its appointment as Trustee in an effort

to defend against foreclosure and to maximize recoveries for the lnvestors. The Trustee

continues to seek to maximize value for the lnvestors in loans made by BDMC to the

borrower in connection with the Bowmanville Project and is working cooperatively with

counselto the first priority mortgage holders. At this time, it appears that the Bowmanville

Project will be refinanced, with sufficient new funds to repay the three first priority

mortgages on the property that comprises the Bowmanville Project but leaving BDMC's

mortgage in its current third place position (and subordinate to the new financing). The

syndicated mortgage loan documents contemplate BDMC subordinating its mortgages to

additional loan facilities, including the facility that is anticipated to be the source of the

funding to repay the existing mortgages on the Bowmanville Project. The borrower has

advised that once the senior mortgage debt is refinanced and the project is no longer in a

distressed state, the borrower will be in a position to obtain the required planning

approvals and to meet related milestones for the project. lf the project continues to

advance, the value of the project will likely be enhanced and the potential recoveries to

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lnvestors should be higher than what would be available if the refinancing was not

completed and the project was sold in its current state.

Dunsire Proiect: a realestate development project in Guelph, Ontario ("Dunsire Project").

On May 15,2018, the Trustee was served with an application for a vesting order sought

by RSM Canada Limited (.RSM') in its capacity as receiver of the Dunsire Project to vest

tile to the Dunsire Project in a new owner related to the current owner, free and clear of

certain encumbrances, including approximately $1.7 million of subordinate, secured debt

owed to BDMC in trust for lnvestors. lmmediately after service of the motion record, the

Trustee and its counsel engaged in comprehensive discussions with RSM regarding the

proposed vesting order. The Trustee sought clarifications regarding the sales process

conducted and the potential value available to BDMC and its lnvestors. Despite the

Trustee's request that RSM seek an adjournment for a period of thirty days to permit

further marketing of the property, RSM was only prepared to provide a short adjournment.

RSM ultimately obtained a vesting order on May 25, 2018. Once the transaction closes,

BDMC's security interest will be expunged from title with very little recovery to BDMC or

the lnvestors due to the purchase price payable for the Dunsire Project and the quantum

of secured debt in priority to BDMC's loans. ln the course of the Trustee's diligence on the

Dunsire Project, it learned that that there may be HST refunds available for benefit of the

lnvestors, which will likely result in at least a partial recovery for lnvestors.

Georgetown Proiect: A real estate development project in Georgetown, Ontario

("Georgetown Project"), consisting of seven different parcels of land collectively securing

approximately $14.4 million of debt owing to BDMC under various syndicated mortgage

loans, including subordinate and mezzanine loans. There are a number of different senior

lenders with priority mortgages on different parcels of land comprising the Georgetown

project. The senior lenders on certain parcels of land comprising the Georgetown Project

have issued notices of sale with respect to the property that is subject to their mortgages

and the period set by the lenders for repayment of their loans has expired. As such, the

Trustee has been engaged in discussions with Fortress and other stakeholders regarding

the Georgetown Project and potential options to address the defaults. The Trustee is also

seeking additional details regarding the senior lenders' intentions with respect to the

Georgetown Project to ensure that the Trustee is satisfied that any sales or marketing

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process is appropriate in the circumstances. However, the Trustee notes that despite its

efforts, a sale of the property could result in significant losses to the lnvestors.

Colliers Proiect: A realestate development project in Barrie, Ontario ("Colliers Proiect"),

with approximately $53 million of debt owing to BDMC under various syndicated mortgage

loans, including subordinate and mezzanine loans. The senior lender to the Colliers

Project has issued a notice of sale under mortgage with respect to the property that is

subject to its mortgage and the period set by the lender for repayment of its loan has

expired. As such, the Trustee has been engaged in discussions with Fortress and other

stakeholders regarding the Colliers Project and potential options to address the defaults.

The Trustee is also seeking additional details regarding the senior lenders' intentions with

respect to the Colliers Project to ensure that the Trustee is satisfied that any sales or

marketing process is appropriate in the circumstances. However, the Trustee notes that

despite its efforts, a sale of the property could result in significant losses to the lnvestors.

Postponements:

ln addition to the enforcement actions described above, the Trustee has been attending

to various postponement and subordination requests, often sought by a borrower on an

urgent basis to prevent senior lenders from taking enforcement action.

Prior and subsequent to the Trustee's appointment, many of the senior loans on real

estate developments that also secure BDMC syndicated mortgage loans have matured or

otherwise come due. ln addition, borrowers have faced funding shortfalls with respect to

achieving development milestones on a project, including planning approvals. The Trustee

has been asked to agree to postpone the security granted to BDMC to new loans to be

made by other lenders that are intended to permit the development to continue. ln many

cases, the Trustee has been advised that failure to grant the postponement would (i)

breach the applicable BDMC loan agreement; and (ii) cause the project to fail and

enforcement steps to occur in the near term.

ln response to these requests, the Trustee, on behalf of BDMC and its lnvestors, has

requested detailed information regarding the applicable project and the proposed use of

funds. ln most instances, the Trustee has concluded that the loan agreement requires

BDMC to postpone to the new loan and that permitting further advances to be made to

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the borrower in priority to BDMC's loan(s) is in the best interests of the lnvestors as well

as increases the likelihood of completion of the project.

The Trustee is considering its options with respect to postponement requests, but

recognizes that many of the projects will fail if further funding is not advanced to permit

the borrower to achieve development milestones and make payments on senior

indebtedness. Further, in many cases the BDMC loan documentation requires that a

postponement be granted in these circumstances. The Trustee is in the process of

obtaining detailed information regarding each project, including development milestones

and senior loan maturity dates, so that it can more proactively address these matters. As

discussed in more detail below, the proposed Stabilization Order is intended to facilitate

the desired proactive aPProach.

I nvestor Communications:

FAAN Mortgage has been engaging with lnvestors since its appointment as manager of

the Administration Business and has continued to do so after its appointment as Trustee.

ln addition to providing lnvestors information about the matters described above and,

where appropriate, seeking consent of lnvestors to material actions to be taken by the

Trustee, the Trustee has provided lnvestors with notice of the Trustee's appointment,

notice of significant developments on the projects that are the subject of their investments

and responded to large volumes of telephone calls and email correspondence from

lnvestors regarding the Trustee's appointment and the status of their investments and the

related projects. lnvestor communications are a critical part of the Trustee's mandate and

are also very time consuming and labour intensive.

ln circumstances where FAAN Mortgage has determined that it was appropriate to seek

lnvestor consent, it has received very few responses and has been required to rely on

ceftain deemed consent provisions of the applicable Participation and Servicing

Agreement (as more fully described in the Forbes Affidavit)'

Other Matters:

ln addition to the activities described above, since the Trustee's appointment, the

Trustee's activities have included, among other things:

(a) commencing a detailed analysis of each project and the associated senior loans,

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72

syndicated mortgage loans and other relevant information, including the status of

the project, the principal development milestones to completion and any known

impediments to achieving such milestones;

(b) attending to partial discharges of BDMC's security interests to facilitate sales of

units or the development of properties;

(c) engaging with the lnvestors' brokerages, including FFM and FDS, who acted as

brokers on behalf of individual lnvestors;

(d) engaging with other stakeholders of BDMC and related parties, including Ms. lldina

Galati, BDMC's shareholder, and her counsel, Fortress and its counsel, and CDCM

and its counsel;

(e) engaging with borrowers and with the borrowers' broker, CDCM, regarding the

postponements and enforcement matters noted above and to obtain detailed

updates on the progress on projects and associated financial reporting;

(f) engaging with FSCO and its legal counsel, including responding to inquiries made

by FSCO in respect of BDMC's activities and records and the Trustee's ongoing

activities;

(g) engaging with mortgage brokerage and administration licensing authorities outside

of Ontario to discuss the Trustee's mandate and the Appointment Order and to

address matters related to BDMC's licenses in such jurisdictions, including

regulators in Manitoba, Saskatchewan, Alberta and British Columbia;

(h) supervising the day to day business activities of BDMC, including supervising the

payment of payroll, rent and related matters;

(i) engaging with BDMC's bank regarding the Trustee's appointment and its mandate;

(j) obtaining access to and, in some cases, possession of, BDMC's records, including

electronic records (primarily in the form of emails) from BDMC's third party lT

service provider; and

(k) engaging with BDMC's insurance broker regarding the Trustee's appointment and

mandate.


The Trustee was required to engage in, and to continue to engage in, the activities

described in the foregoing section in order to protect the interests of lnvestors. These

44

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45

46

47

4B

activities are time consuming and costly and are being carried out in circumstances where

BDMC has little to no revenue.

As noted in the Forbes Affidavit, BDMC is functionally insolvent. BDMC has a number of

regular expenses, including payroll, rent, utilities and other normal business expenses, but

it has no material revenue source. BDMC previously relied upon fees payable when new

loans were established and upon funding from Fortress, neither of which may be

forthcoming in the future.

Since many of BDMC's borrowers are Fortress entities or otheruvise related to Fortress,

the Trustee is of the view that the Trustee's and BDMC's costs associated with

administering the syndicated mortgage loans should not be borne solely by the lnvestors,

but rather should be paid for by Fortress and the borrowers. The Appointment Order

provides for the payment of the Trustee's fees, disbursements and costs (including

professional advisory fees incurred) without delay and also provides that unpaid fees,

disbursements and costs shall be added to the mortgages securing the amounts advanced

by BDMC.

As such, the Trustee has been engaged in discussions with Fortress with respect to

ongoing funding not only of BDMC's operating expenses but also of BDMC's professional

fees (i.e., the fees of the Trustee and its counsel). The Trustee is hopeful that Fortress

and the borrowers will agree to a mechanism whereby BDMC's and the Trustee's costs,

including professional fees for administering the loans made by BDMC, are not borne

solely by the lnvestors. Further, the Trustee understands that it was Fortress's practice,

prior to the appointment of the Trustee, to fund BDMC's expenses (including professional

fees) to the extent BDMC had insufficient revenue to pay its own expenses.

As a result of the above, the Trustee has succeeded in obtaining funding in the amount of

approximately $35,000 from Fortress (which has been funded through CDCM)on account

of certain of BDMC's operating expenses that were incurred prior to the date of the

Appointment Order. Fortress has also funded payroll and certain other operating expenses

following the date of the Appointment Order in the amount of approximately $65,000.

ln addition, the Trustee has succeeded in obtaining some amounts for BDMC's legal and

other professional expenses primarily incurred prior to FAAN Mortgage's appointment

under the MAA from Fortress on account of a certain guarantee and indemnity to FAAN

49.

16

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50.

51

52

53

Mortgage under the MAA (as more particularly described below). There are, however,

significant arrears owing for the period prior to the issuance of the Appointment Order and

significant expenses incurred following the issuance of the Appointment Order.

The Trustee has no assurance that further contributions by Fortress or CDCM will be

forthcoming; nevertheless, the Trustee continues to work with Fortress and CDCM

regarding funding of certain of BDMC's costs. The Trustee intends to keep the Court

informed regarding these matters.

ln addition, as noted in the Forbes Affidavit, priorto the issuance of the Appointment Order,

Fortress and certain of its affiliates provided a guarantee and indemnity to FAAN Mortgage

in respect of BDMC's funding obligations under the MAA. Notwithstanding the termination

of the MAA, pursuant to the terms of the MAA, Fortress is still responsible for the

outstanding obligations up to April 20,2018. Fortress has made certain payments under

the indemnity, but significant amounts are still owing to the Trustee and its counsel and

the Trustee continues to seek to recover these amounts from Fortress.

Notwithstanding that Fortress has been paying certain of BDMC's expenses and has paid

certain debts it owes to the Trustee, the Trustee has no assurance that such funding will

continue. The Trustee has access to certain limited additional amounts (described below

under "Funds held in BDMC Bank Accounts"), and it needs immediate access to certain

portions of these funds and to preserve portions of these amounts during the Stabilization

Period for the benefit of the estate and all its stakeholders. The Trustee is in the process

of obtaining detailed information regarding each project and will use this information to

develop a plan to maximize value for all the lnvestors.

The Trustee has prepared a Cash Flow Projection, on a monthly basis through to the

conclusion of the Stabilization Period on October 31, 2018 ("Gash Flow Period")' The

Cash Flow Projection is attached as Appendix"4". The Cash Flow Projection has been

prepared by the Trustee using the information provided to it by BDMC's employees and

representatives, based on the Trustee's review of BDMC's records and third-party

estimates. A summary of the Cash Flow Projection is provided in the following table:

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June(2wks) July Auq Sept. Oct. Total

Receipts

DisbursementsStaffing costsRent and utilitiesOffice expenses and lTBank chargesOther expenses

Total Operating DisbursementsNew Appraisal feesProfessional feesTotal disbursements

15061 344 346 261 205 1.217

6I4

5

61

29254

4B

33751

105526

35

3333 46

1

B

I1

3

741

0

631

10 ,|

54140150

56140150

7635

150

267350600

54 It should be noted that there are no cash receipts projected during the Cash Flow Period.

Historically, BDMC's primary source of revenue was funds raised from lnvestors in the

form of an administration fee of $1 13, per lnvestor per year of the term of the loan. These

funds were collected at the time of the initial advance of the funds from the lnvestors.

Although there is deferred revenue of approximately $750,0004 on BDMC's balance sheet,

it represents funds that were collected at the time a loan was established, which revenue

was to be earned over the term of the loan. The Trustee has been advised that the cash

was utilized by BDMC at or around the time it was collected. As noted above, Fortress

covered BDMC costs to the extent that such costs exceeded BDMC's revenues.

Among other things, the Cash Flow Projection estimates total operating disbursements of

approximately $267,000, plus approximately $350,000 for New Appraisals (defined and

discussed below).

FUNDS HELD IN BDMC BANK ACCOUNTS

As at the date of the Appointment Order, BDMC maintained five bank accounts at The

Toronto-Dominion Bank and a sixth account has since been opened. A summary of these

accounts is as follows:

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56

4 As at December 3]-,2017

1B

76

Accountname/Reference

Primary Purpose ofaccount (per BDMC)

Balance onApril 20, 2018(appointment)

Current PBalance

ropertyI ype"

Account #1(763 Account)




Account #5(term deposit)

Account #6(GlC account)

Operating account

To hold funds topotentially be paid tothird parties

To hold funds forlnvestors

lnterest ReserveAccount

Regulatory capitalrequired to bemaintained under theMBLAATo hold Victoria MedicalSML Loan repayments

480 2,519

71,329 52,594

EstateProperty

EstateProperty

469,882

1,403,496

25,752

486,874

1,461,471

25,777

RealizedProperty

EstateProperty

EstateProperty

4,511,218 RealizedPropertY

Total 1,970,939 6,540,453

763 Account - this is BDMC's main operating account, used to pay BDMC's operating

expenses, such as payroll, rent, and other general and administrative expenses. There

are almost no funds in this account. Where funds are made available by Fortress, the

Trustee understands that these funds are typically paid first to CDCM and thereafter by

CDMC to the 763 Account. These funds are then immediately paid out by BDMC to meet

critical business needs and, to date, there have not been any surplus sums available for

future needs. The funds currently in this account represent amounts transferred from the

420 Account (described below) or amounts funded by CDCM, to satisfy outstanding

cheques that were issued to pay critical operating costs.

420 Account - BDMC advises it used this account as a "segregated funds account" to

hold fees and other amounts received by BDMC that it believes to be payable to another

party, including brokers but excluding lnvestors. The balance currently in the account is

comprised primarily of a returned bank draft that was never cashed from 2015. The

s Estate Property and Realized Property are defined and described below

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Trustee has been investigating why the bank draft was not deposited by the payee, but

based on a preliminary review it appears that it may have been a duplicate payment that

was issued in error by BDMC. As such, it appears that these funds are not payable to

another party. Since the Trustee's appointment certain critical operating costs that have

not been funded by Fortress were paid from this account'

455 Account - BDMC advises that it used this account to hold funds for lnvestors. There

are two types of balances that are held in this account, (i) funds advanced by lnvestors to

BDMC for investment in future syndicated mortgage loans where such loans have not yet

been executed or other conditions to the advance are incomplete; and (ii) principal

repayments received from borrowers to be ultimately repaid to lnvestors.6 The funds

repaid in respect of the Victoria Medical SML Loans (defined and discussed below) were

paid into this account and subsequently transferred to the interest bearing GIC account.

214 Account - BDMC advises that the 214 Account is the lnterest Reserve Account

described above. BDMC advises that this account is used to hold certain funds that were

originally advanced by Investors to specific projects for the benefit of the respective

borrowers under the applicable syndicated mortgage loan agreement for a project' All

amounts received that were not immediately advanced to a borrower, regardless of the

project, were deposited into this one bank account.T Certain of these funds consist of

interest reserve amounts payable to lnvestors. Additionally, despite the fact that the 214

Account is called the lnterest Reserve Account, the Trustee has been advised that certain

of the funds held in this account are funds that are for the account of certain borrowers,

and, in the past, the Trustee understands that the borrowers have requested BDMC to

issue payments from this account to pay for matters other than interest owing to lnvestors,

such as interest payments on senior loans and bridge loans as well as certain

development costs. ln addition, the Trustee understands that in the past, BDMC received

and complied w1h instructions to apply funds held in the lnterest Reserve Account on

behalf of one borrower to satisfy expenses incurred by another borrower on a distinct

project.

6 Notwithstanding the fact that payments of interest and repayments of principal for all projects were

advanced into one bank accouni, ihe balances are tracked separately by project in BDMC's accounting

software, QuickBooks.7 Notwithstanding the fact that funds for all projects were advanced into one bank account, the balances

are tracked separately by project in BDMC's accounting software, QuickBooks'

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57

Since the issuance of the Appointment Order, the Trustee has received a number of

requests from borrowers for disbursements out of the lnterest Reserve Account. On or

about May 3, 2018, the Trustee forurrarded letters to CDCM, in its capacity as the

borrowers' broker, addressed to borrowers who appearto have an interest in the lnterest

Reserve Account and requested that CDCM distribute the letters to the applicable

borrowers. The letters advised the respective borrowers of the Trustee's appointment and

that no funds could be distributed to the borrowers from the lnterest Reserve Account for

a period of time because, among other things, the funds are subject to the Trustee's

Charge. Further, the borrowers were advised that the Trustee was in the process of

investigating the lnterest Reserve Account and BDMC's other accounts and considering

the various competing claims on BDMC's funds and other property. ln addition, the letters

stated that the Trustee needs additional time to assess the status of all projects, the

anticipated overall administration costs of the estate and the potential sources of funding

for same. The Trustee's absessment of these matters is ongoing. A sample copy of one

of these letters sent is attached as Appendix "4" .

Account #5 - BDMC is required under the MBLAA to have a certain financial guarantee

of $25,000 available, which may include unimpaired working capital. BDMC maintains

$25,777 in satisfaction of this obligation in Account #5.

ln addition to the funds maintained in the various bank accounts. BDMC also has 13

cheques totaling $815,000 ("lnvestor Cheques") that were received by BDMC in October

2O17. The lnvestor Cheques were received from Sorrenti Law Professional Corporation

("Sorrenti"), a law firm that administered certain syndicated mortgage loans brokered by

BDMC. The lnvestor Cheques were issued by Sorrenti in its capacity as administrator of

syndicated mortgage loans owing in connection with a project called Masonary that was

repaid on or about October 5,2017. At that time, certain lnvestors in the Masonary project

requested that their payments be redeployed to projects administered by BDMC; however,

as a result of the FSCO investigation and related regulatory actions, the Trustee has been

advised that BDMC could not deposit the cheques or redeploy the funds. With the

exception of one cheque that was adjusted and re-issued on February 27 ,2018, all of the

lnvestor Cheques are now stale dated. The Trustee has written to Sorrentito advise that

the cheques are stale dated and will therefore not be deposited by BDMC. ln addition,

the Trustee has advised the lnvestors to whom the lnvestor Cheques relate that they

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5B

should contact Sorrenti regarding the return of their funds. The Trustee is in the process

of returning the lnvestor Cheques to Sorrenti.

The Trustee understands that BDMC does not have any other funds other than the bank

balances and cheques described above and the Trustee expects to receive no additional

funds other than intermittent funding from Fortress (both in accordance with its past

practices and its obligations in respect of the MAA) and occasional expense

reimbursements and loan repayments from borrowers. The timing and quantum of any

such payments is unknown.

FUNDS RECEIVED FROM BORROWERS SINCE THE TRUSTEE'S APPOINTMENT

Since the Trustee's appointment, the amounts set out below have been received by BDMC

from borrowers. These amounts are in addition to the amounts received from Fortress

(through CDCM) described above. Funds received from Fortress were immediately

disbursed to pay BDMC's operating expenses. The following amounts paid by borrowers

continue to be retained by the Trustee on behalf of BDMC:

(a) Approximately $1.75 million for the payment of interest and the repayment of

principal to lnvestors that advanced funds pursuant to a loan agreement dated

September 23, 2015, between BDMC and Amadon-Westwater Projects Ltd.

("Victoria Medical Borrower") and $2.75 million for the payment of interest and

the repayment of principal to lnvestors that advanced funds pursuant to a loan

agreement dated September 16,2016, between BDMC and the Victoria Medical

Borrower (collectively, the "Victoria Medical SML Loans"). The Victoria Medical

Borrower had initially advised FAAN Mortgage that it would not be able to repay

the Victoria Medical SML Loans in full and sought a discharge of BDMC's security

' in respect of such loans upon payment of a lower amount. FAAN Mortgage refused

to release BDMC's security and instead engaged in negotiations with Fortress and

the Victoria Medical Borrower that resulted in the full repayment of the principal

and interest owing up to May '1,2018 under the respective Victoria Medical SML

Loans. After receiving payment in full, FAAN Mortgage consented to the discharge

of BDMC's mortgages on the Victoria Medical Borrowe/s property. The Trustee

received the funds paid by the Victoria Medical Borrower in the 455 Account and

these funds were subsequently transferred to an interest bearing GIC account.

59

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80

Certain of the lnvestors' brokers and certain lnvestors have expressed concerns

regarding the Trustee's continued retention of these funds. The Trustee has

responded to these brokers and lnvestors with a similar message that it delivered

to borrowers with an interest in the lnterest Reserve Account to advise that the

Trustee is an officer of the Court and needs additional time to assess the status of

all projects in accordance with its mandate under the Appointment Order, including

the anticipated overall administration costs of the estate and the potential sources

of funding for same.

At this time, the Trustee is seeking the Court's authorization to distribute 50% of

the principal amounts it is holding in respect of the Victoria Medical SML Loans to

the lnvestors who invested in such loans, pro rata based on the amount of each

such lnvestor's investment, in the aggregate amount of approximately $2.2 million.

The Trustee has determined that the remaining amounts it is holding in respect of

these loans should be retained during the lnterim Stabilization Period while the

Trustee continues to assess the status of all projects, As discussed in more detail

below, the remaining portion of the recovery on the Victoria Medical SML Loans

will be treated as Realized Property (as defined below), and will continue to be

held in a separate account and not used for any purpose until further order of the

Court.

(b) lnterest in the amount of approximately $178,0008 was received from Braestone

Development Corporation ("Braestone Borrower") in respect of the May 15 and

June 15, 2018 interest payments. Pursuant to the loan agreement dated

December 1,2012, between BDMC and the Braestone Borrower, the Braestone

Borrower is to pay interest on a monthly basis to BDMC, which is then typically

distributed to the Braestone lnvestors. The Trustee continues to hold the funds

that have been paid to BDMC in the lnterest Reserve Account.

(c) lnterest in the amount of $8,667, received from Kingridge (Oakville East) lnc.

("QEWN Borrower") in respect of the monthly interest payment for March, 2018.

Pursuant to the loan agreement dated December 4,2015, between BDMC and the

QEWN Borrower, the QEWN Borrower is to pay interest on a monthly basis to

8 As of the date of this Report approximately 5100,000 of this amount has not yet been deposited into the lnterest

Reserve Account and accordingly is not included in the lnterest Reserve Account balance in the chart above.

23

81

BDMC, which is then typically distributed to the QEWN lnvestors. The last monthly

payment was made to BDMC on April 12, 2018, however, it had not yet been

distributed to lnvestors prior to the Trustee's appointment and accordingly

continues to be held in the lnterest Reserve Account. No further interest payments

have been received from the QEWN Borrower.

60 The Trustee notes that interest has been paid on only two projects since FAAN Mortgage's

appointment in February, 2017. The majority of the syndicated mortgage loans

administered by BDMC provide that interest accrues until the applicable loan is paid out.

The Trustee notes that many of the syndicated mortgage loans administered by BDMC

have matured, but that the loans are subject to postponement and standstill arrangements

with senior lenders that require BDMC to wait until the senior loans are repaid before

seeking repayment of its loans. The Trustee is investigating these arrangements.

INTERIM STABILIZATION MEASURES AND USE OF FUNDS TO ADMINISTER ESTATE

61 Since the issuance of the Appointment Order, and as detailed above, the Trustee has

been primarily focused on dealing with urgent issues related to certain projects in various

states of distress and obtaining information from the borrowers, CDCM and other

stakeholders with respect to the status of the projects.

62 ln responding to these urgent matters and in assessing the status of projects generally,

the Trustee has been analyzing BDMC's rights and lnvestors' interests under the various

syndicated mortgage loans administered by BDMC as well as the impact of any requested

postponement or threatened enforcement action on such rights and interests. The Trustee

has also begun a detailed analysis of each project and the associated senior loans,

syndicated mortgage loans and other relevant information, including the status of the

project, the principal development milestones to completion and any known impediments

to achieving such milestones.

63. The Trustee has not yet obtained sufficient information regarding the status of each

project, the funding needs of the projects, the maturity dates of third party loans made to

the projects, or the next milestones associated with the completion of the projects. As

noted above, the Trustee is working to complete a detailed analysis of these matters so

that it is in a better position to act proactively to protect lnvestors' interest in these projects.

24

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64.

65

66

One important element of the Trustee's analysis is the potential recoveries to lnvestors if

senior lenders attempt to enforce their security in the near term compared to the likely

outcome for lnvestors if the Trustee decides to agree to a requested further postponement

of BDMC's security to permit the development of a particular project to continue for a

period of time. This process is dependent on a legal analysis by the Trustee's counsel and

a number of factual assumptions and business judgments by the Trustee, including

whether the Trustee's decision is likely to permit the project to continue towards

development and completion (or to the achievement of a critical development milestone)

or whether enforcement prior to the achievement of a potential milestone is likely, and, in

circumstances where enforcement is the likely outcome, the anticipated timing of any such

enforcement.

ln making its assessments, the Trustee must rely, in part, on appraisals prepared in

connection with the applicable project. Unfortunately, many of the available appraisals

suffer from significant shortcomings, including relying on assumptions regarding (i) the

outcome of completion of the applicable project (including the timing of completion, the

cost to complete and the projected sales revenues), (ii) the completion of certain

development milestones and (iii) other matters that may not come to pass. Few of the

appraisals were completed on an "as is" basis, and the few that were are now outdated.

Others appraisals are based on "as developed" values of the land premised on certain

assumptions regarding the eventual completion of the project. Further, there may be

projects where no appraisals are currently available.

ln order to preserve and, to the extent possible, maximize recoveries for the lnvestors,

and to permit the Trustee to make prudent decisions regarding lnvestors' interests, the

Trustee is of the view that in order to fulfill its Court-ordered mandate it needs to continue

to:

(a) complete a detailed review of each of the remaining 43 projects administered by

BDMC, including compiling complete information with respect to all debt owed in

respect of such projects, the applicable maturity dates of such debt, and the critical

project milestones so that the Trustee can proactively engage with borrowers,

lenders and other stakeholders rather than being forced to react to unanticipated

and urgent demands;

25

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67

(b) assess the priority waterfall contained in the applicable loan agreements, including

the validity and enforceability of such waterfall;

(c) engage in discussions with the respective borrowers and senior lenders regarding

options for the projects and recoveries for lnvestors;

(d) retain real estate experts to conduct appraisals on an "as is" basis with appropriate

assumptions ("New Appraisals") for a number of the projects, to the extent

deemed necessary by the Trustee;

(e) continue to engage with lnvestors and respond to lnvestor inquiries; and

(f) continue to execute BDMC's administration duties that arise in the ordinary course,

including reviewing and responding to borrower and senior lender requests, and

engaging proactively with senior lenders considering enforcement actions,

marketing processes or any other action that may have an adverse impact on the

ultimate return to lnvestors.

As noted above, there are costs associated with these activities, and these costs are high

because the Trustee faces many urgent and unanticipated demands on a daily basis. The

Trustee's Charge gives the Trustee a first priority security interest in all funds held or

received by BDMC, including funds held or that are to be held in trust on behalf of

lnvestors, borrowers and other parties, to cover the Trustee's expenses in connection with

its mandate. However, in order to (i) permit the Trustee to conduct necessary activities in

furtherance of its mandate, (ii) clarify and confirm the Trustee's rights regarding certain

Property that is subject to the Trustee's Charge; and (ii) put some temporary restrictions

on the Trustee's rights with respect to these funds, the Trustee respectfully requests that

the Court issue the Stabilization Order with respect to funds held or received by the

Trustee, as follows:

(a) That the Trustee distribute 50% of the principal amount held by the Trustee in

respect of each of the Victoria Medical SML Loans to the applicable lnvestors pro

rata based on each such lnvestor's respective portion of such Victoria Medical

SML Loans;

(b) That the Trustee hold in a separate account, until further Order of the Court, all (l)

funds that are currently in BDMC's or the Trustee's possession or that may come

26

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68

into BDMC's or the Trustee's possession, in each case as a result of a repayment

(in whole or in part) of principal on any loan or other indebtedness owing to or

administered by BDMC on behalf of lnvestors (including, for greater certainty, the

remaining portion of the repayments on the Victoria Medical SML Loans held by

the Trustee after making the distributions previously described), whether or not (i)

secured by any Real Property Charges in the name of the Respondent or in the

name of OTC, Computershare or any other person acting for lnvestors in respect

of investments held through RRSPs or other registered accounts or funds (each

an "RRSP Trustee"), (ii) received before or after the date of the Appointment

Order, or (iii) paid or payable in trust, plus (ll) all interest paid or payable to BDMC

or the Trustee at the time such repayment (in whole or in part) of principal is made

(collectively, "Realized Property") and that the Trustee report to the Court prior to

the end of the Stabilization Period with a recommendation regarding next steps

with respect to the Realized Property, including any potential distribution of any

Realized Property to the lnvestors; and

(c) That the Trustee hold in a separate account all funds (other than Realized

Property) that were in BDMC's possession on or prior to the date of the

Appointment Order as well as any amounts (other than Realized Property) paid or

payable to BDMC or the Trustee (in trust or otheruvise) after the date of the

Appointment Order, including in respect of interest where principal is not repaid,

fees, expenses or other amounts (collectively, "Estate Property") and shall be

authorized to use such Estate Property as set out in the Appointment Order and

as further confirmed by the Stabilization Order.

The Trustee proposes to hold the Realized Property separate and apart from the Estate

property and any other Property and not to use the Realized Property for any purpose

until further order of the Court. The Trustee will, however, use the Estate Property and any

other Property in conformance with the Appointment Order and in accordance with the

proposed Stabilization Order to permit the Trustee to carry out its mandate, including

without limitation, at the Trustee's sole discretion, any of the following:

(a) to provide a retainer for and to pay the professional fees, expenses and

disbursements of the Trustee, its counsel, and any experts or other advisors

retained by the Trustee pursuant to the Appointment Order;

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69

70

(b) to pay expenses of BDMC, including, without limitation, payroll, rent, utilities, taxes,

and other statutory remittances;

(c) to pay expenses incurred in the administration of any loan or indebtedness

administered by BDMC, including, without limitation, in connection with obtaining

New Appraisals of any property or, if necessary, taking or responding to any

enforcement action;

(d) to make protective disbursements to or on behalf of a borrower or in respect of a

project, provided that any such disbursement shall be considered an advance

made to the applicable borrower in respect of such project and the amount of such

advance plus any applicable expenses incurred in connection therewith shall be

added to the sum owing by the borrower and shall be added to the Real Property

Charge in respect of same (except to the extent that such borrower is already

indebted to BDMC for such amount); and

(e) to pay general expenses of BDMC or the Trustee, in that capacity, not covered by

the foregoing.

As noted above, the Trustee has moved the Realized Property currently in its possession

into an interest bearing GIC account and intends to move any further Realized Property

received during the Stabilization Period into this account so that interest is earned on all

Realized Property. The Trustee is considering whether it is appropriate to take similar

steps with respect to Estate Property.

As noted above, the Trustee intends to report to the Court prior to October 31,2018

regarding its progress on the foregoing matters, including its recommended proposalwith

respect to the Realized Property. The Trustee is of the view that, by the end of the

proposed Stabilization Period, it should be in a much better position to provide the Court

and lnvestors with a detailed update on the status of each project, and will have much

better information regarding the potential timing of any repayments on the existing

syndicated mortgage loans and the likely outcome for lnvestors in such loans. At that time,

the Trustee will be in a better position to determine the amount of Realized Property or

any other Property that can be disbursed to the applicable lnvestors and to make

recommendations to the Court with respect to same.

28

B6

71 The Realized Property includes 50% of the principal amounts received in repayment of

the Victoria Medical SML Loans and all interest received. 50% of the principal amount

recovered on the Victoria Medical SML Loans is proposed to be distributed to the

applicable lnvestors and the remaining sums are proposed to be held by the Trustee

during the Stabilization Period and not used.

The Estate Property includes the interest paid by the Braestone Borrower and the QEWN

Borrower.

The Trustee and its legal counsel are tracking their time by project. For certain tasks that

affect all lnvestors, including general notices and the preparation of this Report and the

related Court materials, the time will be charged to a general account that will, at a later

date, be allocated to the various projects based on appropriate considerations and in

accordance with further Court orders. Time spent on project specific tasks, such as

attending to matters on the Brookdale Project and the Bowmanville Project, are recorded

as pertaining to the project in question. Fees incurred in respect of project specific tasks

will be paid out of Estate Property, but it is contemplated that any realizalions on specific

projects will be used to reimburse such amounts. Given the lack of revenue available to

BDMC, there is no other option to fund the Trustee's activities for the benefit of the

lnvestors.

REPRESENTATION FOR INVESTORS

74. As noted previously, there are approximately 11,000 Investors who participate in

mortgages administered by BDMC. Although lnvestors reside throughout Canada, the

vast majority of lnvestors are located in Ontario. FAAN Mortgage has been engaging with

lnvestors since its appointment as manager of the Administration Business and has

continued to do so after its appointment as Trustee.

75. The Trustee's mandate does not include providing legal advice to BDMC's lnvestors, and

the Trustee has recommended that lnvestors seek independent legal advice with respect

to certain matters when the Trustee has determined that it was appropriate to seek

consent of lnvestors to certain actions to be taken by the Trustee in respect of syndicated

mortgage loans. Similarly, the Trustee understands that RRSP Trustees typically advise

lnvestors who have invested in BDMC syndicated mortgage loans to seek independent

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legal advice with respect to enforcement matters and other significant developments in

respect of projects and loans made in respect of such projects.

76 Given the large number of individual lnvestors, the Trustee is of the view that it is in the

best interests of the lnvestors to appoint Representative Counsel in order to provide the

lnvestors with legal representation to protect their common interests, while keeping

professionalfees for lnvestors as low as possible. lf Representative Counsel is appointed,

various lnvestors will not need to retain their own counsel to assist them in considering

proposals put to them by the Trustee or responses to enforcement steps. lnstead,

Representative Counsel will be available to assist lnvestors with respect to their common

interests in loans administered by BDMC and in assessing all matters in these

proceedings. ln appropriate circumstances, Representative Counselwill be able to provide

feedback to the Trustee in connection with its mandate and, where necessary, lnvestor

consent to certain material actions. Representative Counsel's involvement will result in

more timely and cost-effective decisions, especially given the circumstances that the

Trustee has faced to date,

77 Appointing Representative Counsel will enable the Trustee to put in place an efficient and

effective communication plan, and will assist in ihe implementation of various value-

preserving strategies for lnvestors' interests. ln addition, Representative Counsel will

ensure that those investors who do not opt-out of representation will be adequately

represented in these proceedings.

78. The Trustee is therefore seeking an order that appoints Chaitons LLP ("Chaitons") as

Representative Counsel and grants Representative Counsel a charge on the assets of

BDMC already secured by the Trustee's Charge, as security for the legal fees and

disbursements of Representative Counsel. Chaitons has extensive experience in

proceedings similar to this, including those involving real estate investment firms,

developers and numerous investors, including the MBLAA proceedings in respect of the

entities known as the Tier 1 Trustee Corporations.

79. Chaitons acts for the Court-appointed receiver on the Dunsire Project and therefore will

not represent the lnvestors with respect to the Dunsire Project.

80. The proposed Stabilization Order provides that, subject to prior approval by the Trustee

or order of the Courl, Representative Counsel shall be paid its reasonable fees and

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disbursements. Representative Counsel will deliver its invoices to the Trustee, subject to

such redactions to the invoices as are necessary to maintain solicitor-client privilege

between Representative Counsel and the lnvestors, and the Trustee will approve the

invoices and arrange for payment of same from the proceeds of realization on a project.

It is also proposed that Representative Counsel's fees and disbursements may be paid

from any distributions to be made to lnvestors in respect of these proceedings. When

realizations are generated from a specific project, Representative Counselwould receive

payments for the work on that project. Certain amounts may also need to be reserved

from distributions on a given project to address circumstances where no proceeds are

realized sufficient to pay Representative Counsel for its work on a given project. This will

allow for a fair and reasonable allocation of legal representation for the lnvestors. .

While the Trustee is cognizant of the interests of the lnvestors, the Trustee is also

concerned that the costs of Representative Counsel are adequately managed, so that

while discharging its responsibilities, Representative Counsel can add value from the

perspective of Investors. Accordingly, the Trustee has had preliminary discussions with

the proposed Representative Counsel, to ensure that there is a streamlined

communication strategy, and to ensure that there is no duplication of services as currently

provided by the Trustee or its counsel.

83. The following is a summary of the proposed Representative Counsel's mandate

(a) Representative Counsel would act for all lnvestors in respect of these proceedings

regarding their common interests in the loans and other indebtedness

administered by BDMC, including the common interests of lnvestors in any

particular loan or other indebtedness administered by BDMC;

(b) Representative Counsel would act in the best interests of the lnvestors and take

such necessary and appropriate actions as Representative Counsel deems fit from

time to time;

(c) Representative Counsel shall have no obligation to consult with, follow the

instructions of, or provide an opinion to, any individual lnvestor in connection with

the discharge of its duties under the proposed Stabilization Order;

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(d) any lnvestor that does not wish to be represented by Representative Counsel

would be required to provide notice of same in writing to Representative Counsel;

(e) Representative Counselwould be permitted to communicate with the lnvestors by

posting communications on the Trustee's website;

(f) Representative Counselwould be entitled to a charge ("Representative Counsel

Charge") on the Property as security for its fees and disbursements in respect of

these proceedings, both before and after the making of the proposed Order; the

Representative Counsel Charge shall form a charge on the Property ranking

immediately subordinate in priority to the Trustee's Charge;

(g) Representative Counsel would be at liberty to apply to this Court for advice and

directions in respect of its appointment; and

(h) notice of Representative Counsel's appointment would be posted on the Trustee's

website and sent to lnvestors by Representative Counsel (or by the Trustee on

behalf of Representative Counsel) within 7 business days of the receipt by

Representative Counsel of certain contact information for the lnvestors.

The Trustee has discussed the proposed appointment of Representative Counsel with

FSCO and its counsel, who have advised that they are supportive of same.


The purpose of the Trustee's appointment is to protect the lnvestors. The Trustee was

appointed to administer the loans made by BDMC on behalf of the investing public and to

make prudent decisions that are in the best interests of the lnvestors with respect to the

administration and enforcement of the relevant loans. The Appointment Order also

granted the Trustee's Charge to secure the payment of the Trustee's and its legal

counsel's fees and disbursements as well as other costs of these proceedings.

B6 The Trustee has determined that, in order to discharge its Court-ordered mandate, it

needs to (a) complete a detailed evaluation of the condition of each of the projects and

the associated syndicated mortgage loans made by BDMC, and (b) proactively engage

with stakeholders on a project by project basis. Among other things, the Trustee needs to

develop a strategy to maximize recoveries for lnvestors in difficult circumstances. ln

84.

B5

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87.

88.

89.

furtherance of these matters, the Trustee is seeking the Stabilization Order to clarify and

confirm the scope of the Trustee's Charge and to put some additional restrictions on the

Trustee's rights with respect to the funds charged to give comfort to lnvestors, brokers

and borrowers who have expressed concerns about these matters, including the lnvestors

and brokers who have raised concerns regarding the proceeds of the Victoria Medical

SML Loans and borrowers who have raised concerns regarding funds held in lnterest

Reserve Account.

The Trustee has also determined that it is advisable to appoint Representative Counsel

on behalf of the lnvestors.

The proposed Stabilization Order will facilitate the Trustee in carrying out its mandate for

the benefit of all lnvestors and other stakeholders of BDMC.

ln light of the foregoing, the Trustee respectfully recommends that the Court issue the

Stabilization Order in the form attached to.the Trustee's motion record.

Yann Mwtgagr ilmin*s+rafwr lnp.

FAAN MORTGAGE ADMINISTRATORS INC.,SOLELY IN ITS CAPACIry ASCOURT-APPOINTED TRUSTEE OF

BUSINESS & DEVELOPMENT MORTGAGES CANADA INC.,


ALL OF WHICH lS RESPECTFULLY SUBMITTED this 19th day of June, 2018

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Appendix 3:

Second Report of the Trustee dated October 23,2018, without exhibits

92



(coMMERCTAL L|ST)

BETWEEN


Applicant

-and-


Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, TENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006, C.

29 and SECTION 101 OF THE COURIS OFJUSTICE ACT, R.S.O. 1990 c. G.43

SEGOND REPORT OF THE TRUSTEE

ocToBER 23,2018


^J NFAAMt

0RI0lttsr{tfitsTRrT0n5

93

TABLE OF CONTENTS

r NTRODUCTION ............

PURPOSE OF THE SECOND REPORT

SCOPE AND TERMS OF REFERENCE ................

OVERVIEW.

UPDATE ON BDMC,S BUSINESS AND AFFAIRS

SUMMARY OF THE TRUSTEE,S PROJECT ANALYSIS

UPDATE ON ACTIVITIES OF THE TRUSTEE SINCE THE DATE OF THE FIRST REPORT


RECOMMEN DATION REGARDING REALIZED PROPERTY

REPRESENTATIVE COU NSEL

CONCLUSION AN D RECOM MENDATION

t2

3

5

9

..... 10

...,. 18

.....34

.....4r

',..,44.....45

94

INDEX OF APPENDICES

Appendix 1

Appendix 2

Appendix 3

Appendix 4

Appendix 5

Appendix 6

Appendix 7

First Report of the Trustee dated June 19, 2018, without exhibits

Appointment Order dated April 20, 2018

lnterim Stabilization Measures Order dated June 26, 2018

Project Status Chart as of October 15, 2018

Variance Analysis forthe period ending September 30, 2018

Cash Flow Projection for the period ending April 30, 2019

Notice to Investors re Appointment of Representative Counsel

95



(coMMERCIAL LIST)

BETWEEN

THE SUPERINTENDENT OF FINANCIAL SERVIGES

Applicant

-and-

BUILDING & DEVELOPMENT MORTGAGES GANADA ING.

Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2005, C.

29 and SECTION 101 OF THE COURIS OF JUSTICE ACT\ R.S.O. 1990 c. G.43

SECOND REPORT OF THE TRUSTEE

October 23,2018

INTRODUCTION

On April 20,2018, pursuant to an order ("Appointment Order") of the Honourable Mr.

Justice Hainey of the Ontario Superior Court of Justice (Commercial List) ("Gourt"), FAAN

Mortgage Administrators lnc. ("FAAN Mortgage") was appointed as trustee ("Trustee")

over all of the assets, undertakings and properties of Building & Development Mortgages

Canada lnc. ("BDMC") including, without limitation, all of the assets in the possession or

under the control of BDMC, its counsel, agents and/or assignees but held on behalf of any

other party, including, but not limited to, lenders under syndicated mortgage loans

("lnvestors"), brokers, or borrowers, in each case whether or not such property was or is

held in trust or was or is required to be held in trust (collectively, the "Property"). The

Appointment Order was issued following an application made by the Superintendent of

Financial Services ("superintendent") pursuant to section 37 of the Mortgage

Brokerages, Lenders and Adminisfrafors Act, 2006 (Ontario), as amended ("MBLAA'),

and section 101 of the Courts of Justice Act (Ontario), as amended.

96

2 On June 19,2018, the Trustee submitted its first report in these proceedings ("First

Report"). The First Report provided a comprehensive update on the Trustee's activities

during the first two months of these proceedings. ln particular, the First Report provided

additional background information regarding BDMC and its business, provided updated

information on the status of the projects in which the lnvestors hold syndicated mortgage

loans and provided an outline of the next steps that the Trustee intended to undertake in

respect of the administration of BDMC and its estate. A copy of the First Report, without

appendices, is attached as Appendix"1". A copy of the Appointment Order is attached

as Appendix "2". Capitalized terms not othenrvise defined in this Report have the

meanings ascribed to them in the First Report.

Materials filed with the Court with respect to these proceedings (other than confidential

materials filed under seal), including the First Report, the affidavit of Brendan Forbes, legal

counsel at the Ministry of the Attorney General Civil Law Division, Financial Services

Commission of Ontario ('FSCO') branch, sworn on April 19,2018 ("Forbes Affidavit"),

the Superintendent's application record, the Appointment Order, the lnterim Stabilization

Order and the endorsements issued by the Court, are accessible on the Trustee's website

at: www.faanfnortoaoeadmin.com ("Trustee's Website"). The Trustee intends to maintain

the Trustee's Website for the duration of these proceedings and will be updating it as

appropriate.

PURPOSE OF THE SECOND REPORT

The purpose of this second report ("Second Report") is to provide the Court and

stakeholders with an update on the Trustee's activities since the date of the First Report

and to support the Trustee's request for an Order ("Realized Property Order") that the

Trustee shall:

(a) distribute a further amount equal to 20% of the Realized Property originally

obtained with respect to the Victoria Medical SML Loans, such that, when

combined with the distribution made pursuant to the lnterim Stabilization Order,

70% of such funds shall have been distributed;

(b) distributeT0% of all other Realized Property obtained, whether received before or

afterthe date of the Realized Property Order; and

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4.

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5.

(c) be authorized to use any portion of the retained Realized Property to fund the

Required Trustee Activities (as defined herein).

ln support of the Trustee's request for the Realized Property Order, this Second Report

describes the following matters:

(a) Further information regarding BDMC and its business;

(b) An overview of the Trustee's detailed project analysis to date;

(c) An update on the Trustee's activities since the date of the First Report, including

in relation to:

i. Enforcement actions;

ii. Negotiations of early payouts of certain BDMC loans; and

iii. lnvestor communications;

(d) Further information regarding the funding of these proceedings, including receipts

and disbursements and a cash flow projection through to April 30, 2019;

(e) The Trustee's recommendation regarding Realized Property; and

(f) lnformation regarding Representative Counsel's mandate and the Trustee's

engagement with Representative Counsel.

The Trustee intends to report back to the Court by no later than April 30, 2019 with a

further comprehensive update regarding these proceedings. The report to be filed by April

30, ZO19 will give the Court, lnvestors, borrowers, brokers and other stakeholders further

information regarding BDMC and its business and affairs and information regarding the

Trustee's activities during that period. The Trustee anticipates that it will likely be

necessary to prepare shorter project specific reports during the intervening period and will

likely be required to attend before the Court to seek relief or advice and directions from

the Court regarding such project specific issues. For example, the Trustee anticipates

returning to Court in the near term for approval of an early repayment on the Braestone

Project, discussed and defined herein.


ln preparing this Second Report, the Trustee has relied upon unaudited financial

information provided by, inter a/ra, BDMC, Fortress, Canadian Development Capital &

6.

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B

Mortgage Services lnc. ("GDCM"), the mortgage brokerage who assumed the mortgage

brokerage duties of BDMC, and certain of the individual borrowers who have borrowed

funds from BDMC under various syndicated mortgage loans administered by BDMC'

While the Trustee reviewed various documents provided by BDMC, CDCM, and applicable

borrowers (including, among other things, unaudited internal information, appraisals and

financial projections), the Trustee's review does not constitute an audit or verification of

such information for accuracy, completeness or compliance with Generally Accepted

Assurance Standards ("GAAS'), Generally Accepted Accounting Principles ("GAAP"), or

lnternational Financial Reporting Standards ("lFRS'). Accordingly, the Trustee expresses

no opinion or other form of assurance pursuant to GAAS, GAAP or IFRS, or any other

guidelines, with respect to such information.

Some of the information used and relied upon in preparing this Second Report consists of

financial projections and other information received from various third parties, including

appraisals and project cost information. The Trustee cautions that the projections and

other information used and relied upon are generally based upon assumptions and

estimates about future events and/or market conditions that are not ascertainable or that

could change. As such, the information presented in this Second Report may vary from

the projections and information used to prepare this Second Report and the actual results

may differ both from the results projected therein and herein. Even if the assumptions

relied upon therein or herein materialize, the variations from the projections could be

significant. The Trustee's review of the future oriented information used to prepare this

Second Report did not constitute an audit or review of such information under GMS,

GAAP or IFRS or any other guidelines'

This Second Report has been prepared forthe use of this Court and BDMC's stakeholders

as general information relating to BDMC and to assist the Court with respect to the

Trustee's request for the proposed Realized Property Order. Accordingly, the'reader is

cautioned that this Second Report may not be appropriate for any other purpose. The

Trustee will not assume responsibility or liability for losses incurred by the reader as a

result of the circulation, publication, reproduction or use of this Second Report contrary to

the provisions of this ParagraPh.

9.

4

10. All references to dollars are in Canadian currency unless othenvise noted.

99

OVERVIEW

11

12

The First Report described the need for certain interim stabilization measures, including,

among other things, clarification related to the use of certain funds held in BDMC accounts,

to allow the Trustee to discharge its obligations pursuant to the Appointment Order,

perform BDMC's administrative tasks, and to commence an in-depth review of the real

estate development projects that were funded in part,through the syndicated mortgage

loans that were administered by BDMC.

On June 26,2018, a further order of the Court was made ("lnterim Stabilization Order"),

that, among other things:

(a) appointed Chaitons LLP as representative counsel in respect of the common

interests of all lnvestors in these proceedings unless and until an lnvestor opts out

of such representation ("Representative Counsel");

(b) authorized the Trustee to retain all of the funds held by BDMC on the date of the

Appointment Order, or paid or payable to BDMC or the Trustee thereafter,

including interest where principal is not repaid, other than Realized Property

(defined below) ("Estate Property") and to use the Estate Propefi to fund certain

matters in connection with the administration of BDMC's estate;

(c) required the Trustee to hold, in a separate account, until further order of the Court

(l) all funds held or received by the Trustee as a result of a repayment (in whole or

in part) of principal on any loan or other indebtedness administered by BDMC on

behalf of lnvestors, whether or not (i) secured by any Real Property Charges in the

name of BDMC or an RRSP Trustee, (ii) received before or afier the date of the

Appointment Order, or (iii) paid or payable in trust, plus (ll) all interest paid or

payable to BDMC or the Trustee at the time such repayment (in whole or in part)

of principal is made (collectively, "Realized Property") other than 50% of the

Realized Property consisting of realizations on the Victoria Medical SML Loans;

(d) directed the Trustee to pay 50% of the Realized Property consisting of realizations

on the Victoria Medical SML Loans pro rata to the lnvestors entitled to such funds;

and

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13.

14.

15.

(e) required the Trustee to report to the Court by October 31, 2018 with a

recommendation regarding next steps with respect to the Realized Property,

including any potential distribution of Realized Property to the lnvestors.

A copy of the lnterim Stabilization Order is attached as Appendix "3" hereto

Since the date of the First Report, the Trustee has continued to address the many

significant issues that were facing BDMC and the real estate development projects on the

date the Appointment Order was issued. The Trustee also faces numerous new and

unanticipated issues that arise on an almost daily basis, such as enforcement proceedings

commenced or continued against a significant number of the projects, urgent requests to

execute postponement agreements in connection with new funding arrangements

represented to the Trustee to be needed to allow for the ongoing development of the

projects, and consideration of actions to prevent enforcement proceedings from being

taken against other projects. These matters often require the Trustee's immediate

attention and, in certain cases, a comprehensive response from the Trustee and its legal

counsel.

The Trustee is monitoring every real estate development project, regardless of whether

the project is distressed (as described in more detailin this report)or proceeding generally

as anticipated.

The Trustee has also been conducting an in-depth analysis of each project and the

syndicated mortgage loans made in respect of each project. Among other things, the

Trustee's analysis consists of:

(a) an examination of the development milestones for and progress on each project;

(b) the capital structure, debt obligations and all available documents related thereto;

(c) the relative priorities of the debt obligations;

(d) the potential impact on lnvestor recoveries of specific terms of the relevant BDMC

loan documents, including postponement, "waterfall", and rescission rights;

(e) an analysis of the current value of the project (including by commissioning,

reviewing and analyzing appraisals) compared to projected values and projected

costs if subsequent milestones are achieved;

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(f) the status of the BDMC loan (including whetherthe loan has matured); and

(g) the alternatives available for lnvestors in the circumstances.

16. The Trustee's analysis is well underway and the Trustee can report as follows

(a) 13 of the 45 projects included in the Trustee's mandatel are currently subject to

enforcement proceedings taken by prior ranking mortgagees, resulting in

increased risk to the recoveries of lnvestors who loaned funds to these projects;

(b) one or more BDMC syndicated mortgage loans have matured for 13 projects that

are not facing enforcement action by prior ranking mortgagees,2 and the prospects

of repayment on the majority of these loans is uncertain in the near term;

(c) full repayment of many of the syndicated mortgage loans is at risk; and

(d) repayment, in whole or in part, of the majority of the syndicated mortgage loans is

likely to occur much later than was forecasted by Fortress or others.

17 The Trustee is working with its legal counsel and others to develop further strategies and

recommendations to assist in maximizing recoveries for each project (whether distressed

or not) and, where appropriate, communicating with lnvestors regarding its

recommendations. The Trustee is also communicating with Representative Counsel,

where appropriate, with respect to the status of the projects.

18 Due to the early development status of many of the projects and the complicated capital

structures involved, it is anticipated that it will take several years to complete the

administration of many of the syndicated mortgage loans. As such, the Trustee's analysis

is an ongoing process that will have to be updated from time to time to reflect material

developments over the life of the projects. lt is not yet appropriate for the Trustee to make

final recommendations with respect to many of the projects. The Trustee will continue to

monitor the development of the projects and will present interim recommendations as and

1 ln the First Report, the Trustee had identified 44 projects that had received funds from BDMC. The Trusteehas since determined that two projects were included in the Union Waterfront Project described in theproject status chart attached as Appendix 3 to the First Report: (i) the Union Waterfront Project; and (ii) aproject called Port Place 2, which is related to the Union Waterfront Project but independent of it. Port Place2 is the subject of a separate BDMC loan and is not subject to enforcement proceedings as of the date ofthis Second Report.2 BDMC loans have matured on a total of 24 projects, including projects facing enforcement action by prior

ranking mortgagees and projects where no enforcement action is underway.

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19

20.

21

22.

when appropriate. Further recommendations and a long-term strategy for each project are

being developed and deployed on a case by case basis, including strategies to enhance

opportunities for repayment prior to project completion.

The Trustee recognizes the hardship faced by many lnvestors who participated in

syndicated mortgage loans administered by BDMC. The Trustee has received certain

communications from lnvestors detailing the hardship they are experiencing as a result of

their investments and has also been advised that Representative Counsel has received

similar communications. The Trustee understands the potentially detrimental impact of

delays in the borrowers repaying the BDMC loans and delays in the Trustee distributing

any repayments received to lnvestors.

Now that the Trustee's analysis of the projects is further advanced and in order to minimize

hardship to lnvestors to the extent possible, the Trustee is seeking this Court's

authorization to distribute a further amount equal to 20% of the Realized Property that was

originally obtained by the Trustee in respect of the Victoria Medical SML Loans andTOo/o

of any other Realized Property, whether held as of the date of this Report or received in

the future.

The Trustee is also seeking this Court's authorization to use the retained Realized

propefi to aid the Trustee in complying with the Appointment Order and in carrying out

its mandate, as the Trustee, in its sole discretion, considers necessary or desirable for the

administration of the estate, including those matters set out in paragraph 17 of the lnterim

Stabilization Order (collectively, the "Required Trustee Activities").

The Trustee understands that these proceedings may have a disproportionate impact on

lnvestors whose projects have generated or will generate Realized Property at earlier

dates than other projects. As such, the Trustee will provide the Court with a

recommendation regarding an appropriate allocation of the costs that will be borne by

specific projects at a later date, which will be based on a formula that includes some

compensation to those lnvestors whose Realized Property is used to fund the Required

Trustee Activities during the pendency of the proceedings'

The allocation formula and compensation recommendation will be developed at the

appropriate time to fairly and equitably allocate the costs of the Required Trustee Activities

among lnvestors in accordance with the relative risks and rewards of the projects selected

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by each lnvestor for his or her investment. The purpose of the allocation formula is to

ensure that lnvestors in particular projects do not bear a disproportionate share of the

costs associated with the Required Trustee Activities, and, as such, lnvestors in certain

projects should receive a further distribution at a later date in accordance with the

allocation formula.

24 Notwithstanding the challenges and the hardships described above, the Trustee believes

that this Court-supervised process provides lnvestors with enhanced protections and

better oppodunities to obtain recoveries in light of the circumstances surrounding Fortress

and BDMC.

UPDATE ON BDMC'S BUSINESS AND AFFAIRS

On April 20,2018, the Court issued the Appointment Order on the application brought by

the Superintendent. The Superintendent's reasons for bringing that application are

summarized in the First Report and comprehensively explained in the Forbes Affidavit.

Among other things, the Superintendent had previously entered into certain settlement

arrangements with BDMC that required BDMC to retain FAAN Mortgage to manage

BDMC's mortgage administration business. FAAN Mortgage was retained for this purpose

pursuant to a Management and Administration Agreement entered into on February 7,

2018 ("MAA"). The Superintendent served its application record after BDMC breached a

number of provisions of the MAA and became involved in a widely publicized RCMP

investigation related to alleged mortgage fraud.

26. Following its appointment, the Trustee's control over and responsibilities in respect of

BDMC and the loans administered by BDMC increased. As described in more detailbelow

under "Funding of These Proceedings", following the Trustee's appointment, BDMC has

received significantly less funding from other sources than was provided prior to the

commencement of these proceedings, while facing substantially higher costs in

addressing a number of material adverse changes in respect of the real estate

development projects.

27 Among other things, the Trustee continues to face many urgent demands to execute

postponements to new lenders to address both liquidity needs and enforcement activities

that have been commenced or threatened by senior lenders. Several borrowers have

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advised the Trustee that the heightened media attention on Fortress has negatively

impacted the ability of borrowers associated with Foftress and BDMC to obtain new loans

and has made existing lenders reluctant to renew their loans or advance additional funds.

Some borrowers have advised that they are also having difficulty obtaining title insurance

due to these events.

28 Since the date of the First Report, several additional enforcement actions have been taken

by senior lenders. Enforcement actions are described in more detail under "Update on the

Activities of the Trustee". The Trustee has taken and will continue to take appropriate

steps in response to these enforcement actions in an effort to protect the lnvestors'

interests to the extent possible.

29 The Trustee also continues to monitor every project, regardless of whether the project is

distressed or proceeding in the ordinary coLrrse, and to address development requests to

permit the projects to progress in a manner that will maximize lnvestor recoveries.

SUMMARY OF THE TRUSTEE'S PROJECT ANALYSIS

30 The Trustee has been undertaking a detailed analysis of each real estate development

project and of the syndicated mortgage loans made in respect of each project. This

analysis has included an examination of the status of each project, the principal

development milestones required to complete that project, and any known impediments

to achieving the milestones, as well as an examination of the capital structure and debt

owing in respect of each project.

To conduct the project analysis, the Trustee has undertaken numerous activities, including

but not limited to the following:

31

(a) Commissioning 42 new, independent appraisals that provide an "as is" current

value of the properties based on appropriate assumptions and current market

conditions ("New Appraisals");

(b) Gathering and providing necessary information to the appraisers required for the

completion of the New Appraisals. Such information typically also forms part of the

Trustee's project review;

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(c) Performing detailed reviews of drafts of the New Appraisals received and, in many

instances corresponding with the appraisers regarding same;

(d) Corresponding directly with and obtaining information directly from borrowers and

other relevant parties to permit the Trustee to corroborate information obtained

from BDMC and other sources;

(e) Reviewing project budgets and other documentation;

(f) Contacting city planners to obtain updates on the status of the project related

development aPProvals;

(g) Reviewing decisions issued by the Local Planning Appeal Tribunal ("LPAT')

formerly known as the Ontario Municipal Board ('OMB") and similar organizations

regarding development and planning approvals;

(h) Working with a planning consultant to better understand the current development

status of projects, the remaining development milestones for projects, the timing

to achieve those milestones and any potential impediments to achieving those

milestones, in conjunction with an understanding of the various possible exit points

throughout the life of the project; and

(i) Monitoring the status of projects that are currently under construction.

The Trustee has been working with certain borrowers to discuss opportunities to exit

projects and the different points in the development process where an exit is feasible,

including following the issuance of certain development approvals, following completion

of land servicing work, following completion of construction or after substantially all of the

units in the project have been sold. The Trustee has been independently working on

assessing the alternative recoveries to lnvestors at different exit points.

As part of its analysis, the Trustee is also refining its understanding of the material terms

of the senior loans secured on each of the projects and the other financing sources relied

upon by the applicable borrower, the postponements previously executed by BDMC and

BDMC's relative rights and obligations in respect of the syndicated mortgage loans made

to finance a project. The Trustee has continued to communicate with and seek information

from the borrowers, the senior lenders, Fodress, CDCM and other stakeholders with

respect to these matters.

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Over 11,000 individual lnvestors have invested an aggregate amount of approximately

$560 million in syndicated mortgage loans administered by BDMC. These funds have

been advanced in connection with 45 different projects that are in various stages of

development.

A chart setting out specific details regarding the capital structure and development

progress for each ongoing project is provided as Appendix u4" ("Project Analysis

Summary"). The Project Analysis Summary contains particularized information with

respect to each project, but the Trustee cautions that the Project Analysis Summary is

only intended to summarize the results of certain aspects of the Trustee's analysis to the

date of this Second Report. The Trustee continues to refine its analysis on each project

as well as to respond to new developments and information. New developments and new

information can at times have a significant impact on the previous conclusions of the

Trustee's review for that project and its related recommendations. Fufther, certain

confidential information has been excluded from the Project Analysis Summary.

The below table is derived from the Project Analysis Summary and sets out the

development status of the various projects administered by BDMC. For the purposes of

the Project Analysis Summary and the below table:

(a) "Development Stage" projects are projects where various zoning and planning

approvals are being sought.

(b) "Pre-construction Phase" projects are projects where the principal zoning and

planning approvals have been obtained and (in some cases) the marketing and

sale of units are underuvaY.

(c) "Construction Phase" projects are projects where one or more of demolition, site

servicing, excavation or construction have commenced.

(d) "Completed" projects are projects where construction is complete and sales are

advanced, but the BDMC loans have not yet been repaid.

(e) "Exited" projects are projects where the principal assets have been sold, or the

sale of the property has been approved by the Court and a sale is pending or, in

the case of the Victoria Medical Project, the borrower has repaid the BDMC loan.

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BDMCSML Debt

Proiect Status Number of Proiects $000s)

DevelopmentPre-constructionConstructionCompletedExitedTotal

19 209,069109,877177,17032,706

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45

o

043

$560,28731 465

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38

39

40.

The remainder of this section addresses three important aspects of the Trustee's review

to date: (a) a discussion of the New Appraisals being prepared to provide estimated

current values of the projects; (b) an overview of the BDMC loan structure; and (c)

information regarding the Trustee's project specific recommendations.

(a) New Appraisals

One important element of the Trustee's analysis is to understand the potential recoveries

to lnvestors if a project is sold in the near term (as a result of senior lender enforcement

actions or otheruvise) compared to the potential recoveries to lnvestors at a later date if

development of the project continues. This analysis must be undertaken in connection

with many decisions, including whether to agree to a further postponement of BDMC's

security.

The projects often consist of several different parcels of land, and it is not uncommon for

each parcel to have different senior and junior secured lenders. As a result, it can be

difficult to determine the property values in respect of a given project because it is not

clear whether all parcels of land would be sold as a single package or whether the parcels

would be sold indePendentlY.

ln making decisions, the Trustee must rely, in part, on appraisals prepared in connection

with the applicable project. As noted in the First Report, many of the appraisals previously

obtained by BDMC suffer from significant shortcomings, including relying on assumptions

regarding (i) the outcome of completion of the applicable project (including the timing of

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completion, the cost to complete and the projected sales revenues), (ii) the completion of

certain development milestones and (iii) other matters that may not come to pass.

Since the date of the First Report, the Trustee has obtained 31 New Appraisals. These

New Appraisals have been provided in draft form and the Trustee is working with

appraisers to address assumptions and additional factual matters with a view to receiving

final appraisals. The Trustee has obtained valuable insight regarding the projects by

working through the New Appraisals with the appraisers and continues to speak to the

appraisers regularly regarding a number of matters, including projected future realizations

on the projects.

The Trustee negotiated a bulk discount for the New Appraisals in an effort to reduce costs

and therefore increase recoveries on Realized Property.

While appraisals are an important element of the Trustee's analysis of potential recoveries

for the lnvestors, the Trustee must also consider BDMC's rights and obligations under the

applicable syndicated loan documents, such as the potential requirement to postpone to

other lenders (discussed further below). Many other relevant factual matters need to be

evaluated in connection with the Trustee's analysis of appropriate next steps and potential

recoveries on projects, including budgets, market conditions and prospects of achieving

milestones.

(b) The BDMC Loan Structure

The Trustee has been focused, among other things, on examining the capital structure

and debt obligations applicable to each project. This section summarizes the following

p6ncipal components of the BDMC loan structure: (i) key provisions of the applicable loan

and security package and related factual matters; (ii) certain "waterfall" arrangements; and

(iii) certain "rescission rights". Some additional general information regarding these

matters can be found in the First Report and in the Forbes Affidavit. The following section

describes matters generally. Certain project specific details can be found in the Project

Analysis Summary. The Trustee has prepared analyses of these and other matters for

each project and utilizes the results of those analyses in making recommendations and

decisions where required and appropriate.

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46.

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49

(i) Kev provisions of the BDMC loan and securitv packaqe

The BDMC loan documents generally purport to require BDMC to subordinate its security

up to certain specified maximum amounts to facilitate further advances by senior lenders

under existing loans or to facilitate advances under new senior loans to fund the

construction of the applicable project. Among otherthings, the loan documents purportto

require BDMC to postpone its mortgages to (a) a predefined amount of "first-ranking

construction loans" and (b) the difference between the face amount of the BDMC loan and

the amount actually advanced by lnvestors through BDMC (in aggregate, the "specified

maximum amount").

BDMC's syndicated mortgage loans were rarely fully advanced on the initial closing date;

instead, funds were typically advanced in several separate tranches over a period of time.

ln many cases, there is a shortfall between the face amount of the BDMC loan and the

amount that was funded by BDMC prior to the Trustee's appointment. As BDMC is no

longer in a position to advance additional funds to satisfy the full loan commitment set out

in the applicable BDMC loan, the Trustee has received numerous requests to postpone

and subordinate BDMC's security to new lending arrangements to make up for the

shortfall.

Moreover, the Trustee has been advised that some of the projects will need financing in

excess of the specified maximum amounts set out in the applicable BDMC loan agreement

to permit developments to continue. Such funding is often only available if the security

interests granted to BDMC are further postponed and subordinated to the new financing'

The Trustee has entered into new postponement agreements where it appears to be in

the best interests of the applicable lnvestors to do so and in accordance with the applicable

loan documents. New postponements are discussed further under "Update on the

Activities of the Trustee".

BDMC's mortgages often rank third or lower in priority on the projects. The senior

mortgages often secure significant sums advanced to fund the acquisition of the property,

the construction of the project and certain "soft costs" such as obtaining development

approvals. lnvestor monies secured by subordinate BDMC mortgages have typically been

used to fund "soft costs" not funded by senior lenders as well as to service the projects,

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including funding the payment of interest to senior lenders and the payment of propefty

taxes, development fees and similar expenses.

Many of the postponement agreements in effect on the date of the Appointment Order

purport to severely restrict BDMC's rights to enforce on its loans. As a result, BDMC often

has a limited ability to obtain repayment on its loans when the loans mature. lnstead,

BDMC must wait until the project is completed or senior lenders take enforcement action

before any repayment can be anticipated.

Many of the projects are in early stages of development and have therefore not yet

advanced to the point where construction financing is appropriate. ln addition, the projects

are often thinly capitalized and are reliant on new loans from other lenders to meet

development milestones such as obtaining planning approvals. As noted above, BDMC is

customarily asked to further postpone its security in such circumstances.

Even where the projects are more advanced, most of the projects do not appear to have

been attractive to more traditional lenders such as Schedule 1 banks. lnstead, other

lenders in the real estate space have committed substantial sums to projects also funded

by BDMC, but these lenders tend to expect higher returns on their loans and have proven

to be ready to act quickly to enforce their rights if risks to their recoveries materialize.

(ii) Waterfall Arranqements

Many of the loan agreements reference certain repayment "waterfalls" that set out

complex distribution mechanics that, at least in some instances, appear to contemplate

owners of the realestate (including the borrowers and owners of the borrowers) receiving

some of the amounts they invested in the developments before the lnvestors receive all

of the amounts they loaned to the project or a return on those loans. ln some instances,

these payment waterfalls are set out in full in the applicable loan agreements but more

often than not, the waterfalls are only fully set out in certain other agreements that neither

BDMC nor the affected lnvestors are party to, such as shareholder agreements,

development consultant agreements, co-tenancy agreements and related agreements

between Fortress and the applicable borrower or co-owner of the borrower. The Trustee

has received and reviewed certain development consultant and co-tenancy agreements

and understands from its discussions with Fortress and its counsel that similar

arrangements were entered into for a large number of projects.

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54 The Trustee is continuing to investigate the related waterfall arrangements. The

interpretation of these waterfall provisions will likely be an important matter for the Trustee

to consider in the future, and competing interpretations regarding these provisions could

give rise to significant priority disputes even where projects are progressing in the ordinary

course.

(iii) Rescission Riqhts

The Trustee is aware that several lnvestors made their investments through loan

agreements that contain an addendum ("Rescission Addendum") that purports to

provide certain lnvestors a right to rescind their loans and obtain a refund of the amounts

advanced. To date, the Trustee has been provided with a list of 23 projects and 682

lnvestors with loan agreements that include a Rescission Addendum. The Rescission

Addendum provides that BDMC and the borrower are required to provide certain updated

loan documents, disclosure and new appraisals to specified lnvestors and, following the

delivery of these materials, the lnvestor would have 15 days to notify the borrower that the

lnvestor desires to rescind the loan and, following the delivery of that notice, the borrower

would have 60 days to return the sums advanced by the lnvestor ("Rescission Right").

The Trustee understands that, to date, no required updated loan documents or required

additional disclosure has been delivered to any lnvestor. Certain borrowers have advised

that lnvestors cannot seek to exercise the Rescission Right until the updated loan

documents and disclosure are delivered. The Rescission Addendum does not require the

delivery of updated loan documents and disclosure by any specified date. Further, the

Trustee understands that few of the borrowers have any sums available to fund the

exercise of the Rescission Right.

The Trustee is continuing to consider the Rescission Rights. Among other things and as

discussed in more detail below, Rescission Rights will be a consideration in the Trustee's

eventual allocation formula with respect to the costs of the Required Trustee Activities and

the ultimate distribution of Realized Property.

(c) Recommendations

The Trustee is working with its legal counsel and others to develop strategies and

recommendations to assist in improving recoveries for each project and, where

appropriate, communicating with lnvestors regarding its recommendations. The Trustee

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has amassed and analyzed considerable additional information since the date of the First

Report, including draft New Appraisals, and is in a better position to act proactively to

protect lnvestors' interests in these projects. However, there is much work yet to be done.

Among other things, due to the early development status of many of the projects, it is not

yet appropriate for the Trustee to make final recommendations with respect to many of the

projects.

The Trustee has determined that a combination of unfavourable decisions being issued

by the LPAT, development approval delays, construction delays, existing postponement

arrangements and invocations of broad "force majeure" clauses has materially extended

the effective maturity date of the syndicated mortgage loans administered by BDMC such

that many lnvestors should anticipate receiving repayment (if any) much later than initially

predicted. One or more of BDMC's syndicated mortgage loans have matured on 24 of the

45 projects. Of the 13 projects that are subject to ongoing enforcement actions by senior

lenders, 11 projects also have one or more matured BDMC loans. ln addition, 13 projects

that are not facing enforcement action by senior lenders have one or more matured BDMC

loans.

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61 The Trustee is working proactively to address these matters. ln many instances, the

Trustee has recommended that the lnvestors agree to extend the maturity date of the

loans and enter into postponement arrangements to permit a project to continue to

develop. ln some instances, the Trustee has sought feedback from lnvestors regarding

their preferred course of action as it relates to agreeing to an extension of the term versus

allowing enforcement steps to be taken. The Trustee's recommendations and actions with

respect to some of the foregoing projects is described in more detail under "Update on the

Activities of the Trustee".

UPDATE ON ACTIVITIES OF THE TRUSTEE SINCE THE DATE OF THE FIRST REPORT

62 Since the date of the First Report, the Trustee has continued to engage in six broad types

of activities in addition to conducting in-depth reviews of the projects described above:

(a) communicating with borrowers and lenders;

(b) responding to enforcement actions by senior lenders on distressed projects;

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(c) negotiating with borrowers regarding potential early payouts on certain BDMC

loans

(d) seeking to recover amounts advanced by lnvestors where standstillarrangements

do not prevent the Trustee from taking action;

(e) responding to requests for postponements and taking other actions to permit the

projects to continue and to prevent enforcement by senior lenders; and

(f) responding to a multitude of lnvestor inquiries, including inquiries initiated by a

group that calls itself the lnvestor Voice'

(a) Borrower and Lender Communications:

The Trustee has sent letters to (or otherwise communicated with) each of the borrowers

on the projects to advise borrowers of its appointment and to request certain information

to assist the Trustee in completing reviews of each project, including a request that all

reporting required under the applicable loan and security packages be sent to the Trustee

in addition to Fortress or any other delegate of BDMC referenced in the loan documents.

The Trustee has also engaged in project specific discussions with representatives of

borrowers and with CDCM, as broker to certain borrowers.

ln addition, the Trustee has sent letters to each of the secured lenders who are known to

the Trustee to have an interest in a project and to every other person with registered

security on title to the applicable project to advise such persons of the Trustee's mandate,

to request that such persons provide the Trustee with information regarding BDMC's

obligations to such person, and to request that the Trustee be provided with notice of any

enforcement or other material action taken by such persons. The Trustee has also

engaged in discussions with representatives of lenders.

(b) Enforcement Matters :

Since the date of the First Report, an increasing number of BDMC's borrowers face

enforcement actions taken by one or more senior lenders resulting from borrower defaults

under senior loans. As of the date of this Second Report, 13 of the 45 projects that have

received funds from syndicated mortgage loans administered by BDMC are subject to

enforcement proceedings by senior lenders. The Trustee is continuing to respond to

enforcement actions in an effort to obtain the best possible result for the lnvestors in the

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circumstances and to generate as much Realized Property as possible. ln some cases,

the lnvestors' interests are at risk of being, or have already been, severely compromised.

ln such cases, the Trustee is considering alternative approaches to increase the amount

of Real2ed Property that can be generated, including obtaining and analyzing detailed

information regarding the borrower's sources and uses of funds.

It is critical that the Trustee take an active role in any enforcement process, including

engaging with enforcing lenders regarding any proposed enforcement steps and working

with the enforcing lender and other stakeholders to ensure that any enforcement process,

including any sales process to be established, is structured in a manner that protects the

lnvestors to the maximum extent possible. ln addition, the Trustee is seeking an

accounting regarding the borrower's use of funds (including the borrower's use of funds

provided by BDMC) and analyzing transactions. However, the Trustee recognizes that

there may be occasions where the underlying value of the projects (based on updated

appraisals) will not be sufficient to repay all of the lenders who hold security in priority to

BDMC, and, as such, significant costs should not be incurred with respect to those

projects.

When the Trustee is notified that a lender intends to take enforcement action, the Trustee

generally sends a letter to such lenders to remind the lender of the Trustee's mandate and

the existence of these proceedings. The Trustee requests that the enforcing lender keep

the Trustee apprised of developments in respect of the proposed enforcement steps and

requests access to sales process materials and a role in any sales process to be

undertaken for the specific project. The Trustee offers to enter into appropriate

confidentiality agreements in connection with these matters. To date, lenders have

generally responded positively to the Trustee's requests.

ln addition, where appropriate, the Trustee has registered the Appointment Order on title

to projects that are subject to enforcement proceedings that are not supervised by a court

of competent jurisdiction.

Below is a summary of the 13 projects facing material enforcement actions by senior

lenders and the Trustee's efforts in respect of these actions as of the date of this Second

Report follows, as well as an update on the successful refinancing of the Bowmanville

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Project (defined below) and the satisfactory resolution of the related enforcement

processes previously undenaray.

70 Brookdale Proiect: As noted in the First Report, enforcement steps have been taken in

respect of a real estate development project in midtown Toronto ("Brookdale Project"),

with approximately $4.6 million of "mezzanine"3 syndicated mortgage loan debt

administered by BDMC and over $20 million of subordinate syndicated mortgage loan

debt also administered by BDMC. The lnvestors have a 4rh and Sth ranking mortgage

registered on this project. The Brookdale Project is subject to a notice of sale under

mortgage proceeding ("Notice of Sale") brought by Firm Capital Mortgage Fund lnc.

("Firm") in respect of construction financing that has matured. Firm appointed RSM

Canada Limited ("RSM') as its private receiver of the Brookdale Project. On September

21,2018, Firm served a motion record returnable on October 18,2018, seeking a vesting

order to vest the property comprising the Brookdale Project in Empire (Water Wave) lnc.

free and clear of encumbrances, including BDMC's security, senior lender security and a

number of construction liens. ln addition to the activities described in the First Report, the

Trustee has maintained a continuous dialogue with RSM and counsel to Firm regarding

the Brookdale Project, including regarding appropriate terms of the sale process, methods

to maximize recoveries in the sale process and potential purchasers to be contacted. Afier

service of the Court materials seeking approval of the sale, the Trustee engaged in

negotiations with stakeholders in the Brookdale Project and attended before the Court on

October 18,2018 to support the proposed transaction and argue for the best method to

address the ongoing priority disputes. The sale was approved, and a further Court hearing

will be required to address priorities and other matters, as there are significant disputes

regarding priority, releases and entitlement to the proceeds of sale. The Trustee will

continue to work to maximize lnvestor recoveries, including at further Court attendances.

At this time, it is the Trustee's understanding that there may be a distribution under the

mezzanine loan and the syndicated loan. However, the quantum and timing of any such

distribution are unknown.

3 A mezzanine syndicated mortgage loan debt is a BDMC syndicated mortgage loan debt that is in priorityto other BDMC syndicated mortgage loan debt but still subordinate to debt owed to senior lenders. Typically,BDMC mezzanine syndicated mortgage loan agreements contain the same mandatory subordinationprovisions as are found in other BDMC syndicated mortgage loan agreements.

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Charlotte Adelaide Proiect: a real estate development project in downtown Toronto

(,'CHAT Project"), with over $12.3 million of syndicated mortgage loan debt administered

by BDMC and approximately $3.91 million of subordinate syndicated mortgage loan debt

also administered by BDMC. The lnvestors have a2nd and 3'd ranking mortgage registered

on this project. The CHAT Project is subject to a notice of intention to enforce security (a

"244 Notice") under lhe Bankruptcy and lnsolvency Acf ("BlA") issued on July 16,2018

by Diversified Capital lnc. ("Diversified") in respect of senior financing in excess of $9.3

million that has matured. The Trustee has corresponded with Diversified and others since

the issuance of its 244 Notice. lnvestor recoveries on this project remain uncertain.

Colliers Centre Proiect: a real estate development project in Barrie, Ontario ("Colliers

Project") with over $36 million of syndicated mortgage loan debt administered by BDMC

and approximately $16.9 million of subordinate syndicated mortgage loan debt also

administered by BDMC. The lnvestors have 4th and 5th ranking mortgages registered on

this project. The Colliers Project is subject to a Notice of Sale proceeding brought by

Morrison Financial lnc. ("Morrison") in respect of construction financing in excess of $30

million that has matured. As noted in the First Report, the notice period for the sale of the

Colliers Project expired some time ago. The Trustee has been in discussions with

Morrison and its agents regarding the sale process and understands that Morrison is

seeking to bring the process to a conclusion in the near term. The Trustee notes that

despite its efforts, a sale of the property could result in significant losses tothe lnvestors.

Dunsire Proiect: a real estate development project in Guelph, Ontario ("Dunsire Project")

that is subject to a receivership proceeding. On May 25,2018, the receiver, RSM, obtained

an amended and restated vesting order from the Court in respect of the Dunsire Project

to approve a sale transaction and to vest title to the Dunsire Project in a new owner related

to the current owner, free and clear of certain encumbrances, including approximately $1.7

million of subordinate, secured debt owed to BDMC in trust for lnvestors. The Trustee and

its counsel have been engaged in extensive correspondence with RSM regarding the sale

transaction, an accounting of sources and uses of funds, and potential recoveries from

this project. As a result, the Trustee understands that there may be some limited

recoveries to lnvestors who invested in the Dunsire Project, but the syndicated mortgage

loan has been significantly compromised. The Trustee continues to engage with the

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receiver to pursue any avenues of additional recovery based on information to be provided

by RSM and the Trustee's independent analysis.

Glens of Halton Hills / Georqetown Proiect: a real estate development project in

Georgetown, Ontario ("Georgetown Project"), with three syndicated mortgage loan

facilities administered by BDMC: one of approximately $1.7 million, a second of

approximately $g.g million, and a third of approximately $4.4 million. The lnvestors have

3'0, 4th and Sth ranking mortgages registered on this project. As noted in the First Report,

there are a number of different senior lenders with priority mortgages on different parcels

of land comprising the Georgetown Project. Certain senior lenders on certain parcels of

land comprising the Georgetown Project have issued Notices of Sale and 244 Notices in

respect of such parcels of land. On August 24,2018, the borrower filed a notice of intention

to file a proposal under the BIA (an "NOl") and KSV Kofman lnc. ("KSV")was appointed

proposal trustee. By Order dated September 20, 2018, the time for the borrower to file a

proposal under the BIA was extended to November 7, 2018. The Trustee has been

engaged in discussions with the borrower and KSV regarding the Georgetown Project,

including regarding the sales and marketing process proposed and approved by the Court

on October 15, 2018 and the stalking horse sale agreement approved in connection

therewith. The Trustee intends to work with KSV and the borrower in an effort to achieve

a transaction for the Georgetown Project that will result in a recovery for Georgetown

Project lnvestors.

Mississauqa Meadows 1 Proiect: a real estate development project in Mississauga,

Ontario ("MM1 Project"), with approximately $5.2 million of syndicated mortgage loan debt

administered by BDMC. The lnvestors have a 5th ranking mortgage registered on this

project. The MM1 Project is subject to both a 244 Notice and a Notice of Sale issued by

Firm, the l"tranking mortgagee, in respect of senior financing in excess of $4.9 million

that has matured. The Trustee has engaged in correspondence with Firm and others both

prior to and since the issuance of its 244 Notice and Notice of Sale.

Mississauqa Meadows 2 Proiect: a real estate development project in Mississauga,

Ontario ("MM2 Project"), with approximately $3.6 million of syndicated mortgage loan debt

administered by BDMC. The lnvestors have a 3'd ranking mortgage registered on this

project. The MM2 Project is subject to both a Notice of Sale and a 244 Notice issued by

Firm, the 1't ranking mortgagee, in respect of senior financing in excess of $1.4 million

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that has matured. The Trustee has engaged in correspondence with Firm and others both

prior to and since the issuance of its 244 Notice and Notice of sale.

Old Market Lane Project: a realestate development project in Woodbridge, Ontario ('OML

project"), with approximately $3.8 million of syndicated mortgage loan debt administered

by BDMC and two additional subordinate syndicated mortgage loan facilities also

administered by BDMC that rank pari passu with one another, in the amounts of

approximately $3.1 million and $6.4 million, respectively. The $3.8 million of syndicated

modgage loan debt includes $2.2 million of syndicated mortgages advanced by lnvestors

outside of a registered account ("Cash lnvestors"). lt is unclear at this time if the Cash

lnvestors postponed to JYR Capital Corporation's ("JYR") mortgage. JYR is one of the

priority lenders. The remaining balance of the $3.8 million syndicated mortgage loan was

advanced by lnvestors through registered accounts ("Registered lnvestors") and their

interests have been postponed to JYR. The OML Project is subject to a Notice of Sale

proceeding brought by JYR in respect of financing in excess of $695,000, and to a 244

Notice issued by Firm, the 1"t ranking mortgagee, in respect of seniorfinancing in excess

of $3.5 million. The Trustee has engaged in correspondence with JYR, Firm and others

both prior to and since the issuance of the Notice of Sale and 244 Notice, respectively.

Triple Creek Proiect: a real eState development project in Rocky View County, Alberta

("TC project"), with over $12.9 million of syndicated mortgage loan debt administered by

BDMC and approximately $2.5 million of accrued interest for which the lnvestors have

been given a separate mortgage that is also administered by BDMC. The lnvestors have

4th and 5th ranking mortgages registered on this project. The TC Project is a large block of

land near Calgary and is subject to a Notice of Sale initiated by Romspen lnvestment

Corporation ("Romspen"), the first priority mortgagee, prior to the issuance of the

Appointment Order in respect of senior financing in excess of $3.2 million that has

matured. Eagles Edge CapitalCorporation ("Eagles"), the second priority mortgagee, has

also commenced enforcement proceedings against the TC Project in connection with

outstanding debt totaling approximately $2.6 million. The Trustee has engaged with

Romspen and Eagles, including engaging with Romspen regarding the sale process, but

understands that the value of the TC Project property is likely too low under current market

conditions and the current designated use for the land for there to be any material

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recoveries to the lnvestors who loaned funds to the TC Project. The value is not

anticipated to increase until the designated use of the land is changed.

Union Waterfront Proiect: a real estate development project in St. Catharines, Ontario

("Union Waterfront Project"), with over $7.4 million of syndicated mortgage loan debt

administered by BDMC and approximately $9.4 million of subordinate syndicated

mortgage loan debt also administered by BDMC. The lnvestors have 3'd and 4th ranking

mortgages registered on this project. The Union Waterfront Project is subject to

receivership proceedings initiated by FirstOntario Credit Union in respect of unpaid debt

in excess of $10 million. msi Spergel lnc. was appointed as the court-appointed receiver

by order dated August 3, 2018. The Trustee has been engaged in discussions with msi

Spergel lnc. regarding the receivership and the sales and marketing process for the Union

Waterfront Project. msi Spergel lnc.'s deadline for the submission of offers for the

properties that are the subject of the Union Waterfront Project is November 20,2018.

Whitbv Commercial Proiect: a real estate development project in Whitby, Ontario ("Whitby

project"), with over $14.7 million of syndicated mortgage loan debt administered by

BDMC. The Investors have a 2nd ranking mortgage registered on this project. The Whitby

project is subject to a Notice of Sale proceeding brought by Ken Gold, the 1't mortgagee,

in respect of acquisition financing that has matured. The Trustee is in discussions with the

borrower with respect to a potential refinancing of the Whitby Project and has engaged in

correspondence with Gold since the issuance of the Notice of Sale.

Bowmanville Proiect: a real estate development project in Clarington, Ontario

("Bowmanville Project"), consisting of three separate parcels of land that secure

approximately $5.3 million of syndicated mortgage loan debt administered by BDMC. As

of the date of the First Report, each of the three parcels of property comprising the

Bowmanville Project was subject to separate enforcement proceedings brought by the

three separate first priority mortgagees. The Trustee took a number of steps in an effort

to respond to these enforcement actions and to maximize potential recoveries for the

Investors. These efforts culminated in a refinancing of the Bowmanville Project, with

sufficient new funds to repay the three first priority mortgagees on the property, one of

whom was also the second priority mortgagee on two of the properties. The Trustee

agreed to subordinate BDMC's mortgage to the new first priority lender in accordance with

the BDMC loan documents but also received full payment of its expenses in connection

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with responding to the enforcement actions and postponing BDMC's mortgage' BDMC's

mortgage remains in 3'd ranking position. The borrower has advised that it is in the process

of obtaining the required development approvals and working to meet related milestones,

which is projected to increase the value of the Bowmanville Project.

Lake and East Proiect: a real estate development project in Oakville, Ontario ("Lake and

East project"), with over $9.1 million of syndicated mortgage loan debt administered by

BDMC. The lnvestors have a 2nd ranking mortgage registered on this project. The Lake

and East Project is subject to a Notice of Sale proceeding brought by Vector Financial

Services Limited ("Vector"), the l"tmortgagee, in respect of over $3.7 million of senior

financing that has matured. Negotiations of a potential refinancing of the debt owing to

Vector are undenvay and the Trustee is engaged regarding a potential postponement with

respect to such refinancing.

Treehouse Proiect: a real estate development project in Scarborough, Ontario

("Treehouse Project"), with over $5.4 million of syndicated mortgage loan debt

administered by BDMC. The lnvestors have a 2nd ranking mortgage registered on this

project. The Treehouse Project is subject lo a244 Notice and Notice of Sale proceeding

brought by Firm, the 1"t mortgagee, in respect of over $1 .8 million of senior financing that

has matured. BDMC's syndicated mortgage loan to the Treehouse Project has matured

and the Trustee has been requested to postpone BDMC's mortgage to new financing in

the amount of $3.5 million to repay Firm and to fund project costs. The execution of this

postponement would require the maturity date of the BDMC syndicated mortgage loan to

be extended. The Trustee is seeking lnvestor input regarding next steps with respect to

this matter and has sent a notice to the Treehouse Project lnvestors in this regard.

(c) Negotiations regarding early payouts

Since the date of the First Report, the Trustee has been engaged in negotiations with

certain borrowers and with Fortress and CDCM on behalf of certain borrowers regarding

potential early payouts of the applicable loans. As recoveries under certain of the projects

are uncertain, the Trustee has actively engaged in discussions with respect to any such

early payout opportunities. Many of the payout discussions are at early stages, but the

Trustee is seeking to advance these discussions in circumstances where the Trustee

believes an early payoutwould be in the best interest of lnvestors.

26

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85

86.

87

B8

89.

The Trustee has engaged in negotiations with Braestone Development Corporation

(,,Braestone Borrower") regarding the amounts due to BDMC under the loan agreement

dated December 1 , 2012 in respect of a real estate development project in Moonstone,

Ontario ("Braestone Project"). The Trustee understands that the Braestone Borrower

faces significant environmental issues on certain aspects of the Braestone Project that will

likely result in material delays in the progress of the project and the repayment of the

BDMC loans made to date.

The Trustee has negotiated a settlement agreement with the Braestone Borrowerwhereby

the Braestone Borrower would pay $10 million to BDMC as a full and final satisfaction and

compromise of all the Braestone Borrower's obligations to BDMC under the loan

agreement. The full amount due under the Braestone loan (including interest and certain

deferred lender fees) exceeds $16 million; however, when previously paid interest of

approximately g5.4 million is factored into the analysis, the proposed payout would result

in a full payment of the principal owing on the BDMC loan plus compensation of

approximately 15o/o on that principal amount. The Trustee has recommended that the

setlement agreement proceed and is currently seeking feedback from Braestone

lnvestors. The Trustee anticipates that it will be returning to Court in the near term to seek

the Court's approval of the proposed settlement. Full details of the proposed settlement

will be provided when Court approval is sought.

As discussed in more detail below, if the Trustee is able to obtain the Court's approval of

the proposed settlement with the Braestone Borrower and to close the transactions in the

near term, the Trustee anticipates seeking authorization to return additional Realized

property to the lnvestors. The Trustee may determine that it needs to retain as little as

20% of the Realized Property following receipt of repayments on the Braestone Project.

The Trustee is also in negotiations with The Harlowe lnc. and certain of its representatives

regarding a potential repayment of the syndicated mortgage loan made to The Harlowe

lnc.

ln order to give clarity on the process to lnvestors and borrowers, the Trustee advises that

it intends to follow a similar approval process with respect to The Harlowe lnc. and future

similar repayment opportunities.

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90

91

92

93

94

(d) Seeking Recoveries: the Eden Project

ln addition to projects facing enforcement actions by senior lenders, the Trustee faces

challenges to recoveries on the syndicated mortgage loan made to 2309918 Ontario lnc.

("Eden Borrower"). The Eden Borrower is indebted to BDMC in respect of loans made

for a real estate development project in King City, Ontario, consisting of approximately 28

residential homes ("Eden Project"). These homes have been sold and the senior loans

have been discharged. The mortgages in favour of BDMC have not been discharged and,

to date, no payments of the sums secured by BDMC's mortgages have been repaid. The

lnvestors are owed in excess of $7 million (including accrued interest) in respect of the

Eden Project.

As late as June 2018, Fortress was advising participants who attend certain periodic

update conference calls hosted by Fortress that the syndicated modgage loan secured on

the Eden Project would be repaid in fullwithin a matter of months.

ln early July, 2018, the Trustee was advised by PACE Developments lnc. ("PAGE"), the

developer on the Eden Project, on behalf of the Eden Borrower, that there would be no

recovery to lnvestors on the Eden Project, notwithstanding the communications by

Fortress of full payment expressed weeks earlier. PACE advised that certain cost overruns

not previously accounted for had absorbed the over $7 million payable to lnvestors. ln

light of the very concerning representations made to the Trustee and others, the Trustee

engaged with PACE to obtain the financial information related to the Eden Project to

undertake a detailed review of the sources and uses of funds advanced throughout the

Eden Project.

Since July, 2018, the Trustee faced increasing pressure from representatives of the Eden

Borrower, PACE and CDCM to discharge BDMC's security on all of the homes to permit

buyers to own the properties free and clear of any pre-existing security.

The Eden Borrower and PACE continued to insist that the Trustee discharge BDMC's

security without repayment of any of the amounts owing. When the Trustee refused to do

so, the Eden Borrower threatened to bring legal action against the Trustee and also

appears to have advised certain of the homeowners to seek a remedy against the Trustee.

As a result, on September 12,2018, the Trustee made demand against the Eden Borrower

and PACE. ln addition to demanding repayment of the full amount owed to lnvestors and

95

28

r23

96.

97

professional fees incurred to the date of the letter, the Trustee demanded additional

documents to explain the significant change in the Eden Borrower's financial position over

such a short timeframe.

While pACE has responded to the Trustee's requests for documents, the Trustee is

continuing to investigate the cause of the significant change in forecast recoveries to the

lnvestors while pursuing remedies against the Eden Borrower'

Since the issuance of the demand letter on September 12,2018, the Trustee followed up

in writing seeking advice as to when repayment would be made. As no response has been

received, the Trustee delivered a demand letter and a 244 Notice on October 19, 2018.

98.

(e) Postponements:

ln addition to the enforcement actions described above, the Trustee is often asked to

execute postponements to other financing sources, Postponements are typically

requested where a borrower needs additional funds to develop the project, either in the

form of construction financing or other development financing, or where the borrower is

seeking to refinance an existing loan because that senior loan has matured, is nearing

maturity or is otherwise in default. To date, cedain of the senior lenders have refrained

from commencing enforcement action for a period of time to allow the applicable borrower

time to seek to refinance its debt.

gg. The Trustee has been attending to postponement requests as part of the administration

of the projects. Postponements are often sought by the borrower on an urgent basis' In

many cases, the Trustee has been advised that failure to grant the postponement forthwith

would (i) breach the applicable BDMC loan agreement; and (ii) cause the project to fail

and enforcement steps to occur in the near term'

100. postponements range in complexity from simple postponements that are required by the

terms of the existing BDMC loan and security package to more complex postponements

that involve one or more of (i) increases to the size of the permitted priority amounts initially

contemplated by the existing BDMC loan agreement and security package, (ii) extensions

to the maturity date of the existing BDMC loan facility, or (iii) other changes. ln many

cases, the Trustee has learned that BDMC had previously executed postponement and

standstill agreements that contain provisions that purport to limit BDMC's rights and

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remedies and effectively extend the maturity datea of the BDMC loan facility beyond the

date contemplated by the applicable loan agreement.

101 ln response to these requests, the Trustee, on behalf of BDMC and its lnvestors, has

requested detailed information regarding the applicable project and the proposed use of

funds. ln most instances, the Trustee has concluded that the loan agreement requires

BDMC to postpone to the new loan or that permitting further advances to be made to the

borrower in priority to BDMC's loan(s) is in the best interests of the lnvestors because

such action increases the likelihood of completion of the project and the eventual

repayment to the lnvestors.

102 The Trustee has endeavoured to negotiate the least restrictive postponement possible in

the circumstances and to recover its costs in connection therewith. To date, the Trustee

has succeeded in recovering some of its costs and its legal counsel's costs in connection

with the execution of postponements. As discussed in more detail below, the Trustee has

also communicated with lnvestors and Representative Counsel regarding postponements,

including seeking lnvestor consent where appropriate.

103. The Trustee continues to consider its options with respect to each postponement request,

however, it recognizes that many of the projects will fail if further funding is not advanced

and that recoveries to lnvestors are likely to be detrimentally impacted if the borrower does

not make payments on senior indebtedness or achieve certain development milestones.

Further, in many cases the BDMC loan documentation purports to require that apostponement be granted in the circumstances. ln appropriate circumstances, the Trustee

has therefore agreed to execute such postponements.

(f) lnvestor Communications, Meetings and the lnvestor Voice

104 lnvestor communications remain a significant component of the Trustee's mandate. On

average, the Trustee receives 30-45 calls a day and 20-30 emails a day, with increased

call and email volumes following of the issuance of any material notices or media attention

on the projects, Fortress or the proceedings generally. The Trustee endeavours to

respond to all inquiries in a timely manner. lnvestors contact the Trustee to seek general

4 Many postponement and standstill agreements prohibit BDMC from taking enforcement proceedings untilthe senior lender has taken such actions, which has the effect of extending the maturity date on the loansto the day that a senior lender takes action or the project is completed.

30

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information about the proceedings, the role of the Trustee and Representative Counsel,

as well as specific information regarding the projects that are the subject of their

investments.

105. ln addition to general inquiries, the Trustee also informs the affected lnvestors when

enforcement action is taken against a project or other material developments occur, and,

where appropriate, seeks the consent of lnvestors to material actions to be taken by the

Trustee, such as extensions to the term of a loan or the execution of a postponement that

would have the effect of extending the term of a loan or waiving or amending a material

provision of the applicable loan agreement.

106 lnvestor responses to the Trustee's requests for lnvestor consent remain limited, but the

Trustee has also continuously consulted with Representative Counsel regarding lnvestors'

interests, including prior to relying on deemed consent provisions in the applicable

Participation and Servicing Agreement (as more fully described in the Forbes Affidavit).

Meetinqs with other lnvestors

107 ln addition to corresponding with lnvestors by telephone and email, the Trustee has met

both formally and informally with groups of lnvestors and agents for lnvestors.

108 For example, the Trustee met with a group of lnvestors who contacted the Trustee to

request a meeting on behalf of approximately 30 lnvestors who, as a group, have

advanced loans to 13 projects (the "Known lnvestor Sub-Committee"). Many of these

lnvestors have also invested in other projects individually. The Known lnvestor SuF

Committee advised that it would represent the larger group in discussions with the Trustee

going fonarard.

1 0g. ln advance of the meeting, the Known lnvestor Sub-Committee provided the Trustee with

details of the loans made by the group of lnvestors it represents as well as a list of

questions regarding the associated projects. At the meeting, the Trustee provided

information regarding each of the projects, updates regarding the status of the projects

and the proceedings generally. The Trustee has also agreed to convene periodic meetings

with the Known lnvestor Sub-Committee in the future to keep them apprised of project

developments. The Known Investor Sub-Committee advised that it would disseminate the

information shared with them to the larger group of lnvestors its represents. The Trustee

and the lnvestors found this meeting to be both efficient and productive.

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110

111

112

113

114

lnvestor Voice

On or about July 26, 2018, the Trustee began receiving a form letter dated July 16, 2018

addressed to the Trustee, FSCO and this Court ("lnvestor Form Letter"), which raised a

number of concerns related to the Trustee's mandate, the appointment of Representative

Counsel and the cost of these proceedings generally. To date, the Trustee has received

approximately 130 of these lnvestor Form Letters.

The Trustee has responded to each lnvestor who sent the lnvestor Form Letter to advise

those lnvestors that the Trustee understands and appreciates the concerns expressed,

but that the lnvestor Form Letter contains several important misstatements regarding the

Trustee, its mandate, and BDMC's business. FSCO also sent a letter to lnvestors

expressing its agreement with the statements made in the Trustee's response.

The Trustee's response informed lnvestors that it had received many identical letters and

suggested that it would be helpful for the person who drafted the letter to contact the

Trustee directly to discuss the matters raised in the letter and to have a full and frank

discussion regarding the author's concerns and expectations in the circumstances.

Shortly after the Trustee sent its response to the lnvestor Form Letter, the Trustee was

contacted by the person or group of persons calling themselves the "lnvestor Voice". The

lnvestor Voice advised the Trustee that it was behind the lnvestor Form Letter and asked

the Trustee to meet with a group of 15-20 people who acted as agents for lnvestors, many

of whom were also lnvestors themselves.

The Trustee has been engaging with lnvestor Voice over the last several months, including

through correspondence and by hosting a meeting at the Trustee's counsel's offices on

October 19, 2018. At the meeting, the Trustee and the lnvestor Voice discussed the

lnvestor Voice's concerns and the Trustee believes that the meeting was productive. The

Trustee also provided information regarding certain projects and the proceedings

generally. The Trustee agreed to create a mailing list for the agents who make up the

lnvestor Voice and to send those agents the notices that the Trustee sends to applicable

lnvestors regarding projects as well as general notices sent to all lnvestors.

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115

(g) Other Matters

ln addition to the activities described above, since the Trustee's appointment, the

Trustee's activities have included, among otherthings:

(a) distributing 50% of the recoveries on the Victoria Medical SML pro rata to the

lnvestors entitled to such funds, as required by the lnterim Stabilization Order;

(b) sending letters to all construction lien claimants seeking to assert a priority lien

over any project to advise such claimants of the stay of proceedings set out in the

Appointment Order;

(c) sending letters to certain other plaintiffs in actions naming BDMC as defendant to

advise such persons of the stay of proceedings set out in the Appointment Order;

(d) attending to partial discharges of BDMC's security interests to facilitate sales of

individual units or the development of properties;

(e) continuing to engage with other stakeholders of BDMC and related parties,

including Ms. lldina Galati, BDMC's shareholder, Fortress and its counsel, and

CDCM and its counsel, regarding refinancing efforts, enforcement actions,

regulatory matters and the funding of these proceedings;

(f) continuing to engage with borrowers and with CDCM, as broker to some of the

borrowers, regarding the postponements and enforcement matters noted above

and to obtain detailed updates on the progress on projects and associated financial

reporting;

(g) engaging with FSCO and its legal counsel;

(h) engaging with mortgage brokerage and administration licensing authorities outside

of Ontario to discuss the Trustee's mandate and the Appointment Order and to

address matters related to BDMC's licenses in such jurisdictions, including

regulators in Manitoba, Saskatchewan, Alberta and British Columbia;

(i) obtaining recognition of the Appointment Order under Saskatchewan's The

Enforcement of Canadian Judgmenfs Act, 2002 atthe request of the Financial and

Consumer Affairs Authority of Saskatchewan; and

(j) supervising the day to day business activities of BDMC, including supervising the

payment of payroll, rent and related matters.

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116 ln accordance with Appointment Order, the Trustee was required to engage in, and to

continue to engage in, the activities described in the foregoing sections to protect the

interests of lnvestors. These activities are complicated, time consuming and costly and

are being carried out in circumstances where BDMC has no revenue,

117 As noted in the First Report, BDMC is functionally insolvent. BDMC has regular expenses,

including payroll, rent, utilities and other normal business expenses, but it no longer has

any revenue sources. Prior to February 7,2018, BDMC relied upon fees payable when

new loans were established and upon funding from other sources. BDMC will not be

making new loans in the future and funding from other sources has ended. BDMC was

receiving some funding from Fortress after February 7,2018, but that funding has now

ceased as well.

(a) Funding from Fortress and CDCM

i1A. Since many of BDMC's borrowers are Fortress entities or othenvise related to Fortress,

the Trustee remains of the view that the Trustee's and BDMC's costs associated with

administering the syndicated mortgage loans should not be borne solely by the lnvestors,

but rather should be paid for by Fortress and the borrowers. As noted in the First Report,

the Appointment Order provides that the unpaid Trustee's fees, disbursements and costs

(including professional advisory fees incurred) shall be added to the mortgages securing

the amounts advanced bY BDMC.

119 The Trustee has continued to engage in discussions with Fortress and CDCM regarding

the ongoing funding of BDMC's operating expenses and of BDMC's professionalfees (i.e.,

the fees of the Trustee and its counsel). On June 22, 2018, at Fortress's request, the

Trustee renewed its demand that Fortress pay the $224,078.63 owing to the Trustee and

the 9271,684.98 owing to its legal counsel for activities prior to FAAN Mortgage's

appointment as Trustee on account of a certain guarantee and indemnity given by Fortress

to FAAN Mortgage under the MAA (as more particularly described in the First Report)-

Despite the fact that such demand was issued at Fortress's request, Fortress has not paid

any of these amounts to date. The Trustee renewed its demand on October 19,2018. The

Trustee will continue to seek to recover these amounts from Fortress.

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120

121

122

123

When the First Report was issued, the Trustee was hopeful that Fortress and the

borrowers would agree to a mechanism whereby BDMC's and the Trustee's costs,

including professional fees for administering the loans made by BDMC, are not borne

solely by the lnvestors. No agreement on these matters has been reached, and the

Trustee is not optimistic that an agreement will be reached in the future.

Since the date of the First Report, Fortress and CDCM have ceased funding any of

BDMC's ongoing expenses, although CDCM was sharing the costs of rent and certain

utilities for premises it shares with BDMC (BDMC's offices are currently located on the

second floor of a unit shared with CDCM). On September 28. 2018, CDCM advised that it

no longer requires the office space it shares with BDMC. CDCM intends to vacate the

premises on or about October 31,2018, CDCM has been working with the Trustee in that

regard. When it became apparent that neither Fortress nor CDCM would continue pay

any portion of the rent for BDMC's office space and BDMC would be required pay all the

rent for such space, the Trustee determined that BDMC should vacate the premises to

reduce BDMC's expenditures. BDMC will be vacating the premises on or about November

15,2018.

Fortress also ceased funding payroll and a number of other operating expenses on or

about June 18,2018, so the Trustee has had to fund these amounts from Estate Property.

Due to the limited funding available to the Trustee in connection with these proceedings

and impending closure of BDMC's office, the Trustee has determined that it is in the best

interests of BDMC and its estate to reduce the number of employees retained by BDMC.

Accordingly, after the resignation of two of the four BDMC employees, the Trustee chose

not to replace those employees.

Although Fortress, through CDCM, had provided some funding to BDMC to the date of the

First Report, the amount of funding was significantly less than originally hoped and

Fortress has not met its obligations in respect of the professional fees payable to FMN

Mortgage and its legal counsel under the MAA. The Trustee does not know whether any

further contributions by Fortress or CDCM will be forthcoming; nevertheless, the Trustee

continues to engage with Fortress and CDCM to seek funding of certain of BDMC's costs

and recovery of amounts due under the guarantee and indemnity. The Trustee will keep

the Court informed regarding these matters.

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130

124

125

126

Notwithstanding the foregoing, as noted in the First Report, the flow of information from

Fortress and CDCM improved following the issuance of the Appointment Order. To the

Trustee's knowledge, there has been no fufiher direct correspondence sent by GDCM to

the lnvestors since CDCM delivered a retraction of the notice that CDCM sent to lnvestors

in respect of the Brookdale Project on March 26,2018. The Trustee continues to maintain

a cordialworking relationship with Fortress and CDCM and is working with representatives

of both companies in furtherance of its mandate in an attempt to maximize recoveries for

lnvestors.

(b) Need to utilize Realized Property

pursuant to the lnterim Stabilization Order, the Trustee has access to certain limited

amounts constituting Estate Property. BDMC currently has no source of funding otherthan

Estate property. Since the date of the lnterim Stabilization Order, the Trustee has been

using the Estate Property in accordance with the Appointment Order and the lnterim

Stabilization Order to pay BDMC's expenses so that the Trustee can continue to discharge

its mandate for the benefit of the estate and all its stakeholders. The Estate Property will

soon be exhausted, so the Trustee is seeking the Court's authorization to use a portion of

the Realized Property going forward. Absent such authorization, the Trustee will not have

sufficient amounts to fund the Required Trustee Activities during the Cash Flow Period

that must be undertaken to protect lnvestors' interests, and the vast majority of lnvestors

will be at risk of having their interests significantly prejudiced. The Trustee's specific

recommendation to protect lnvestors in the circumstances is set out further below.

lnterest paid by borrowers is Estate Property. However, the majority of the syndicated

mortgage loans administered by BDMC either provide that interest accrues untilthe loan

is paid out or that interest was only payable until an interest reserve was exhausted and

then accrues untilthe loan is paid out

127. Since the issuance of the lnterim Stabilization Order, the Trustee has succeeded in

obtaining Estate Property from certain borrowers in the amounts set out below. These

amounts are in addition to the amounts the Trustee succeeded in obtaining from Fortress

(through CDCM) described above'

36

131

128

(a) Approximately $145,000 on account of professional fee reimbursements in

connection with postponements, refinancings and other significant transactions,

which the Trustee has succeeded in negotiating on a case by case basis;

(b) Since the date of the First Report, the Braestone Borrower has paid interest in the

amount of approximately $89,000 pursuant to the loan agreement between BDMC

and the Braestone Borrower. These receipts constitute Estate Property. As noted

above, these funds have been or will be expended in order to fund the Required

Trustee Activities. The Braestone Borrower ceased paying interest on or about

July 1 5, 2018. lf the transaction contemplated by the settlement agreement with

the Braestone Borrower described above can be closed in the near term, interest

payable by the Braestone Borrower in connection with the transaction will

constitute Realized ProPertY.

(c) Since the date of the First Report, no further interest has been paid by Kingridge

(Oakville East) lnc. ("QEWN Borrower")'

The Estate Property described in the previous paragraph has been disbursed to pay

BDMC's operating expenses and professional fees as described herein. The chart below

provides a summary of the variance analysis for collections and costs incurred for the

period ending September 30, 2018. The detailed variance analysis is attached as

Appendix "5".

S

Proiected Actual Variance172 172Collections

Operating costsAppraisalsProfessional feesTotal disbursementsNet cash flow

211350450

179

400

32350

501 011 579 432

(1, 011) A07\ 604

129. The significant variances are explained as follows

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130

Collections5 - the positive variance relates primarily to the collection of interest and the

reimbursement of fees by the Borrowers on the Humberstone and Bowmanville projects

in respect of postponements requested and provided on those projects.

New Appraisals - the positive variance relates to the fact that the New Appraisals have

not yet been finalized and invoices have not yet been received. Accordingly, the amounts

projected for New Appraisals remain unpaid. This is a timing difference.

Professional fees - the positive variance relates to a timing difference.

BDMC continues to maintain six bank accounts at the Toronto-Dominion Bank. A

summary of these accounts is as follows:

Accountname/Reference

Primary Purpose ofaccount (per BDMC) Balance in

First ReportBalance atSept 30-18

PropertyTypeu





Account #5(term deposit)

Account #6(GlC account)

Operating account

To hold funds topotentially be paid tothird parties

To hold funds forlnvestors

lnterest ReserveAccount

Regulatory capitalrequired to bemaintained under theMBLAATo hold Victoria MedicalSML Loan repayments

2,519 EstateProperty

418

52,594

486,874

1,461,471

25,777

4,511,218

118

486,874

1,002,680

25,857

EstateProperty

RealizedProperty

EstateProperty

EstateProperty

2,288,702 RealizedPropertY

Total 6,540,453 3,804,649

5 Note that the collections figure does not include approximately $37,000 of fees recovered in respect of

the Danforth Project as those funds were received after September 30' 2018.6 Estate Property and Realized Property are defined and described below.

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133

131 As of the date of this Second Report, the total Estate Property (excluding the term deposit

that must be retained pursuant to MBLAA) is approximately $810,000.

132. A high level summary of the accounts is provided below. A more detailed discussion of

these accounts is available in the First Report.

Account #1 and #2 - BDMC's primary operating accounts. The 420 Account (Account

#2) is considered a segregated funds account and typically holds amounts payable for

source deductions and other similar amounts as those amounts become due and until

those payments are issued. Funds are advanced from lhe 214 Account (Account #4) to

these accounts to fund operations. Payments are then issued by way of cheque or wire

transfer from these accounts.

Account #3 - Used to hold investor funds. Two types of balances are typically maintained

in this account, (i) funds advanced by lnvestors to BDMC for investment in future

syndicated mortgage loans where such loans have not yet been executed or other

conditions to the advance are incomplete; and (ii) principal repayments received from

borrowers to be ultimately repaid to lnvestors.T The funds repaid in respect of the Victoria

Medical SML Loans were paid into this account and subsequently transferred to the

interest bearing GIC account (Account #6). The funds currently remaining in this account

relate to funds advanced by 7 prospective investors that were not ultimately deployed to

a project and 3 lnvestors that had uncashed cheques from a project that was paid out prior

to the Trustee's appointment. The Trustee is seeking the Court's approvalto return 70%

of these funds to those individuals.

Account #4 - BDMC advised that this account was historically used to hold funds

advanced by lnvestors to specific projects for the benefit of the respective borrowers. All

amounts that were received that were not advanced to the borrower were deposited into

this one bank account.s The Trustee was advised that the funds held in this account were

for the account of certain borrowers, and, in the past, borrowers requested BDMC issue

payments from this account to pay for interest reserves, and other matters, such as

7 Notwithstanding the fact that payments of interest and repayments of principal for all projects wereadvanced into one bank account, the balances are tracked separately by project in BDMC's accountingsoftware, QuickBooks, and the interest amounts were typically transferred from this account to the 214account.I Notwithstanding the fact that funds for all projects were advanced into one bank account, the balancesare tracked separately by project in BDMC's accounting software, QuickBooks.

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134

interest payments on senior loans and bridge loans as wellas certain development costs'

Since the issuance of the lnterim Stabilization Order the funds maintained in this account

have been used to fund operating costs.

Account #5 - BDMC is required under the MBLAA to have a certain financial guarantee

of g25,000 available, which may include unimpaired working capital. BDMC maintains

$25,777 in satisfaction of this obligation in Account #5'

Account #6 - This is an interest bearing GIC account that currently holds Realized

Property from the Victoria Medical SML loan repayments.

133. The Trustee has prepared a Cash Flow Projection, on a monthly basis for the seven-month

period ending April 30, 2019 ("Cash Flow Period"). The Cash Flow Projection is attached

as Appendix ,'6". The Cash Flow Projection has been prepared by the Trustee using the

information provided to it by BDMC's employees and representatives, based on the

Trustee's review of BDMC's records and third-party estimates. A summary of the Cash

Flow Projection is provided in the following table:

$000sReceipts

DisbursementsStaffing costsRent and utilitiesOffice expenses and lTlnsuranceAudit feesBank chargesOther expenses

Total Operating DisbursementsNew Appraisal feesProfessional feesTotal disbursementsNet cash flow

Opening cashlNet cash flowClosing cash

1828

373525

420

311350400

2,061(2 061 )

1,003(2 061 )(1,058)

Note 1: Comprised of Estate Property, net of the term deposit required under MBLAA

40

135

134 It should be noted that there are no cash receipts projected during the Cash Flow Period.

Historically, BDMC's primary source of revenue was funds raised from lnvestors in the

form of an administration fee of $113.00 per lnvestor per year of the term of the loan.

These funds were collected at the time of the initial advance of the funds from the

lnvestors. As noted in the First Report, there is deferred revenue of approximately

$750,000e on BDMC's balance sheet, but that deferred revenue represents funds that

were collected at the time a loan was established and used by BDMC prior to FAAN

Mortgage's engagement under the MAA.

135. Among other things, the Cash Flow Projection estimates total operating disbursements of

approximately $311,000. Overalloperating costs have been reduced due to the headcount

reduction and planned vacating of BDMC's offices.

1 36. It is anticipated that the New Appraisals will be finalized and paid for in the near term.

Further, it is contemplated that outstanding professional fees of the Trustee and its

counsel accrued and unpaid as at September 30, 2018 will be paid over the Cash Flow

Period.

137. Overallthere is a funding need of approximately $1 million to the end of April, 2019. Given

BDMC has no source of income to fund these proceedings, the Trustee is seeking the

Court's authorization to use the Realized Property in order to continue to carry out its

mandate to protect all lnvestors and to prevent the vast majority of lnvestors form suffering

significant prejudice.


138 Based on the Trustee's review of the Cash Flow Projection, the Trustee has determined

that it no longer needs to retain all the Realized Property that it is currently holding and

that it has a first ranking charge over. The Trustee is therefore seeking this Court's

authorization to distribute an additional amount equal to 20% of the Realized Property

previously obtained by the Trustee in respect of the Victoria Medical SML Loans and 70%

of any other Realized Properly, whether held as of the date of this Report or received in

the future.

e As at December 31,2017

41

136

139. The Trustee has consulted with Representative Counsel regarding this recommendation.

The Trustee understands that Representative Counsel supports the general

recommendation that the Trustee retain 30% of all future Realized Property; however, the

Trustee understands that Representative Counsel will advise the Court that lnvestors who

loaned funds through the Victoria Medical SML Loans have requested that all Realized

Property generated from the Victoria Medical SML Loans be distributed to them forthwith'

The Trustee would like to be in a position to return this money to the lnvestors in the

Victoria Medical SML Loans, but the Trustee has determined that it is in the best interests

of all lnvestors to retain 30% of all Realized Property and use a portion of such Realized

property to fund efforts to generate further Realized Property. There are no independent

sources of funding available to fund the Required Trustee Activities that must be

undertaken to protect lnvestors' interests. Should the Trustee fail to continue to act on

behalf of the lnvestors with respect to the remaining projects, the remaining lnvestors will

be at risk of having their interests significantly harmed'

140

141

142

143

The Trustee is therefore seeking this Court's authorization to use the Realized Property

retained following the distributions contemplated by the Realized Property Order to fund

the Required Trustee Activities in order to maximize the Trustee's ability to generate

further Realized ProPertY.

Going fonrrard, the Trustee intends to develop an allocation formula at the appropriate

time to fairly and equitably allocate the cost of the Required Trustee Activities among the

lnvestors in accordance with the relative risks and rewards of the project selected by each

lnvestor. This will ensure that lnvestors receive as much Realized Property as possible in

the circumstances and are compensated (to the extent possible) in a fair and equitable

manner for any additional risk imposed on such lnvestors as a result of these proceedings.

The exact terms of the allocation formula will need to be developed at a later date, when

more Realized Property has been generated and the Trustee is in a better position to

determine an appropriate allocation of the expenses associated with the Required Trustee

Activities among the different projects and the applicable loans made to such projects'

The Trustee will consider a number of factors in connection with any such allocation,

including the length of time a given loan remained outstanding during the proceeding, the

timing of any repayment on a loan in comparison to the maturity date provided for in the

42

t37

applicable loan agreement, key terms of the applicable loan agreernent, any applicable

Rescission Rights, and other relevant factors, The allocation formula will also include

some compensation to those lnvestors whose Realized Property is used to fund the

Required Trustee Activities during the pendency of the proceedings. The purpose of the

allocation formula is to ensure that lnvestors in particular projects do not bear a

disproportionate share of the costs associated with the Required Trustee Activities, and,

as such, lnvestors in certain projects should receive a further distribution at a later date in

accordance with the allocation formula.

144 Among other things, the Trustee notes that the portion of the expenses associated with

the Required Trustee Activities allocated to persons who invested in the Victoria Medical

SML Loans should be small since the Realized Property in respect of the Victoria Medical

SML Loans was received at an early date.

145 Depending on developments with the proposed payout of the Braestone Project

(discussed above) in the coming weeks, it is anticipated that the Trustee will seek an order

from the Court that, among other things, authorizes it to distribute additional Realized

Property in connection with the receipt of the proposed Braestone Project payout. The

Trustee may determine that it needs to retain as little as 20o/o of the Realized Property

following receipt of repayments on the Braestone Project. Further, the Trustee anticipates

that it will seek authorization to distribute further Realized Property when other repayments

are received.

146 However, the Trustee currently predicts that there will be a limited number of projects that

give rise to recoveries in the near term and that recoveries on many of the syndicated

mortgage loans are at risk. Further, as noted above, the Estate Property has been or will

be exhausted in the near term. As such, the Trustee is of the view that it must retain a

portion of the Realized Property and utilize the retained Realized Property to fund activities

intended to maximize the recovery of additional Realized Property in the future.

147. Any Realized Property that is not utilized will continue to be held in an interest bearing

account.

148. The Trustee, its legal counsel and Representative Counsel are incurring expenses in an

effort to generate the maximum amount of Realized Property. The Court granted the

Trustee a first priority charge over all Propedy, including Realized Property, in the

43

138

Appointment Order as security for the payment of the Trustee's and its legal counsel's

professional fees and expenses. The Trustee is recommending that 70% of all Realized

Properly be distributed to lnvestors notwithstanding the Trustee's Charge over such funds

and is seeking to retain only the amount that is required to fund the Required Trustee

Activities in the near term, including the payment of a portion of the Trustee's professional

fees and the fees of its legal counsel. The Trustee, its legal counsel and Representative

Counsel are relying on the charges granted under the Appointment Order and the lnterim

Stabilization Order and the prospects of future Realized Property for the balance of these

professional fees and for the work to be performed in the coming months.

REPRESENTATIVE COUNSEL

14g. Under the lnterim Stabilization Order, Chaitons LLP was appointed Representative

Counsel to represent the common interests of the approximately 11,000 lnvestors who

participate in mortgages administered by BDMC, including the common interests of

lnvestors in any particular syndicated mortgage loan'

150. Following the issuance of the lnterim Stabilization Order, the Trustee provided

Representative Counsel with extensive information regarding the lnvestors, including

contact information for lnvestors and the applicable loan documentation entered into by

each lnvestor, BDMC and the applicable RRSP Trustee.

151 The Trustee notified all lnvestors of Representative Counsel's appointment and provided

lnvestors with Representative Counsel's contact information and details regarding the

process to opt out of representation by Representative Counsel. This information was also

posted on the Trustee's website. A copy of the Notice is attached hereto as Appendix

ttTrt .

152. Todate, 11 lnvestorswithatotal of $608,000investedthroughBDMChaveoptedoutof

representation by Representative Counsel'

153. Representative Counsel has established a toll-free number and dedicated email address

to facilitate lnvestor communications. The Trustee understands that Representative

Counsel receives a large volume of calls and written correspondence and has been

responding in a timely manner to such communications the extent that the inquiries pertain

to legal issues covered by Representative Counsel's mandate.

44

139

154. The Trustee also understands that Representative Counsel has been dealing with a large

number of inquiries from lnvestors regarding their rights and remedies and potential

causes of action against third parties, including potential sources of recovery other than

the borrowers under the various BDMC loans'

155. Among other things, Representative Counsel has advised that they have received many

communications from lnvestors who invested in the Victoria Medical SML Loans. These

lnvestors are very concerned about delays in repayments of the Realized Property

consisting of realizations on the Victoria Medical SML that were received prior to the

issuance of the Appointment Order. Both the Representative Counsel and the Trustee are

cognizant of these concerns and the Trustee has consulted with Representative Counsel

regarding the proposed Realized Property Order to protect lnvestors who invested in the

Victoria Medical SML Loans to the extent possible in the difficult circumstances of these

proceedings.

156. The Trustee has also consulted with Representative Counsel when appropriate, including

regarding (i) lnvestor consent to certain postponement and subordination agreements and

extensions to the maturity date of loans, (ii) enforcement steps taken by senior lenders,

(iii) the response to the lnvestor Voice; (iv) the Eden Borrower's demands for partial

discharges and failure to repay the amounts it owes; (v) other sources of recovery on

projects, including obtaining an accounting of borrowers' uses of lnvestor funds; and (vi)

the Trustee's recommendation regarding Realized Property. The Trustee and its counsel

are in regular contact with Representative Counsel, in particular with respect to significant

decisions that would likely have a material impact on lnvestor recoveries.

CONGLUSION AND RECOMMENDATION

157 The Trustee is working tirelessly to fulfill its mandate to protect the interests of the

lnvestors and enhance the prospects that the lnvestors will recover some or all of the

amounts they advanced through BDMC. Among other things, the Trustee continues to

administer the loans made by BDMC on behalf of the investing public and to make prudent

decisions that are in the best interests of the lnvestors with respect to the administration

and enforcement of the relevant loans.

45

1,40

158. The Interim Stabilization Order permitted the Trustee to utilize Estate Property to fund the

Required Trustee Activities and to report to Courl by October 31, 2018 with its

recommendation regardlng Realized Properly. Based in its efforts to date, the Trustee has

recommended that it be required to retain 30% of all Realized Property and permitted to

utilize such retained Realized Property to fund the Required Trustee Activities and that the

Trustee be ordered to distribute the remainder or Realized Property. The Trustee

anticipates returning to Court to obtain the Court's authorization to distribute further

Realized Property in the near term. At that time, the Trustee anticipates that it will also

seek the approval of its activities to date and its fees and disbursements in connection

wiih those activities.

159. The Trustee will report to the Court at a more appropriate time with a recommendation

regarding a fair and equitable allocation of the recoveries on Realized Property, including

appropriate compensation for lnvestors.

160. The Trustee observes that it is necessary to use the retained Realized Property to

maximize the ability to generate further Realized Property in the future, and that future

Realized Property will benefit all lnvestors through the allocation formula to be developed.

The Trustee believes that this Court-supervised process provides lnvestors with enhanced

protections and the best opportunity in the circumstances to obtain recoveries. The

Trustee will continue to attend to all BDMC matters in an effort to maximize recoveries to

lnvestors.

ALL OF WHICH lS RESPECTFULLY SUBMITTED this 23'd day of October, 2018

tranw Mwtaanv A)rwlnktra*orv ln*.JJ

FAAN MORTGAGE ADMINISTRATORS INC.,

SOLELY IN ITS CAPACITY ASCOURT.APPOINTED TRUSTEE OF

BUILDING & DEVELOPMENT MORTGAGES CANADA INC.,


46

L4L

Appendix 4:

Realized Property Order dated October 30, 2018

142

Court File No. CV-l8-596204-00CL


COMMERCIAL LIST

THE HONOURABLE MR.

JUSTICE HAiNEY

TUESDAY, THE 30th DAY

OF OCTOBER,2OIS

)))

BETWEEN


Applicant

-and-

BUILDING&DEVELOPMENTMORTGAGESCANADAINC.

ResPondent


MORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT' 2006' s'o' 2006'

C.29 ANd SECTION 101 OF TIiJiI' COARTS OF JUSTICEACT,R'S'O' 1990 C' C'43

REALIZED PROPERTY ORDER

THIS MOTION, made by FAAN Mortgage Administrators lnc' ("FAAN Mortgage")' in

its capacity as Court-appointed trustee (in such capacity, the "Trustee"), of all of the assets'

undertakings and properties of Building & Development Mortgages Canada Inc' (the

..Respondent") pursuant to section 37 0f the Mortgage Brokerages, Lenders and Administrators

Act, 2006,s.o.2006, c.2g,asamended (the "MBLAA"),and section 101 of the courts of Justice

lcl, R.s.o. i990, c. c.43, as amended, for an order, inter alid, (i) requiring the Trustee to

distribute certain Realized Property, as more fully set out herein; and (ii) authorizing the Trustee

to utilize certain Realized property to fund the Required Trustee Activities (as defined herein), was

heard this day at 330 University Avenue, Toronto, Ontario;

u0c n r

5v,

/guIt 99

cam

<f

r43-2-

ON READING the Second Report of the Trustee dated October 23,2018 (the "Second

Report"), and on hearing the submissions of counsel for the Trustee, Chaitons LLP, in its capacity

as Representative Counsel, counsel for The Superintendent ofFinancial Services, and such other

counsel as were present, no one appearing for any other person on the service list, as appears from

the affidavit of service of Jacob Schmidt swom October 24,2018,fi1ed;

SERVICE

1. THIS COURT ORDERS that the time for service and filing of the notice of motion and

the motion record herein is hereby abridged and validated so that this motion is properly returnable

today and hereby dispenses with further service thereof.

DEFINITIONS

2. THIS COURT ORDERS that any capitalized terms used but not defined herein shall have

the meanings given in the Order of the Court in respect of the Respondent dated June 26,2018

(the "Interim Stabilization Ordey'') or in the Second Report.

REALIZED PROPERTY

3. THIS COURT ORDERS thatthe Trustee shall:

(a) distribute a further amount equal to ZAYo of the Realized Property obtained with

respect to the Victoria Medical SML Loans pro rata to the lnvestors entitled to such

funds, such that, when combined with the distribution made pursuant to the Interim

Stabilization Order, 70% of such funds shall have"been distributed on a pro rata

basis; and

(b) distribute 70% of all other Realized Property obtained pro rata to the Investors

entitled to such funds, whether received before or after the date of this Order.

4. THIS COURT ORDERS that the Trustee is hereby authorized to use all or any portion

of the retained Realized Property to aid the Trustee in complying with the Appointment Order and

in carrying out its mandate, as the Trustee, in its sole discretion, considers necessary or desirable

144-3

for the administration of the estate, including those matters set out in paragraph 17 of the Interim

Stabilization Order (collectivelyo the "Required Trustee Activities").

5. THIS COURT ORDERS that the Trustee shall report to the Court by no later than April

30,2019 regarding the Required Trustee Activities undertaken following the date of this Order.

GENERAL

6. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,


effect to this Order and to assist the Trustee and its agents in canying out the terms of this Order.

All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to

make such orders and to provide such assistance to the Trustee, as an officer of this Coutt, as may

be necessary or desirable to give effect to this Order or to assist the Trustee and its agents in

carrying out the terms of this Order.

j. THIS COURT ORDERS that the Trustee be at liberty and is hereby authorized and

empowered to apply to any court, tribunal, regulatory or administrative body, wherever located,

for the recognition of this Order and for assistance in carrying out the terms of this Order, and that

the Trustee is authorized and empowered to act as a representative in respect of the within


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Appendix 5:

Braestone Updates

L47

Building & Development Mortgages Canada lnc.

April 11,2018

Dear Lender:

Re: Syndicated Mortgage Loan ("Loan") to Braestone Development Corporation("Borrower") on the security of a Second Position mortgage on 3009 Line B NorthMoonstone, ON f"Braestone Proiect")

PIease accept this update to your investment in the Braestone Project.

As you are aware, the Project has an upcoming maturity date of July 15,20L8, and the LoanAgreement contains provisions allowing the term to be extended for a further 12 months,with a revised maturity date of fuly 75,20'1.9 f"Maturify Date").

Please see the attached letter from the Borrower engaging the L2 month extension, asoutlined in Section 4 of the Loan Agreement dated December 1, 20IZ ("Second TermExtension"J.

Pursuant to Section 4 of the Loan Agreement, if the Second Term Extension is exercised bythe Borrower, the Borrower shall pay to the Lender an extension fee equal to 1o/o of theprincipal amount of the Loan, payable upon the Maturity Date and an additional Projectcompletion fee equal to 2o/o of the principal amount of the Loan, payable upon SubstantialCompletion of the Project fas described in section L0 of the Loan AgreementJ.

Project Update

Canadian Development Capital & Mortgage Services Inc., on behalf of the Borrower, hasadvised that the first two phases of the Braestone Project are sold out and sales of Phase 3opened in the fall. Delivery of homes from Phase 1 and 2 are ongoing, and construction ofPhase 3 is scheduled to begin later in the spring.

If you have any questions please contact your licensed mortgage agent or BDMC directly

Thank You,

BDMC

Building & Development Mortgages Canada Inc.,by its Manager, FAAN Mortgage Administrators Inc.

25 Brodie Drive, Unit B, Richmond Hili, ON L4B 3K7 / P: 905'508 4B2B I F:905-508-3957 / www bdmc.ca/ Admin License 12304

]IITtrftrTTInM[nliF*qrlrquE{

ffiI48

dolvn bome, up country.

April3, 2018


8-25 Brodie Dr.


Olympia Trust Company2200, I25 9th Ave SE

Calgary, AB T2G 0P6

To whom it may concern

Re: Extension for the existing loan for the Braestone Project

Pursuant to section 4.0 of the original Loan Agreement, we hereby exercise our option toextend the maturity date on the above noted project by twelve {12) months to July 15,

2019.

5in

J. David BunstonBraestone Development Corporation85 Bayfield Street, Suite 500Barrie, Ontario L4M 3A7

T: (70s) 730-s900 F: (705) 730-10s9

85 Bayfield Streot, Suite 500, Baffie, Ontario L4M 3A7 braeston€.ca

149

FAANr0Rt0t0tA$ilmtslRAI0RS

May37,20L8

Dear Lender:

Re: Syndicated Mortgage Loan made to Braestone Development Corporations pursuant tothe Ioan agreement dated December L,2Ol2 ("Loan Agreement") regarding the propertylocated at 3009 Line 8 North Moonstone, ON ("Braestone Proiect")

On April 20,2018, FAAN Mortgage Administrators Inc. ("Trustee") was appointed as trustee overBuilding & Development Mortgages Canada Inc. ["BDMC") under a court order issued pursuanttosection 37 of the Mortgage Brokerages, Lenders and Administrqtors Act, 2006 as amended, andsection L01 of the Courts of Justice Acf, as amended. A notice regarding the Trustee's appointmentwas previously provided.

We are writing to you in our capacity as Trustee regarding the Braestone Project.

On May L5 2018, BDMC received approximately $89,000 which represents the May 15, 20L8interest installment pursuant to the terms of the Loan Agreement. The Trustee is currently holdingthose funds and is unable to make the interest distribution at this time.

The Trustee is working on reviewing a number of issues in connection with loans administeredby BDMC, including the impact of the Court Order on the Trustee's ability to distribute funds. Wemay require a further order of the Court in advance of any distribution of funds.

We intend to update you as soon as our review is complete, including with respect to the timingof a distribution to you.

Yours very truly,

trann' Mw$aga A)rninwtrattrr lnp,

FAAN MORTGAGE ADMINISTRATORS INC.IN ITS CAPACITY AS COURT-APPOINTED TRUSTEE OFBUILDING & DEVELOPMENT MORTGAGES CANADA INC.AND IN NO OTHER CAPACITY

FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Streel Eost Toronlo, Oniorio, M5C 2T5

r.50

Appendix 6:

Braestone Offer and Braestone Settlement Agreement

nbdf40t

151

DATE:

TO:

OFFER TO SETTLE

ocroBER 17,2018

FAAN MORTGAGE ADMINISTRATORS INC,, SOLELY IN ITSCAPACITY AS COURT.APPOINTED TRUSTEE OF BUILDING &DEVELOPMENT MORTGAGES CANADA INC. AND IN NO OTHERCAPACITY

-and-

OLYMPIA TRUST COMPANY

Braestone Development Corporation (the "Borrower"), hereby presents this offer to settle (the

"Offer") on the teims and conditions set forth in the Settlement Agreement enclosed herelvith, as

ftlll consideration for all obligations owing by the Borrower under that certain Loan Agreement

dated December 1, 2012 (the'ol,oan Agreement") with Building & Development Mortgages

Canada Inc. (formerly Centro Mortgage Inc.), in trust ("BDMC'), as lender. BDMC entered into

the Loan Agreement on behalf of a syndicate of individual lenders, and Olympia Tnrst Company

("Olympia';) acts as trustee for a subset of such lenders who have self-directed accounts with

Olympia.

The Borrower understands that FAAN Mortgage Administrators Inc. ("FAAN Mortgage") was

appointed as trustee of BDMC (the "Trustee") pursuant to an order of the Ontario Superior Court

of Justice (Commercial List) dated April 20,2018 under section 37 of the Mortgoge Brokerages,

Lenders and Administrators Act, 2006, as amended, and section l0l of the Courts of Jt'tstice Act,

as amendecl, to, among other things, administer the loans previously entered into by BDMC, and

any actions involving BDMC with respect to this Offer shall be directed to and executed by the

Trustee.

The Borrower ftlrther understands that, as this Offer represents a cornpromise of debt and a release

of all parties' obligations pursuant to the Loan Agreement and related documents, FAAN

Mortgage and Olympia intend to reach out to the individual lenders forming the syndicate under

the Loan Agreement with respect to this Offer. Therefore, the Borrower hereby agrees that this

Offer, and its signature on the Settlement Agreement enclosed herewith, shall be inevocable by

the Borrower and shall remain open for acceptance by providing counter-signed copies of the

Settlement Agreement enclosed herewith to the Bonower until 5:00 p.m. Toronto time on

l.+lo+emb€r-9re0.H (or such other date as

accept the Offer by each of the Trustee,result in this Offer being revoked. In the

above, the Loan Agreement shall remainand effect in accordance with its terms.

may be agreed by the Bonower in writing). Failure to

on behalf of BDMC, and Olympia, by such date shall

event that thi.s Offer is rejected or revoked as outlined

unaffected and shall continue and survive in full force

The Borrower looks forward to your response.

-L-L52

BRAESTONE DEVELOPMENTCORPORATION

By:

Name:

Title:

iat

-3- 153

SETTLEMENT AGREEMENT(dated as of October 17 . 2018)(the'(Settlement Agreement")

BETWEENBRAESTONE DEVELOPMENT CORPORATION

-and-

FAAN MORTGAGE ADMINISTRATORS INC., SOLELY IN ITS CAPACITY ASCOURT.APPOINTED TRUSTEE OF BUILDING & DEVELOPMENT MORTGAGES

CANADA INC.

-and-


WHEREAS Braestone Development Corporation (the "Borrower") is the borrower undera Loan Agreement dated December 1, 2012 (the "Loan Agreement') with Building &Development Mortgages Canada Inc. (formerly Centro Mortgage Inc.), in trust ("BDMC"), as

lender, whereby BDMC issued a loan in an amount up to and including the sum of $15,384,615 tothe Borrower;

AND WHEREAS the sum of $13,350,100 (the "Loan") was actually funded by BDMCpursuant to the Loan Agteement;

AND WHEREAS BDMC entered into the Loan Agreement on behalf of a syndicate ofindividual lenders, and Olympia Trust Company ("Olympia") acts as trustee for a subset of such

lenders who have self-directed accounts with Olympia;

AND WHEREAS on April 20,2018, FAAN Mortgage Administrators Inc. ("FAANMortgage") was appointed as trustee of the assets, properties and undertakings of BDMC (the

"Trustee") pursuant to an order of the Ontario Superior Court of Justice under section 37 of theMortgage Brokerages, Lenders and Administrotors Act, 2006, as amended, and section l0l of theCourts of Justice Act, as amended, to, among other things, administer the loans previously entered

into by BDMC;

AND WHEREAS the Borrower, BDMC and Olympia entered into the Loan Agreementto assist in the initial funding of a development of approximately 229 homes to be constructed at

3009 Line 9 North, Moonstone, Ontario (the "Propert5r", and such development, the "Project");

AND WHEREAS in corurection with the Loan, BDMC and Olympia were granted acharge on title to the Property with Charge No. SC1039835 in the amount of $13,384,000 (the

"Charge");

AND WHEREAS there is currently $13,350,100 outstanding under the Loan;

AND WHEREAS approximately $5,455,870 in interest pursuant to the Loan has beenpaid by the Borrower;

-4-

AND WHEREAS as of the date of this agreement, there is currently $267,002 of accrued

interest payable to BDMC under the Loan;

AND WHEREAS pursuant to Section l0 of the Loan Agreement, the Borrower is required

to pay to BDMC a Project completion fee equal to 15% of the principal amoult of the Loan, by

no^later than 30 days lollowing Substantial Completion of the Project (as defined in the Loan

Agreement);

AND WHEREAS the initial maturity date under the Loan Agreement was January 15,

2018, and such loan was extended in accordance with the terms of the Loan Agreement by the

Borrower in writing to July 15, 2018 and then further extended, again in accordance with the terms

of the Loan Agreement, by the Borrower in writing to July 15,2019 (the "Maturity Date", and

such further extension, the "second Term Extension");

AND WHEREAS pursuant to Section 4 of the Loan Agreement, due to the exercise of the

Second Term Extension, the Borrower is required to pay to BDMC an extension fee equal to lYo

of the principal amount of the Loan on the extended Maturity Date, and an additional Project

compleiion fee equal to 2o/o of the principal amount of the Loan, payable upon Substantial

Completion of the Project (as defined in the Loan Agreement);

AND WHEREAS there has been a dramatic decline in sales of units of Phase I of the

Project since early 2077, and the Borrower has experienced substantial increases in construction

cosis and delays ln environmental approvals, which have created concern about the timing for

Phase 2 of the Project and have impacted Project cash flows;

AND WHEREAS the Borrower requires additional financing in order to complete Phase

2 of the Project and would like to reduce its existing debt in order to facilitate new financing

arrangements;

AND WHEREAS the Borrower has advised that certainunexpected environmental issues

have arisen that threaten the timing of Phase 2 of the Project and could add a further two to seven

years to the Project timeline;

AND WHEREAS the Borrower provided, and the Trustee received, a commitment letter

providing proof of sufficient financing to pay the Settlernent Payrnent (as defined herein);

AND WHERJ,AS the Trusree consulted with individual lenders with respect to the

proposed Settlement Agreement and, following such consultation, determined that it is in the best

interests of the individual lenders to enter into this Settlement Agreement;

AND WHEREAS the parties hereto wish to enter into this Settlement Agreement in fullsatisfaction of the obligations owing by the Borrower to BDMC under the Loan Agreement;

NOW THEREFORE in consideration of the covenants, ageements and releases set forth

herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby

acknowledged, the parties agree as follows:

l. Each party represents and warrants to the others that to the best of its knowledge, the

recitals to this Settlement Agreement are accurate'

154

-5- 155

2. The parties hereto represent and warrant that the total amount that would be payable toBDMC under the Loan Agreement is $16,020,120 (the "Obligations"), consisting of the followingamounts, and that such amounts represent all of the monetary obligations owed by the Borrowerto BDMC under the Loan Agreement:

(a) Principal owing in the amount of $13,350,100, payable on the Maturity Date;

(b) Interest owing as of October 15, 2018 in the amount of $267,002, plus any

additional interest that would be accrued until the date the loan is repaid;

(c) Project completion fees in the amount of $2,002,515, payable upon SubstantialCompletion of the Project; and

(d) Extension fees, including the additional Project completion fee resulting from the

Second Term Extension, in the amount of $400,503, payable on the Maturity Date.

3. The Borrower hereby agrees to pay to the Trustee, on behalf of BDMC, upon the EffectiveDate of this Agreement, a lump-sum payment in the amount of $10,000,000 (the "SettlementPayment"). The Bonower agrees that it shall waive, and shall not assert, any right of set-off orany other defense to the payment of the Settlement Payment.

4. The Borrower shall, upon the Effective Date of this Agreement, execute and deliver a fulland final release in favour of the Trustee, BDMC, Olympia and their related entities (including theindividual lenders) (collectively, the o'Releasees") in respect of, inter alia, any and all obligationsunder the Loan Agreement and all other documents between the Borrower and BDMC, in a formcustomarily provided to secured lenders and in the form reasonably agreed to by the Releasees (the

"Release").

5. The Borrower hereby represents and warrants to the other parties hereto that, as of the date

hereof:

(a) It is solvent, has the capacity, power and authority to enter into, execute, deliver,

and cany out the terms of this Settlement Agreement, all of which have been dulyauthorized by all proper and necessary action and it has duly executed and deliveredthis letter agreement.

(b) The execution of this Settlement Agreement will not violate or conflict with itsorganizational documents, any mortgage or other documentation it is party torelating to the Project or the Property, or any law, regulation or order or require any

consent or approval that has not been obtained.

(c) This Settlement Agreement is a legal, valid, and binding obligation ofthe Borrower,enforceable against it in accordance with its terms, except as such enforceabilitymay be limited by applicable bankruptcy, insolvency, arrangement, reorganizalion,moratorium, or similar laws affecting the enforcement of creditors' rights generally

and by equitable principles.

6. The Trustee, on behalf of BDMC, acknowledges that the Settlement Payment represents

$3,6l7,l02less than the full amount of the principal and interest owing today and a further

-6-

$2,403,018 (excluding additional accrued to the ultimate date of repayment) that could become

owing under the Loan Agreement. The Trustee, on behalf of BDMC, agrees that, as of the Closing

Date (as defined herein), it shall be deemed to accept the Settlement Payment in full satisfaction

of the Obligations, and shall waive any rights to any further payments that may become payable

to BDMC under the Loan Agreement.

7. The Trustee shall use commercially reasonable efforts to seek approval of the Settlement

Agreement by way of court order substantially in the form agreed between the Borrower, the

Trustee, and Olympia (which shall, for greater certainty, contain a release of all obligations of the

Borrower under the Loan Agreement) (the 'oorder") issued by the Ontario Superior Court ofJustice (Commercial List) (the o'Court"). The parties hereto agree that this Settlement Agreement

shall not be binding on any party until the issuance of the Order. Following the issuance of the

Order (the "Effective Date"), the Borrower shall be required to pay the Settlement Payment and

issue the Release as contemplated in Sections 3 and 4 herein. The Release shall not be effective

until the Closing Date.

8. The obligations of the Trustee, on behalf of BDMC, and Olympia contained in this

Settlement Agreement, including without limitation the obligations set out in Sections 6 and l0hereto (except for the obligation to seek Court approval pursuant to Section 7 hereto, which shall

be effective as of the date that the Trustee and Olympia execute this Settlement Agreement) shall

be subject to the issuance of a certificate to the Borrower by the Trustee in the form to be attached

to the Order (the "Trustee's Certificate") and the filing of the Trustee's Certificate with the Court

following the satisfaction of the conditions precedent set out in Section t herein (the "ClosingDate").

9. The Trustee shall be required to issue the Trustee's Certificate to the Borrower upon the

satisfaction of the following conditions precedent (which conditions rnay be waived by the Trustee

in its sole discretion):

(a) the Order has been granted by the Court and no material objections (in the sole

opinion of the Trustee) were raised by individual lenders or by any other party at

the motion for approval of the Order, or, if any material objection is raised, the

appeal periods in respect of the Order have expired with no appeal being filed or,

if an appeal has been filed, any such appeal or motion for leave to appeal has been

fully disposed of with no further right of appeal or leave to appeal;

(b)

(c)

(d)

the Bonower has paid the Settlement Payment to the Trustee;

the Bonower has provided the Release to the Releasees;

the Borrower has certified that all of the representations and wananties contained

in this Settlement Agteement continue to be true as of the Effective Date; and

the Borrower continues to be, in the reasonable opinion of the Trustee, incompliance with all of the terms of this Settlement Agreement.

156

(e)

For greater certainty, the rights and obligations of each party as contained in the Loan

Agreement and the security granted to BDMC and Olympia (including without limitation the

Charge) shall remain effective until the Closing Date.

-7- 1,57

10. As of the Closing Date: (i) the Bonower, FAAN Mortgage, BDMC, Olympia and all

individual lenders acknowledge and agree that they shall have no further rights or obligations inconnection with the Loan Agreement and the Loan Agreement shall be terminated with no further

force or effect; (ii) the Trustee, on behalf of BDMC, and Olympia shall cause any and all security

held by BDMC and/or Olympia to be discharged, including the discharge of the Charge from title

to the Property; (iii) the Trustee, on behalf of BDMC, and Olympia shall release any interest itmay have in any insurance policy(ies) relating to the Property; and (iv) the individual lenders shall

be deemed to have released the Borrower from all obligations and security provided in connection

with the Loan Agreement.

I l. Each of the parties hereto shall execute and deliver such additional documents, instruments,

conveyances and assurances and take such further actions as may be required to cany out the

provisions hereof and give effect to the transactions contemplated hereby.

12. The parties agree that the terms of this Settlement Agreement shall be disclosed to the

individual lenders under the Loan and shall be included in the motion materials for approval of the

Settlement.

13. Each party confirms it has received independent legal advice relating to this Settlement

Agreement, and that it has voluntarily entered into this Agreement with the benefit of such advice

for the purpose of making a full and final settlement of amounts outstanding under the Loan

through this Settlement Agreement.

14. This Settlement Agreement constitutes the entire agreernent between the parties withrespect to the subject matter hereof and supersedes all prior negotiations, undertakings,

representations and understandings between the parties. This Settlement Agreement shall further

enure to the benefit of and be binding upon the parties and their respective successors,

representatives and assi gns.

15. This Settlement Agreement may be executed by the parties in counterparts, and may be

executed and delivered by facsimile, PDF or e-mail and all the counterparts and facsimiles shall

together constitute one and the same agreement.

16. This Agreement will be governed and construed in accordance with the laws of the

Province of Ontario and the laws of Canada therein, and any dispute arising from this Agreement

must be adjudicated before the Ontario Superior Court of Justice'

[Remuinder of page intentionally leftblankJ

158IN WITNESS OF WHICH the parties have duly executed this Agreement as of the dateindicated above.


Name:

Title: 9a

By

FAAN MORTGAGE ADMINISTRATORSINC., SOLELY IN ITS CAPACITY ASCOURT-APPOINTED TRUSTEE OFBUILDING & DEVELOPMENTMORTGAGES CANADA INC. AND IN NOOTHER CAPACITY

By

').' ./ n,i\;,* 64--*

Name:

Title:Lana Bezner

Managing Director


ByName:

Title:

159t

:lN WITNISS OF 1VHICH the parties have duly executed this Agreernent as of the date

indicatecl above.

BRAESTONII DNVELOPMENTCORPORATION

5, Rovall

9t

By:

Title

FAAN MORTGAGE ADMINISTRATORSINC., SOLELY IN ITS CAPACITY ASCOURT.APPOINTED TRTISTEE OIT

BUILDING & DEVELOPMDNTMORTGAGES CANADA INC. AND IN NOO"I'[INR CAPACTTV

By:

Narne:

Title:

OI,YMPIA T COMPANY

By:

Jonathan Bahnuikra nsel

Andrea Gillis, Vice Prssident

150

Appendix 7:

Braestone Consent Request dated October 23,2018

t5r

M0[l0A0trDlilllltTRAt0Rs

NFAA

October 23,2018

Dear Lender

Re: Syndicated Mortgage Loan ("Loan") made to Braestone Development Corporation (the"Borrower") pursuant to the loan agreement dated December \,20L2 ("Loan Agreement")regarding the property located at 3009 Line 9 North Moonstone, ON ("Braestone Proiect"or "Property")

Request for approval regardingthe Sylrdicated Mortgage Loan to Braestone DevelopmentCornoration.

As you are aware, on April 20, 2018, FAAN Mortgage Administrators Inc. I"FAAN Mortgage" orthe "Trustee") was appointed as trustee over the assets, property and undertakings of Building &Development Mortgages Canada Inc. ["BDMC") under a court order ["Appointment Order")issued pursuant to section 37 of the Mortgage Brokerages, Lenders and Administrators Act, 2006and section 101 of the Courts of Justice Act. By order of the Ontario Superior Court of Justice

[Commercial List) ("Court") dated lune 26,20'LB, Chaitons LLP was appointed as representativecounsel to persons who made loans through BDMC ["Representative Counsel"). Notices havepreviously been sent to you regarding the appointment of FAAN Mortgage as Trustee and ofChaitons as Representative Counsel.

We are writing to you in our capacity as Trustee regarding the syndicated mortgage loan made byyou as a syndicated mortgage lender ("SML") to the Borrower in respect of the Braestone Projectpursuant to the Loan Agreement between BDMC and the Borrower ("BDMC Loan"), and thevarious associated documents.

The Borrower has presented the Trustee with an offer for the early repayment of the BDMC Loan.

For the reasons set out below, the Trustee recommends accepting the offer in full satisfaction ofall amounts due or that may become owing to you under the Loan Agreement, and would like torequest your feedback in advance of accepting the offer'

The offer provides for payment by the Borrower of $L0 million ["Offer") in respect of theoutstanding principal balance of $13.35 million. The full amount due under the Braestone loan

fincluding interest and certain deferred lender fees) exceeds $16 million; however, whenpreviously paid interest of approximately $5,4 million ("Paid Interest") is factored into theanalysis, the proposed payout plus the Paid Interest would result in the full repayment of theprincipal owing to the SMLs, plus a furtherLS%o above the outstanding principal. The Offer isconditional upon Court approval and a release of all future obligations of the Borrower withrespect to the Loan Agreement and the BDMC Loan. The Offer also includes the extinguishment ofall further rights and obligations of BDMC and the SMLs under the Loan Agreement and theassociated mortgage on the Property. If approved, payment is expected to be made by theBorrower to the Trustee shortly following Court approval'

FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Sireel Eosi Toronio, Onlqrio, M5C 2T6

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$0RT0A8tADiIIIIISTftAISRS

NFAA

A copy of the Offer is attached hereto as Schedule "A".

Overview of Current Status of Braestone Proiect

The Borrower has developed Phase 1 of the Braestone Project but is awaiting approvals tocomplete Phase 2. The Borrower has advised that it will be unable to complete the BraestoneProject prior to luly 2019, being the end of the extended term as set out in the Loan Agreement,due to challenging market conditions. Therefore, the Borrower does not expect to be able to paythe BDMC Loan in full on the extended maturity date.

After speaking with the Borrower and reviewing information provided to the Trustee, the Trusteeunderstands that the market challenges affecting the completion of the Braestone Project include,but are not limited to:

ll.

the slowdown in the overall real estate market in the area, which has resulted in slowerthan expected home sales; and

unforeseen environmental issues that have stalled the environmental approvals requiredfor the development of Phase 2 of the Braestone Project. The Trustee understands that thedelay in environmental approvals relate to the following outstanding issues:

a. Species at risk (specifically, brorrrn bats);b. Forestry at risk [specifically, butternut trees);c. Fisheries;d. Approval for a river crossing which accesses Phase 2B; ande. A re-assessment of previously approved wetland boundaries

The Borrower has advised that there are no established guidelines to resolve certain of theseenvironmental issues, which may result in longer than usual delays. The Borrower furtheradvised that it has sought advice from environmental consultants and has been advised that itcould take 2 to 7 years to remedy the lands in order to commence construction of Phase 2,

As a result of the above, the Borrower is seeking to refinance the Braestone Project but has

advised that it must reduce its overall debt in order to do so. Accordingly, the Borrower is seekingto repay the debt owing to the SMLs under the Loan Agreement at a discount. The Borrower has

advised that it is unable to repay the full principal amount of the BDMC Loan; however, given thatBDMC was paid interest when due of approximately $5.4 million [up to and including the July L5,

201.8 interest paymentJ, the Offer would result in full repayment of the principal amountadvanced and a net return of approxim ately 1-50/o on that principal amount.

L

FAAN MORTGAGE ADMINISTRATORS lNC. I 920-20 Adeloide Slreei Eosi Toronto, Ontorio, M5C 2T5

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il0nI0ABt40il{illlsIRAtr0RS

NFAA

The return is calculated as follows:

Principal outstanding (A): $13,350,100

Loan repayment: $10,000,000Interest paid: $ 5,455,870Total payments (B): $15,455,870

Net recovery [B-A): S 2.L05,770

Assessment of the Offer and Recommendation

The Borrower has advised that the Braestone Project will not be complete by the time the Loan

Agreement matures in July 2019, and that the Borrower is unlikely to obtain replacementfinancing sufficient to repay the BDMC Loan in full on the maturity date. Further, given the termsof the Loan Agreement and the expressed need by the Borrower to refinance the Braestone

Projec! BDMC would likely be required to postpone and standstill to additional priority loans untilsuch time that those amounts are repaid [which the Trustee understands would not be until such

time that the Braestone Project is completed). Accordingly, and based on the estimates providedby the Borrower, it is possible that the BDMC Loan may not be repaid until 2025 and at the timethat the loan is ultimately repaid there is a risk that it will not be repaid in full.

As of July '1,5, 20!8, the Borrower ceased paying interest on the BDMC Loan. The Borrower has

advised that it will not make further interest payments in the event the Offer is not accepted and

the Loan Agreement continues in force.

Acceptance of the Offer by the Trustee would result in the SMLs foregoing the following amounts,which would otherwise become due on the BDMC Loan if it were repaid on or about October L5,

201.8:

Remaining principalAccrued interest to October '],,5,201'8

Extension fees [incl. additional deferred lender fee)Project completion/deferred lender fee

Total potential foregone recoveries [before additional accrued interest)

3,350,000267,000400,000

t 003,000$6,020 000

If the BDMC Loan were repaid after October 15,201,8, additional interestwould accrue and be

payable on the date that the BDMC Loan was repaid.

In completing its assessment of the 0ffer, the Trustee engaged a real estate appraiser to provide acurrent as-is appraisal value of the Property. Based on its review of the appraisal and theoutstanding debt ranking in priority to the BDMC Loan that would be required to be repaid priorto the BDMC Loan, the Trustee is of the view that the Offer is reasonable in the circumstances.

FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adelqide Street Eost Toronto, Onlqrio, MsC 2T6

164

FAANH0[l0A0tAtMilfi$I$AT0l$

Given the environmental issues encountered by the Borrower, the uncertainty as to the timing bywhich they will be remedied and the general uncertainty as tothe future of the market, the Trustee

is of the view that, although the Offer potentially provides discounted returns to the SMLs, thereis value in the certainty provided by accepting the Offer and crystalizing the outcome of the BDMC

Loan. Further, as noted above acceptance of the Offer results in an overall net positive return ofapproximately 1,5o/o on the total principal amount advanced'

Next Steus

At this time, you should review this notice and the Offer carefully and arrange to obtainindependent legal advice regarding these matters. If desired, you can consult with Chaitons LLP,

in its capacity as Representative Counsel. Representative Counsel's contact information is below'

Attached as Schedule "B" hereto is an instruction letter to the Trustee that gives you an

opportunity to indicate whether you are in favour of or against the acceptance of the Offer in fullsatisfaction of your investment under the BDMC Loan'

If you have any obiections to the acceptance of the Offer described herein. you shouldreturn the instruction letter to us by mail. email. or fax, within ten (10) da}rs. If you agree

with the Trustee's recommendation to accept the Offer, please also return the instruction letter tous by mail, email, or fax, within ten [10) days to indicate your agreement'

After ten (10) days, the Trustee, in consultation with Representative Counsel, will decide whetherto accept the Offer by an exercise of the discretion granted to the Trustee under the AppointmentOrder. Any acceptance by the Trustee of the Offer would not be binding on the Trustee or the SMLs

until the Offer is approved by the Court. In the event that the Trustee accepts the Offer, copies ofthe Court materials will be served upon you prior to the proposed Court date, which is anticipatedto occur as soon as practicable thereafter'

A prompt response is required in the circumstances.

FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Street Eqsi Toronto, Onlqrio, M5C 2T6

165

r40RT8A0tADII$lSrIAIgR$

NFAA

Should you have any questions of the Trustee, our contact information is below (if you arecontacting us by phone or email, please reference Braestone Proiect).

Email: Info(oFAANMortgageAdmin.comLocal Telephone Number: 4t6-606-3338Toll-Free Telephone Number: 1-833-495-3338

Should you wish to contact Representative Counsel, their contact information is below fif you arecontacting Representative Counsel by phone or email, please reference Braestone Proiect).

Email: [email protected] Telephone Number: 1-888-203-0509

Yours very truly,

Yanru MorQagr l0min*s+ra,tury \rc,.

FAAN MORTGAGE ADMINISTRATORS INC.SOTELYIN ITS CAPACITYAS COURT.APPOINTED TRUSTEE OFBUILDING & DEVELOPMENT MORTGAGES CANADA INC.AND IN NO OTHER CAPACITY

FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Sireel Eost Toronto, Oniqrio, MsC 2T6

L66

,Ol NFAA$0fiT0A0tADilililSlRlI0n$

Schedule "8"

Braestone Proiect I nstruction Form

Re: Braestone Proiect Notice & Request for Approval

TO: FAAN Mortgage Administrators lnc. ("Trustee"), in its capacity as Court-appointedtrustee of Building & Development Mortgages Canada lnc. ("BDMC")

RE: Early repayment of the BDMC loan made to Braestone Development Corporation("Borrower")

t, (Lender Name) have received a request for the following:

my authorization to the Trustee:

(i) to accept the S10 million offer ("Offer") made by the Borrower for the early repayment of theloan advanced by BDMC to the Borrower under the Loan Agreement dated December t,2012 ("Loan

Agreement") in substantially the form attached as Schedule "A" to the Notice to Lenders datedOctober 23,2018, which includes a release of BDMC, the Trustee and individual lenders with respectto all rights and obligations under the Loan Agreement and related documents; and

(ii) to negotiate, on my behalf, matters related to the Offer and all agreements reasonablyneeded in connection with same.

((i) and (ii) hereinafter collectively called the "Proposal").

Acceptance of the Proposal:

The undersigned hereby provides the following feedback with respect to all of its interest in the Loan

Agreement as described above (mark one only);

n Yes, I agree with the Trustee's recommendation to accept the Proposal as described above; or

n No, I object to the acceptance of the Proposal as described above.

lf you have additional feedback with respect to the Proposal and the proposed acceptance thereof, please

provide full details regarding the nature of your feedback, question or concern below;

FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adelqide Slreei Eosi Toronto, Oniqrio, M5C 2T6

L67

FAANil0RI0A0rAl}ifilfi$rntls*s

Certification:

By returning this instruction form and signing below, I certify that (a) I have full power and authority to give

instructions with respect to the Proposal and its effect on my investment under the Loan AgreemenU (b) I

have read this Notice & Request for Approval and the Trustee's Notice to Lenders dated October 23, 2018; (c) I

have obtained such independent legal advice as I believe is necessary in the circumstances; and (d) I hold thefollowing interest in debt administered by BDMC under the Loan Agreement:

Debt in the amount of

Na

Signature

Date

Please return this form using one of the following methods:

i) if by email: [email protected] Subject line "Braestone Approval Form"

ii) if by mail to the following address:


25 Brodie Drive, Unit 8


Attention: Braestone Approval Form

iii) if by fax: 905-508-3957, attention Braestone Approval Form

FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adelqide Slreei Eqst Toronlo, Ontorio. MsC 2T6

168

Appendix 8:

Manzoor Fee Affidavit

t69

Court File No. CV-l 8-596204-00CL

ONTARIOSUPERIOR COURT O[' JUSTICE

(COMMERCIAL LIST)

BETWNEN


Applicant

-and-

BTIILDING & DEVELOPMENT MORTGAGES CANADA INC.

Respondent

APPLICATION UNDER SECTION 37 OF TT{EMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O.2006, C. 29

and SECTION 101 OF THE COURTS OF JUSTICEIC4 R.S.O,1990 c, CA3

AFFIDAVIT OX' NAVEED MANZOOR(sworn November 19, 2018)

I, Naveed Manzoor, of the Town of Oakville, in the Plovince of Ontario, MAKE OATHAND SAY:

1. I am a managing director of FAAN Mortgage Administratots Inc., the Court-

Appointed Trustee (the "Trustee"), without security, of all of the assets, undertakings and

properties of the Respondent in these proceedings and as such have knowledge of the matters

170-2-

hereinafter deposed. Where I have indicated that I have obtained facts from other sources, I believe

those facts to be true.l

2, I make this affidavit in support of a motion by the Trustee for, among other things,

approval of the fees and disbursements of the Trustee.

3. In addition to the description of the activities of the Trustee contained in the First

Report, the Second Report and the Third Report, attached hereto as Exhibit'oA" is a copy of each

invoice issued by the Trustee for the period between April20, 2018 and September 30,2018 (the

"Approval Period") setting out the Trustee's fees, reimbursable expenses and applicable taxes for

the relevant period, along with a summary ofthe activities undertaken by the Trustee in connection

with such invoice. I confirm that these accounts accurately reflect the services provided by the

Trustee in this matter for the Approval Period and the fees and disbursements claimed by it for the

Approval Period.

4. Attaohed hereto as Exhibit "B" is a sohedule of the accounts rendered by the Trustee

for the fees and disbursements incuned in connection with the activities summarized in Exhibit A

undertaken in these proceedings during the Approval Period.

5. Attached hereto as Exhibit '(C" is a schedule summarizingthe individuals who have

worked on this matter, including their roles, hours and rates during the Approval Period.

G. Attached hereto as Confidential Exhibit "D" (the o'Confidential Manzoor

Exhibit") are true copies of the dockets rendered by the Trustee for activities undertaken during

the Approval Period. The Trustee is seeking a sealing order with respect to the Confidential

I Capitalized terms used and not otherwise defined in this affidavit have the meanings given to them in the Third

Report of the Trustee dated November 19, 2018.

171,

-J-

Manzoor Exhibit due to the fact that the information contained in the Trustee's detailed dockets

includes privileged and comrnercially sensitive information regarding the projects and BDMC

generally, and the disclosure of that privileged and/or commercially sensitive information could

have a material adverse effect on the recoveries that may ultimately be available to Investors in

these prooeedings.

7. To the best of my knowledge, the total hours, fees and disbursements incuned by

the Trustee for the period between April 20, 2018 and September 30, 2018 are reasonable and

appropriate in the circumstances.

SWORN BEFORE ME at the City ofVancouver; in the Province of BritishColumbia on November 19 18

Taking AlJidavits Naveed

SolicltorftJtil 3000 nderlang

v7B tC3

t72

THIS IS EXHIBIT "A" REFERRED TO IN

THE AFFIDAVIT OF NAVEED MANZOOR

SV/ORN BEFORE ME ON THIS 19TH OFNOVEMBER,2OlS

A TakingAffidavits

' l\'- j.: ::\-.,,r :-.i'

. i.,::\,;... .(\\

i\ !'

I - ]{ATE TODDITOiIES

= _llarlrterand SolicltorgnilFloor, 3600 Lysanrter laneRcnmond, B.C., VZB iCg

804-2474786

L73

Exhibit A

t74

FAANH8n I0A0[.[ 0 ti i il I S I n tI 0 B s'

Invoice00l

Mhy 31, 20tB

RC; F,AAN TruBtee(oTfusteol')Involce fmthe 2018 2018

The,frustee:s activides for the perloti April 20, 20.X8 to Matr1 3L 2018 ("Period'l), iirc.ludq, bilt arenot lirnited to the.follow-lng:

Proiect,Matters

.. Throughout'the ,Pe{iod the Trustee, ds..4lt with:nurneraus plojqct spqc_ific, malter.s .and,corresponded with Osler Hosltln & Hai'csurt LLP tf'O.sler"), thit'ffistedis legal counsel,regarding same as necessary, includlng, o-ut not lirnlted to, the followingl

o Vittorla Metllcal Project - reviewing and execritlng the mortgage dischargedocumerits on or about April 26,2AL8t

,o 6th & l0thPr.oject - reviewlng,requests for partial'dischar,ges,related to the sale ofunits to the.borrowei, in order to $enerate.funds to be used to fund futu.re prqjectcos.ts;

:.o Kernp Project - revieWing and.execUting postponenent documents;

o Bfookdqle Project,-,eKenStvely revieWing.nurylerous eqralls:andrnemos'related to

a p-Qtentlal s:ett]ement agreement in an effort to prevent-enforcement biy the priofitylendeu

.o Averton Rutherford Project - reviewlng the form of partlal discharges and thedocumentatio'n ielated to the reQuested partial dlschargEs;

b Brhestond Project - revlewlngand executlng partlal dischArges;

o Humberstone Project - reviewing project informatiOn related to a request topostpone !o 4ew mezzariine financing;

o Bo.Wrnanviile froject - deali4g with matters related to eriforcOmbnt proceedingscommence..d hy the priority lenderq lncluding the postponement to the new prioritylo4It;:

.o Harlswe Project - reviewing docurnentation relirtgdto alan.e widening request;

FAAN MORTGAGE ADMINISTRAIORS lNC,' I 9'2G20 Adelcilde Slreet'Eosf Toronlo; Onlorlo, Mse'2T6

175

FAANld0flt0rBll0l,llillsIRtT0[s

,o MMl & MMZ Projects - corresponding with Fortress Real bevelopments lnc.("Fortressf') regarding a potihtlal sale. of tho land that ts the subject of thes?proJects; a.dd

o Dunslre Cirelph ProJect - correspo4ding wlth the rdceive4 its ccuncel and Osier. regardlng the sale approvalimotion, in additioh to revlewlrrginformatlon pp-vided

by the reCeJver regarding.the recelvorship proceedlngs and the related saie process.

o P'roviding project specific updateq tq the investor$ upan request and.followtng up wlthCanadian Development Capiteil &, Mortg,qge SeMcqs. hq. '[,1CDCM'IJ and Fontress, onfrequent basis to obtaln Informatisn regardihg,same.

Investor Notices:

r .Drafting, finallzingand distribUting,q not'lce to ailinvestors:'dated April.2:1, 2018, a6yisint.of the Trustoti's appointment;

r . Dnafting; finalizlng'and dtstrlbutlngthe 1fOUo. W!.!g'proiect specific noticesr'

o Coliiers notice dated April30, 2018;

o Brookdale notlse dated April 30, 2i,0t9;

o ceqqggtgwn netlce d4tedMay ?,?0I8;

o Victoria Mbdlcal notices dated May 10,20.18;.

o Capltal Pointe,rtotice datedivlqy LLi20L8;

.o Triple Crepk,nstlce deted May 11, -20-18;

o Bt4gs@ne noticd.dpted May 17, 2018;

o Remp nodcerdhted May ?.1,ZALBi

o Brookdale noticerdated May25, 2018;,

o Bowmanville notice dated May 28,2018; and

o Lake & East notice dated May 30, 20181

General Matteirs

. Attendlng,at Court on April 20,20t8 in respect df the mdtion appointing FAAN MortgageAdminisuators Inc; as Trustee qf BDMC;

'FMN MORTGAGE ADI\4[NI$IBATOR$,lNq: | '9r&29'Adelqfde:slreet Egst ioronto, Ontq.rb, M.sc 2T6

176

t-/ffi51r Attending at BDM.G premises at25 Brodie Dr:, dally throughoiit the Period;

l l,ogging andrespondlng to numer0us investoii' call3 and ernails duri4g the Period;

with the'prlnclpals of Fnrtress on a perlodic basls regardingthe $tatus:qf vari.ousincludi4g poteniial qaleand.fepayme$t opportunitles being untlertakpn,by those

I MeetlngprojectS,'parties;

r, Draftingand reviewinga list of FrequentlyAgked Qgestions; to address,cgr.nmon qqestibngraised by inrrcstors:following the appoirrtmen't:of ,FAAN Mortgage Administratots lric. asTfustee, ahd posting sarne on the Trusteerswebsite;

r Attehding calls with FFM and FDS, two olthe brokerages that brokered loans forBDMC;

. Attending periodiC calls with Olympia Trust Company, regarding various matters relatedto the BDMC loans;

r Attending perlodlc calls wlth Computerihare Trust Company, regarditrg varlous mattersrelated tothe BDMC loans;

o. Reviewing mattexs rqla.ted to the BDMC bank accounts; -the. funds in eaqh account and theboold<eeping related to sarhe, and cqngidering.matters. related to the use of funds ln thebank.,aceounts and the'contJnued fundingof BDMGis adminlsffatlon business ('fFundl.ng:Matters");

. Attending calls with Osler regarding the Fundlng-Ms61g1r,

r. Attending pefiodtC lnvestor meeflng$ dt:the BDMC preniiseq;

r Revlewing and firializing a letler to ce-itaiu bqFoWefs:having funds ih one of the BDMC

baskaccounts, oil or aboubMqy, 4; 2Ot8;

r Revlewing conference call minutes:ftomconference calls hosted by Fortress on lanuary 24,2018; February ?Q, 2018,and April 25,zAtB to update.b.fekers on the status of the various.projects

o: Correspofidlngwith BDMGs insurhricG,'brdlterlegSrding BDMC$'ihsurdnce policy-;

. Correspondlirgurith Financial Services Commission cif Ontario and its legal eounsel;

r Correspontling with BDMCTs IT provider',regarding, various BDMC fl related ,matters,inclu{iqgthe eslablishment of a dedilated BDMC server;

.. Correspondingwlth provincieJ ltgenping sroupq regapdng,matters..pertainl4g'to the,BDMClicenses,in other provinces; includingAlberta and Saskatchewan;

FAAN MORTGAGE ADMINISTRATORS lNC. | 92G20 Adeloidc $heel Eost Toronlo, Ontsrio, MSC 2T6

\77

FAANi,l{RIBA$[A0MtilIS'tnAI0Rs

. Cqrresponding with repreqentativ€s of CDCM regard.lng books and records required byBDMci

. Overseeing the reconciliation of the BDMC Investor r€cords to ensure that the BDMC

records:accurately reflect the correct Investbr lnformatioh, hcludin$ the number 0flnvestors in each project and the amount i.nvested by eaph Investor;

r Oversqeing. the .review and updatlirg of, the BDMC electrsniq 'pgcor{s to ensure that alltnvestor.closlngpackages were scannpd pd readily available in €lectronlc format;

r Drafting and reviewing the Trustee's first rOpoit to Court and corresponding with Osleran d Chaitons IiLP, rep resentativ€ -ceuns el, t'e gard I n g sam e;

.. 'Reviewingrand commenting on the initial draft of the interim stabilization orderj

r Payrtrgoperating:'expenses includiag among otherthings, rent and payroll;

.. Managingthe,BDMC employees, responding.to their qgestions'and providing direction as

hecessary;

r Managing the.Trusteels website, iniluding arrangirtg for the postin! of mateflal! relaled to

the'appointment Ef the Tnusteei

r Attendjtr,gnurnergus calls with Fortress;

. Attendlng meetings; calls and exghaqgi.ng hurleFousemails with Osler regarding theseproceedings; and

r Dealingwith'all othbrmeetings, correspondehce, etc. pertalningto this mafter'

&f

Total fees per attached time summaryHSTToIal

$

$

zLL,482.5A27,482,32

238,884.82

FAAN MQRTGAG,E AD14INISIRATORS lNC, | ?20i20 Adeldlde slroet Eo$l ToroRto; o-ntorip, M5G2T6

1.7 8

FAAN Mort$age, Adminidtrators. I nc;Building & Development Mortgages Ganada lnc.Time,$ummary-For the Ferlod

Lana BeznsrDanlel'Sobel.NagmiLiebermanNick Niktikakls

20:18;to 31 2018

Dlrector

ManagingManagerManager

DilectorDirector

Rate52

435436300300

154.e563,20

f2s,30

67,4A3:.2827,492,0A37,990.00

802.00

962.03Average hourly rate

179

NFAAM0nA0filllll

A0tTIllRS

0II

Is

,Re: FAAN Mqrtgage Adminlstrators Inc:lh its,,cqpscity as

("Trusteet') o-f 'Buildlng,& DeveloB-mont Mortgages Canada

Iirvoice 002,

fune 30,3018

Gourt appointed Trusteelnc, ('rBDMcf')

Involoe for the'perlod. tnne 1to lune 30,,201.8

TheTrusteefs,actlvlttes for the perlod June L, lotg ro fune 30, 20'L8 ['Period"); tirclude; but.arOnorlimtted tq lhe followingi

Profect Matters

. Throrighout the Perlod,the Trustee,dealt with numero,rls plqject speiifle matters and

oorresponiied with 0sler Hoskin & Harcourt LLP ["Osier') the Trusteels legal counsel,regarding saill€ as:rrecessar.y,'lncluding but not limited t0, the following:

o Humbefslqne Project - reviQwln$ and executlng a postponement agreement topostpone to new ri,rezzanine ilhancingl

o Bradforrd/Bond Head Project - revlewJng a postponement f,equest fOr a loan tofacilitate' the repayBent of' the existlng bridge lo4ns 4nd execUtiRg the-

postponementwtth respdct to samei

o Brookdale Froject - corrdspond{ng with RSM Canada Lirnite4 the privately

appointed recsiver of the Brookdale ProJect CiBrookdal€ Receiver"), on a periodicbasis, rqgardtng the. sale Broce$s to be. gommenced bly'the Brookdale. Receiver,

lncludlng providing,the Bfookdale ReQeiver wlth the Trusteels'vjews oh the sale

process, ln,addition to reviewing the sale process materials provided to the Trusteeby the Btooltdale ReceiVor;

o Bowmanville.Project - dealingvrrith matterS related td enftircenient proceedings

commensed by the piiqrit,{ lenders; includingthe postponement to the new prlorityloan;'

o Unlon Waterfront - dealtng with matters related to the enforcement proceedings

commenced bY the PriorltY lender;

o Braestqne ProJect - rgviewlng and executing parHal diqcharges;

.o Georgetown - dealing with matters related to the enforcqhent proceedin$s

commenced by gne:of'the priority lenders;

FAAN MORTGAGE ADMINISTRATQRSINC. I t20-?o Adeloldg s.ft:eet EosfiToronlq, onlqrio; Msc 2T6

r_80

r./ FAAN-Tv Fof,,t,,i'ti'r-l

o Peter Rlchmond ProJect - reviewing., docurnentatioh and: corrbspondtng withFortress,Real Developments !nc, ("Fbrtress") regarding a request by the borrowerfor securlqy related to ftinds it advanced to the proJect and a request for acorpspqndin g postponement'from BDM C regarding se me;

Establishing a praces$ for t}e detalled prsject reviews to be:completed by the Trustee ofall Projects adminlstered b:r BDMC;

Commencing the detailed proJect,reviews, whtch !11clu{e, the review of loan agreements,participation and servlcing agreements,; lender aeknowledgcment and corisents,developrnent consultant.agreements, budgets, cost congultant repofts, capital stacks andvai'lous, other' do ctimeilts pef tal n in g to each o f th e, proJectg;

r Corresponding wtth ahd solicitlng Quotgs'ftbm threet apprais4l firmqpossfbleengflgement:by the Ttustee toprepare "as 15" appraisals for each

Cofi n ectlgn with loans admi nlste,red by BD M C;,, and

r Provldlng proJect specific update.s to the investors upon requqst and following up withCanadian Development Gapital & Mortgage Services.lnc. I"CDCMJ and Fortress on a

frsquent basls to obtaln infornratibn regarding.same;

'lnvestor'N6,tlces,

r Reviewlng a draft notice to all inve$tors, advising of the appointnrent of Chaitons LLP as

representative:toun seli

. Drafting, finalizing and distributing the following project specific notices:

o Braestqng nqtice dated lune 1, 20I8i

-o Capital Pointe nofice dated lgng !,,20LFi

o Dunsire'Ggelphnotiee datedJune 14, 20L8;

o The Kemp.notice dated fune 21,2018

o URion Waterftontnotiee dated |une 21, 20L8t

o Geqrgetotyn noticq dated.funq p7, 20L8;

o Humberstone notice dated ]ung 27,20L8;

o Wellington House notice dated lan:eT7,20tr8; and

o Brookdale notice' dated fune.28,:2018.

a

I

regardin$ theirof the prbiectS in

FAAN MORTGAGE ADI\^INISTRAIORS lNe, | 92&20 Adelolde Streel Eosl'Toi6nlbi'.Onlorlo;.[45c 2T6

181

l{0

T0

FAAFr0HistAIlHtilIs'ItI f

sI

General Matters

o. Attendlng at BDMC premlses at 25 Brodle Dr., daily throug-hout the Period;

o Logging and responding to numerous investor calls and emails du.ring the Period;

r Meetlng with the ptfncipals of Fortress on a periodic basis regarding'the status of variousproJects, including potentlal sale and repayment opportunities being undsrtiken by t[oseparties;

r Atte:nd{ng c-alls with FFM and FDS, two of the brokerages thatbrokered loans for BDMC;

r Attending a conference call on f une 4,ZA1.3 convened by'Fortress to update brokers on thestatus of:thd'various'projectsi and revidwing the mlnutes'regardlng sarne;

. ReVieWing and fitrallzing the TruSteefs flrst report td Couf;t dated June 19, 2018 in reipectofthe motion returnable lune 26,20L8 ("fune 26tb Motionf'), and corfespondingwith Oslerand Chaitons LLP, proppsed representatlve counsel, :regqpdln$:sorlei

e Reviewing.and co..mmedting on,the drAft notice of motion aqd the draft Csu:rt order inrespect of the Iune 26th Motion;

r Attending at Courb,on June 26' 2018;

I DraftingaRd feviewing a llstsf FrequetrtlyAsked Questiotrsi to add.resSComrhoh questions

rais ed' by iirvestors followln g the June 2 6th Motion;

r Correspondtngwtth Olympia'Trust egnlpany on a perlodic basis regardingvaribus matters

relatdd to th€,BDMC' loaris;

i: Correspondlng;v,rith Gorfiputershare Trust Companyioh a.peflodic:bAsis regafdingvaribusmatter$ related to the B-DMC.loans;

r Attepdi,ng pe.risdlc investor meeflngs at the BDMC prem.lses an.d at the Trusteeis oifiee;

. Correspondingwith Financial Services Commission of:O$arlo and lts legal counseli

. eorfesponding with'BDMCfs- IT provlder regarding,vudout BDMC IT "related matters,

includlngthe establishmbnt of a dedicated BDMC ierverl

r Corr€spond,ing with reprdsentatlves of CDCM regarding books and recoFds required by

BDMC;

FAAN:MORTGAGE,ADMINI$IRATORS rNC. | 92G20 Adeloldb Street E6st Toronlo, orilorio; MSc 2T6

TB2

FAANFfl 0 f, I 0 I B,tA0NililStRtI0f,S

. Oversee,ing the ,rdConciliation of the' BDMC Investor fecords to ensure that the BDMCrecgrds alsurately reflect the correct Investor infoi.rnation; includtng the number ofIiivestors in each projictand the amo.u$t invested byeaih Investor;

r: OverseGing the ieviEW and updatlng of tbe BDMC electronic reeerdg. to enqure that allavailao-le, lnvestor closing pack4ges were scanned hnd readily available in electqonlcfoqnat;

r Payirig operatinge{,penses lncluding alnong other things; rent and payroll;

.. Managtng the BD.MC employees, respondlhg to their ques;tlons:and providlng direction as

necessary;

o Attendi:ng nuinefous calls wlth Fortre-ss;

I Attending meeilngs, calls and exchanging nurherous emails with Osler regarding'theseproceedings;

e: Managlngthe,T.rgstee's webslte, IUcludlngarranging for the posti.Wof'ntatefials frorn theIune.26th Mstionir4nd

r Dealingwith all'other meetings; correspondencg etc. pertainingto this tnatt€r;

Total fees per attached'tirne sunnmary 140,512,5018,266,63HST

Total 15 779,t3

$

$

FAAN MORTGAGE ADMINISTRATORS lNC. | 920-20 Adeloide Slreel Essl Toronlo, Onforio, MSC zTa

r.83

FAAN Morlgage Admlnistrators lnc.Bull{lng & Doiielopment Mortgages Canada lnc'Time.SummaryForthe Feiiod June 1.. 2018;to .lune 30, 2018

Naveed Manzoor'Lana BeznerDqnlelSobelNaomi'LiebermanNick Nikjlkakls

ManagManagManagerManager

DlrectorDlieclor

Hourg Total

435 ,1i0,75 48,176'.25435 39.95 17,378,25300 74.98 22,494,OO

300 139.5b 41,850.00

,@360.68Average hourly rate

L84

FAANlitBI0astA0NrNlslR'lT0[$

Invoice 003

Iuly tl,20nt

Re: Gour.t :appo-inted TrusteeInc. ("BDMC")

TheTrustee-'sactivitiesfortheperlodluly!2018tofuly31i2018(lPerlodi')'fnclude'butarehotllmited to the followi,4gt

:Prolect Matters

:f Throughout the Perlod the Trustee dealt with numerouq..prgie$ lpeciffc rnatters end

cqmesionded wlth 0sler Hoskjn & Hareourt ILP ('osler'f) and Chaitoils' LLP,

r*p.**ntrtiv€ counsel, fegarditrg same as necossaryi including but not llmited to, the

following;

o Vtctorta Me-illcal ProjeCt - reviewing the dtstribution schedule for the partial

dtstributisn to'investors and facllitatlngpayment of same;

o Eden/Klng,Cit1r- meeti-ng.with Pace Developments ln its qapacif as representative

of thi Ede;borrower,regardingthe .determination by the borroweirthat it is unable

to repay 111e BDMC lqan,"and iequesting and revlewlng:documentation related tot}e Eden Prd-jequ

o. Union Waierffont: r€vJdw regetvershlp appllcatiqn inat€rials and dealin$ withma-tters legarding.same; including discus$ions wlth the receiver;

o Danforth - reviewlng matters related to the rgques.ted postponement to'allow the

proiect to move foriard Wlth constructlori flnartcing ahd discussions with Osler

regarding sanre;,

I peter Ric-tuirqnd ProJgct - continuing to rqvlew documentatiqn and corresponding

with fortross,Real Developfrents Inc. ('Fortress"J ahd Osler regardi.ng a request by

the,bor.rswer for qecurity:retated ts.funds.ltradvanged ta the pr:oject.and a request

for a csrresponding postponernent ftom B'DMC i'egarding Same;

o South Shore Project.-,revieWtngdocuhentatlon'on.eonsffuction liens reglstered on

the project and.discussisnswdfr the.borrowerrs representative regarding expected

resolutlon of safne;

o Harlowe ptoject -,reviewirig a settldntent offer and performing a levieW'of the

proJect to determlne the appropriateness of satne:

FIAN M9RTGA9E AqMiNisTBAToRs t.Nc, | ?2G2p Adeloldq Streel Eo.ql Tqronlo'opforlon Msc 2T6

185

t-/f,ffiNAll,tlll,llSIRll'0'RS

o Braestone Proje.c! - revleWing a settlemenlt'offgr and perfor-mlng a'review of the:projectto deteflnihethe appropriatenesis of samo. As well, re9ieWingaUd executlngpa rtial discharge*,and

o Brookd4le ProJect -,ehgagi-ig with the Brqokdele receiver, i'is counsel and Oslerregardl ng matrcrs related'to the Brookdale'sale process;

r Establishing a.process for the. detailed prdject reviews to be.q,ompleled by the Trustee efall projects adrnlnis:tqred by BDMG.;

. Performing detalied project reviews, including but not limited.to, [he review of loanagreements, partlcipqtion and servicing agredmeuts, lendef qsktrowledgement andconsents, developinent'consultant agreeinents, budgets, capltal stacks,and viirlous otherdocuments pertaining to each of{he proiects;

r Cqrrespondlng With tvvo appralsal ffnns regarding the negotlatlon of'tlieir engagementIetters,and etrg4gihg them to comi)lete the "as'is" appralsitls for each of the proJects. wtthloans administered by BDMC;

r Working:wlth the BDMC employ,ess and the appraisers.to obtain the,information required'by the a-ppr.aiqers for ttre preparatig4 of Q.re,appraisEl$;,and

r Prpvidlng prgjecl,$pecific updatgs tg the investors upon request atrd following up withCanadlan Developrnertt Capita[ & Mortgage :seivlces,lnc. ("CDCM|IJ 'and F.oftress on afrqquent basis to obtain information rregardlng satTl€;

IliVestor Notices

r Reviewtng a dfaft noHce to all investors, advising of the appointrnent of Chaitons LLP qs

fepresentative counsel;

. Drafting finalizingrand distributing the following proJect speciflc noticesi

o Victaria Medical,nqtices dated luly t7,2AL8;.

'o. Bowmanville notice dated luly 18,201.8i

o Gapital Poirrte notice dated luly 18,2018;

o Oid Market Lane nstiee datedluly L8; 2018; an.d

o U-nion Waterfront noticedated lullt 26, 2018,

pg11r1 pIQffTGAGE ADMINISIRATORS iNC. | ?2e20 Adelqide Slreet Fort Toronto,.Onldrio,.'M5C- 2T6

186

FAANHBABMI

nl{

lgl0tISIRtr0ns

'Gerieral Matters

r Atrgridlng at BDMC premlses at 25 Brodle Dr., dailythrOqghout the Peiiod;

r Logging and responding to numerous investoi calls dnd emails during the Period;

r Meeting wtth the principals of Fortress on a perlodic basis rogarding the statgs. of varigusproJects, incluStng p.oJential,sale and r€payment opp"orturities belngundertakenby those

partiesl

,. Attendtng calls with FFM and FDS, two of the brokerages that,brokered loans for BDMC;

., Correspondlng wtth Oly-rnpia Trust Company ou a periodic basis regprding varlous matters

relatod to the'BDIvlC loans;

. Corresponding'wlth Computershare Trust Company on a periodic n'aSlS regairdin$ vafititts

matte* re-lated to the BDMC loans;

., Attending peiiodic investor ms,etirjgs,a.t the EDIvIC premises andra! the Trustee's office;

rOorrespondtpgwithfinaircial$ervicesGommissionofontaris'andltslegalgpunt,el;

o Correspondtng with BDMCTs IT provider regaiding varlous BDMC IT related matters;

., Cori'espoRding with repfesentatives'of CDCM regarding informafion rdQubsts fOi varlous'

proiects:and riga.rdlngihe bosks and records reguired by''BDMc;

. Reviewing."n6 ,linalizing a list of Fre^qu9nt!V^{1ked Questions, ts address' comrroh

ques$ons raised byinveslbrs followingthe JUne 26u' Motlon;

.. Managlqg the Trustee's websltq; includi4-g,arrEnging:for the posting o.f the. Frequenily

As.ked Questiorls dat€d luly L7,,2A.18 on tliewebsite;

o Reviewing and',finalizing a letter to be distributed to prlority len$ers on proiects

administdied'by:BDMC, tJadyisepf the TrusteeiSnppointmentand that the Trustee should

be informed oi anlr enf.i,ro"metrt proceedlngs cdmmenCed: of to b-e cdmmenced by the

lenderi

r Reviewing,notices received from numerous investors; inltiated by the'ilnvestorVoice" arid

torre3ponding with Osler regardi4g'same;

.r Revtewlng a response to the Invest0r Voice letter and distributlSrg,s-qrne;

r Overseeing the leview and updating of the BDMC electronic records to qnsure that all

available inyestor closing packages were scanned.and readtly available in electronic

formatiFAAN MORTGAGE ADMNiSIRA{OR$ lNC. | 92G20 Adelside slreet,Eosl Torolrle,.onlorlq,.M$c.2T6

187

FAANH0fiI$r0fAlilili{tsl'ni1'0ns

. Wqrking with BDMG to establish a process to prepare:interest calculation.surhmart's inordef to'csnfifih:the total interost paid on'eac! loan qrid the accrued interest orglng on each

loan admlnlstered by BDMCi

r Paying operatlng:expensesincluding arnong other thlngs, ient.and payroll;

r Managirlg the B'DMC employees, responding to their questtons,and.providi4g dlrection as.

necessary;

r Correqponding with Chaitpns LLP, represehtative cqunsel, on a perlqdlc basis regardingthese proceedlngs;

' Attendlng numerous calls with Forness;

r Attending moetings; calls and exchanging numdrou$ einails with Osl0r regarding tlieseproceedinrgs; and

r Dealing with alt other:meetlngs, correspon{ence, etc. pertaining to this matter,

d

Total fees per attached time summaryH$TTotal

$ 136,615,95

--.. - 17,76Q,Q7:$ t54,376,02

FAAN MORTGAGE ADMINFnATORS lNg, I t2C29 ldeloloe Slreel Eqst Tsronls, onlsila, MSG 2T6

188

FAAN Mortgage Admlnlsffatorc lrio.Bulldlhg & Development Mortgages Canadq lnc.Tlme..SummaryFor: the Perlod July 1, 2018 to,July 31 , 2018

Lana Beznerpanlel:Sobel$helby DraperNaomiLiebermanNlck Nlktlkakis

Managing.PireotorMenaglng DlreetorManagerManagerManager

Rate Hours TotalI

96.408.92

97.6683.84

149.50

435435300300300

41,934,003j8E0.20

11;295,0025,152,0044,850"00

398.16 136,615.95

Averag-e hou.rly rate 343.12

189

FAANti0Rl0tuiA0'MillrsfRrI0Rs

Invoice 004

August31,,2018

,Re: FAAN,.Mortgage Adminlstrators Inc. in its eapaclty as,Court appointed Trustee("Trusteo") qfbuilding & Dsvelopmont ltlofigages Canada Inc.'1"BDMeu)Invoice forthe perlodAugust.l to 3L12018

The Trustee's activltles for the poriod August 1, 201.8 tp August 31, Z0tg ("Peitod'), include, butare not'limited to the following:

Profect Matters

. Throughout thq,Feriod the Tfustee,dealt with.numerous project speclfie matters andctbrrbspohd,ed with Osler'Hoskin & Harcourt LLP [i'Osler"), the Trustee's counsel, andChaitqns LLP; representative counsel, es necessary regarding same, including but nOtItmited to, the folloWing:

o Danforth - r€viewlng matters related to the requested pogtponement to allow theprofectto move'forward With:cons*uction flnanclng ahd discusslonswith Osler andthe appr4lser of the Danforth project rqgardlng samei

o Peter Richmond Proiect - continuing to rgviqw documentation and cprrespondingwlth Forfess Real DeveloprnenB hlc" ("FortressoJ and Osler regarding a reqriest by.

tle bor.rower fpr securiff rplated'to funds it advaneed to the proJect and a, r€Questfor.a correspgnding postB.dnemel-lt from BDMC regardlng game;

o Harlowe Pro,ect - reviewing a.settlement offer and perfotming a review of theprolect to determine'the appropriateness of same;

o Braei.stoqe Project - reviewlng a settlement offer and perforrning a revlew of theproJ ect to deterrnine the a,ppropriaten Bss of sarhe; As w6ll, revteWl$ g and executin g

partial dlecharges;

o Brookdale ProJect -mattgrC related to the Brookdale sale process;

'o Union Wateffrbnt Project - dealtng with' matterS ielated to the reteivershipproceedingc including ealls wlth the court.appointed recelver r€garding the

feeeFerqbiF BrOccecllngs:genepally aqd the,planned. g;als prpqes.E

o Geofgetown Projeet - dealing with matters,retated tq the reffnancing of the proiect' and the noiice ef.intention:to rnake,a proposal.ffled by the bsrroweri

a South Shsre Project -revJewing docurnentation,on consFuetion liens registered on

FAAN MORISAGE ADMINTSTBATO.RS tNC. | 92S.20 AdOloide StreoJ EOsl Tolonlo, Onlorlo, M5C'2T6

190

FAANH$Hr0fil}ElDMnt$lnAI'0Rs

the.projectqnd.discussions wlth the b,orror,v€rfs rdpresbntadve rdgardi4g expectedresolution of same;

r Perfqrming dltailed proJect reyieWs for all proJects: administered'by BDMC, including, butrlot ltmited to,reviewlhg loart agreemrents, partlclpation and serviclng agreemeilts, Ienderacknowledgement,and consente, development csnsulthnt:agreements, budgets, capltalstacks, waterfalls gnd varlous o-tlier docurtrents pexta-ining,to eqch of the projects;

I Meeting and attendlng galfs with a planning consultant on a pdriodlc basis regarding thedeyelopment status of : each proiect, 'the 'remaitling milestones and any potenfial;inrpediments to achieving those milqstones that may arlse; and incorporatlng same lntothe project specific analyses;

r Corfespondirrg with the appratsal firms engaged to complete th€ "as is" appraisals for eachof the prolects witlt loans administered by B'DMC;

r Working with the BDMC, employees to compile tnformatlon required by the appraisers forthe preparation of the appraisals and responding tgthe:.appraisens' inquiries and requestsfo r ad dl ti onal itl formation regarding sa me; and:

'c Providing project specific updatd.$ to the, invbstois upon request:and following up withCanadian Development Capital & Mortgage .sewlces Inc. (tgp6y"J and Fortress on a,

frequent basis tobbtaiu inforrnation regarding same,

'tnvestdr Notlces

o Drafttng, flnaliztng'and distributing the following project specifib nodces:

'o CHAT notice dated August 1, ?018;

o Georgetown notice dated Atrgust1,2018;

o Danforth notice dated Auggst 2; 2018;

,o Union Waterfront notice dated August 10; 20tr-8;

o Old Market Lans [otices dated,August 1,7 aud 20,2018; and

e The Kemp Rotice dated Auggst 90, 2018.

Gbneral Matteirs

r Attending at BDMC premises at 25 Brodie Dr., dAll11 thrbughout the Ferto{;

o Logging and resiroilding to numeiFous lnvestor calls and ernalls durlng the Feriod;

FAAN MQRIGAGE ADMINISTRATORS lNC. I 9,2G20 Adelolde Slr€el Eoit ToronlolOrllorio,.MSC 2T6

t-91

FAANblsfilsc0tAllMIIIISIRAI{'FS

. Meeting with 'the princlpals' of Fortress on a periodic basis regardihg the sthtus of VariousproJects, including poiential salB apd repayment opportunitles betng undertaken by thos.e

Partles;

o Attending calls with FF'M and FDS, two bf the brokerages thal brokered loans fp-r BDMC;

r Corrospondtngwith Olympia TrustGompanyon a periodichasls reg.ardingvarlous mattersrelated 1q glie; B-DMG loans;

r Cqrre^sponding'with. Computelsbare Trust Company pn a penlodic basis regarditrg varlous.matters'relatedrto the BDMC loats;

r, Attending pefiOdlc'tnvestbi rheetingsat the BDMC prerhises and'at'the Trustee's'offlce;

r. CorrespondlngWithFinancial Seiviee$ Commission of 0nta'!16'and its legal counsel;

.. Corresponding:wlth'BDMCrs IT ptovlder r€gardlrtgvarl0ug BDMC IT telated matters;

. Correspondlngwlth provlncial licensinggroups rergardingmatters pertelning'to the BDMC

lisencos in other prqvfnce€, inclrrding Alberta and'Saskatchewan;

.. Correspogding with rqpresentqtlrles of CDCM regarding.informatlon vequests forv-ariousprojeets and regardlng'the books and records.reqqired by BDMC;

o Attonding a conference call.on,August 14, 2018 cohvened b5r t'orfress to updatebrokers on

the statul,of the various projects, and:revtewing the ,rninutes'regarding sanlei

. Respondlng:to additionalcorresgoRdence f-romthelnvestorvoice and conveRing:calis and

exchan gin g emails tvith Osler rqgarding: sam e;

r gveiseeing the review and updatirlg of the BDMC electrohic_rqcQrds'tp ensure that 1[avallable. investor closing paikages vuere scanned .,and readily available in electronic

formaU

.l Re.viewingand flnqllzlrgo letterto:allborrowets datedAuguit20,'2019, requegting'among

othef thtrigs, various:dolumdhtation,related tothe re3pectlVe:p'r.oiectS; Which is required

to be provided by the borrowers to BDMC pursuant to the terms'of the loan agrsemehts;

r Overseeing the process established to prepare interest calculation surnmaries'to conflrm

the total interest paid on each loan and the accrued intelest owing on each lban

administered by BDMC;

r Paying operating expenses includingamong otler thlngs, rent and payroll;

t#

FAAN MoRTGAGE ADMINISTRATORS lNc. I ?2q20 Ad€lolde slreel Essl'loronlo, orrlorio, M5c,2T6

192

t*/n+aq*AoMtilrsInlto[$

r Managng the, BDMC emplciyees, respondirrg to their questlons and providiqg dlrection as

neces$ery;

r Attending numerous calls wlth Fortress;

r Correspondlng rylgS Chaitqns:L[P on:a periodic basls,regardlng these proceedlngs;

o Attending meetings, calls and exchanging numerous emails wlth 0sler regarding theseproceedingsi and

. Deailng.with,ail other meetlngs, correspondence, etc, pertaining to this mattor,

$ 123,481.50Total fbbs per attached time summaryHST

Total :$52,60

0

FAAN MORTGAGE ADMIN|STRATORS,INC, I ?2&..20 Adeloide slieei Eo3tToronlo, onloilo, Msc 2T6

193

FMN Mortgage Admlnlstrators lnc.Buildlng & Developmght Mortgages Canada lnc,

Tlme SummaryFoi the Feriod 1, 2018 to Auoust 3.|. 2018

Lane Bezner.$helby DiapdrNaomlLleberrnanNi.ck Niktlkakis

Rolerector

Managing DlrectorMa46gerManagerManager

Rate Hours otal4354353003oo300

86.20784464.,14

11

37,497.0023i532.0019.242.Oo

00

338,7{Average hourly rate

t94

r-/t+ANA,,Mt,H::::r,

Septernber 30, 2018

Re: FAAN Mortgage Admlnlstrators Ih€, in its caBaclty as Gourt. appointed Trustec('!Trusteet') of'Buildtng & Development.Mortgages Ganada.Ini". ('1gpy6t';Invoics for the pertod,september '1'to Senternber 30,2018

The Trustee's activltles for the perlpd September t, 2018 to September 30, 2018 ['rPeriod"),include, but are not limited to the following:

Froiect Matters

r Throughout the Peqiod the Trustee dealt with numerous proJect specific matters andcorresponded wit}l Osler Hoskln & Harcou.rt LI,P (l'Qsler"J, the Truptqe's ceunsel, andChaitons. LLP, representatlve coUnsel; as neees'sary fegarding same, including but notli,rnited to, the follow.ing:

.o Danforth Projcct -,matters related to the requested pQstppnem.en$

o Feter Richmiind,ProJect - aontlnulrig'to review documentatioh and correspondtngwith Fortress' Real Developrnerrts Inc' ('Fortress't1q.nat Osler regafding a request by the borrower for s.ecurity related to funds itadvanced to the, proJeet .and a request fdr a:correcpqnding posqpanement fromBDMG,regarding same;

o Eden/King Gily Projeql -reqlestlng and rqviewing,do-cumentation related tq theEden project, cdrres.ponding wlth Oslerregarding correspondencb received from

eounsel to theborrower, reviewlng.demand letter.issued to counsel to the borrowerregardlng the repaymen! of the BDMC loan;

o llarlowe,FrOJecG - iidViewtng;;a settletng[t offer.and pefforrhing a review of theprojectto :determlne the'approprlate.ness of'earne;

o Braestone Project - reviewing a.settlement qffer and performing a review of theproJecttodeteruilnetheappropriatenessofsame, Aswell,reviewingbndexecutlngpartial discharges;

:o Erookdale Proiecl -mqtlers related to the Brookdale sale process, includrng ,therevlew of motipn tnaterials in respect of the sale, approval motion returnableOctober 18,2018;

o Bauhaus P.roject * reviewing a postponement request and correspondlng withCanadian Development Capltal & Mortgage Services Inc. ('CDeMl and

FAAN MORTGAGE ADMINISIRATORS lNC. | 92G.20 Adelside Slreel Eosl Toronlo, Ontorlo, MSC 2T6

195

FAANrtt,flt0AqI{0lr(llllSlRAI0[$

Cottrputershare regarding same;

o Mississariga Meadows 1 and 2 Proieqts - rnatters related to the enforcernent,proceedings commenc.ed by the prlorlty lender$., lhcluding cbntinued discussionswlth the bbrrowerregardinga potential sale:transactlon for the properties;

o Treehouse ProJect - reviewing a postponement request and corresponding withOsler regarding same;

.o Georgetown Froject - dealing with matters related to the notice ofintenrion to makes,proP a$al Sed by the,' borroweri

o Whitby'Project.- reviewing.mhtters.related to reffnaneing of priorlty lendef;

r Performing detailed proiec!.reviews for all projects administered by. BDMC, includlng, butnot linnited to, dlscussions,With'a planning ConSirltant regarding the pioiects, revlewlngloan agreements, pqrticipation and serviclng agreements, lender acknoWledgement and

conserits, developinent cbnsultant agieements; b-udgets, capilal stacks and various qtler' documents perlaiuing to.each of:the projects;

. Working w:ith the BDMC employees io.compile infbrmatiou.required by the appraisers fortho prefaration of theappraisals and re{pqnding to the appraisers' inquirios and requestsfor additisnal information'regardin g same;

r CorrecBondlngwlth the appral3al flrms engaged to compl'ete the "as is"'appralsalsfor each

of the projects-.wlth loaas.administe.red by BDMCI

r R€viewing draft appralsals ln conneetion wlth proJect revlews and corresponding wlth the'

appraisers regaiding'sarhe;

r Attendlhg calls with certain borrowers regardilig, among other thin$S, the status of theirproJeets,

-uP.cor.nlng nnllestpnes and:timing.to, completionl,and

o Prqviding proJect speclfic updates to the investors,ulon'request and following up withCDCM and Foftres$ on a frequehtbaSis to.obtain infofmation regarding same?

lnvestor Notlcgs

r Drafting fhalizing and distributing:ft6 r611owing project speeific notlces:

o Gapltal Pointe'notice dated Septen'lber 5, 2018;'

o wfiltby nofice:dq'ted'sepgem-ber 7, 2078;

o Georgetown notices'dated September 12 and 26, 2i,0L8:

fAAN MORTGAGE ADM|NISIRATORS iNC. | 9tu20 Adplqide Slieet Essf,Torontq, ohtcirio, Msc 2T6

196

t#n+aqqADl.lliltsIItT0Bs

:o Colliers notice dated September,21,2018;

o Hunibqrslohe [otlce clated'september 26, 2018;

o Old Market Lhn€ nodCe dated Seplember 26,2018i

o Misslssauga MeadoWs t htitlce dated Septemp-er 28,20.18;'and

o Mississauga Meadows 2 notice dated Septernber 28,2018.

General'Matters

r Attending'at BDMC premises at ?5 Brodie Dr., daily througlrout the'Period;

. Logging and res-ponding to ntrffi€rousinvestor calls:emails during the Ferisd;

r Meeting with the principals of FortresF on a periodic basis regardingthe'status of varlousproJects; includirig potential sale and repayment oitportunlties belngrrridertaken by thos€parties;

r Responding to calls and emails from:brokers regardingvarious'proJects;

I Correspondilgwith Olympia TrustCompany.on a petiodic:basis rogarding varlous mattersrelated to the B:DMC'loans;

r Gorresponding with Computershare Trust Gompany gn a p.ei.iodic basis regardingvariousmqtters related to the.BDMCloans;

r Attending periodic'investor rneetings at the,BDMC.premises and at the,Trusteets offlce;

o Correspondingwith Financial Services Commlssion of Ontario and its legal counsel;

e Corr€spqndingwith BDMC's IT provlder regardlngvarious BDMC IT related matters;

r Correspondtngwith representatlveq of CDCM regarding lnfonnatipn requesls for variousproJects and rq$ardhg the bookS and records required by'BDMC;

. Corresporidlng with BDMCIs insiirancO brokef regatding the renewal, of the BDMC

lnsurance,,:and compiling info rmation req ulred by the insurer wjth' respect to same;

r Corresponding with provincial llbensing'gro-ups,'regarding matters pertaining to the BDMClicenses in other provinces;

o Ovoiseetng the review and updating of the remaining BDMC electronic .reeords andassistingthe BDMC employees wlth the follow uF regardingsame;

FAAN MORIGAGE ADMINISTRATORS ING;. | .920,20 Adeloide,Slreel Eosl Toronto, Onlorio, M5C]2T6'

L97

t-/ Nst0Rs

FAAt*0Fl6.tAnilrillsInt

a Overseeing thd process established to prepare interqst calculatlbn summaries to conflrmthe total interest pald on each loan and the accrued interest owing on each loanadministered by BDMC;

Paylng operating expenses inc-luding among other thi4gs, vsnl and payroli;

Managlng the BDMC employees, respondingto their questions and provldlng.directipn as

necessaty.;

a

o

) Malntatning the Trusteels,webslte;

e Gorrespondingwith Ghaitons LLP on'a,periodicbasis regardlng thdse proceedings;

. Attendtng meetfngs, calls and exchanging numerous'emails with Osler regardirtg theseproceedingsl and

r DeallngWtth all qther mee.tings,'aorrespondqnce, etc- pertaining.to thi-b matter,

Total fees perattached time summar|HSTtotal

$, L22;4r5.75.15,914,05

$ r3-e,32?:90

FAAN MoRTGAGE ADMINISTBATORS lNC,'l t2q-2o,AdeloidE Slieet Eosf,fo1sn1q, ontsilo, MSC:2T6

198

FAAN Mortgage Administrators lnc,Bulldjng & Development Morlgages Canada !nc.Tlme.$ummaryFor the Period September 1, 2018 to September 30, 2018

Fersonnel Role' Hourty'Rate ($) Hours Arnount{$)NaVeed ManzoorLanq BeznerDanlel$obelShelby DraperNaomiLiebermanNick Niktlkakls

Totaf

Averagg hourly rate

Managing DirectorManaglng DlreotorI1{anaging DirectorManager[i/lanagerManager

436 12;60 5,491.00 .

435 91.35 99,797.2543F 4,50 1,957.50300 22;19 6,648,00300 87.:14 26,142,.00300' 141.50; - 42;1$p.q0

@340.75

L99

THIS IS EXHIBITOOB'' REFERRED TO IN


SWORN BEFORE ME ON THIS 1 Y OF NOVEMBER,2018

A Taking Affidavits

766

200

EXHIBIT B

SUMMARY OX'ACCOqNTS

For Billing Perlod Ending Fees Taxes Total

April 20 - May 31, 2018 $211,402.50 $2'1,482.32 $238,884,82

June 30, 2018 $140,512.50 $18,266.63 $158,779, I 3

July 31, 2018 $136,615.95 $17,760.07 $154,376.02

August 31, 2018 $ 123,481.50 $16,052,60 $139,534, l0

September 30, 2018 9122,415.75 $15,914.05 $138,329.80

Total $734,428.20 $95,475,67 $829,903.87

20L

THIS IS EXHIBIT "C'REFERRED TO IN


SWORN BEFORE ME ON THIS 1 Y OF NOVEMBER, 2018

Taking AffidavitsA

iIAIE IIODD,JONE8ftnlebrand sollclbr

2nd Floor, 3800 LYsander laneRlchmond, B.c., V7B lcg

804-247./'-766

202

HGIIBIT C

203

FAAN Mortgage Administrators lnc.Building & Development Mortgages Canada lnc.

Time SummaryFor the Period April 20, 2018 to SePtember 30,2018

PersonnelNaveed ManzoorLana BeznerDanielSobelShelby DraperNaomiLiebermanNick Niktikakls

Total

Average hourly rate

RoleManaging DirectorManaging DirectorManaging DirectorManagerManagerManager

Hours Amount27.30 55,375.50

539.65 234,747.75116.57 50,707.95138.25 41,475.00436.40 130,920.00737.34 221,242.00w

350.48

Rate435435435300300300

204

THIS IS CONFIDENTIAL EXHIBIT "D" REFERRED TO IN

THE AFFIDAVru OF NAVEED MANZOOR

SWORN BEFORE ME ON THIS 19TH DAY OF NOVEMBER, 2OI8

A for Taking Affidavits

'W

205

Exhibit D

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207

Appendix 9:

De Lellis Fee Affidavit

208



(CoMMERCIAL LrST)

BETWEEN


Applicant

-and-


Respondent

APPLICATION I-INDER SECTION 37 OF TIMMORTGAGE BROKERAGES, LENDERS AND ADMINISTMTORS ACT, 2006, S,0.2006, C.29

and SECTION 101 OF THE COURTS OF JUSTICE ICI R.S.O. 1990 c. C.43

AF'F'IDAVIT OF MICHAEL DE LELLIS(sworn November 19, 20L8)

I, Michael De Lellis, of the Town of Oakville, in the Province of Ontario, MAKE OATH ANDSAY:

l. I am a barrister and solicitor qualified to practice law in the Province of Ontario

and am a partrer with Osler, Hoskin & Harcourt LLP ("Osler'), counsel for FAAN Mortgage

Administrators Inc., in its capacity as Court-Appointed Trustee (the "Trustee"), without security,

of all of the assets, undertakings and properties of the Respondent in these proceedings and as such

209

-2-

have knowledge of the matters hereinafter deposed. Where I have indicated that I have obtained

facts from other sources, I believe those facts to be true.l

2. I make this affidavit in support of a motion by the Trustee for, among other things,

approval of the fees and disbursements of the Trustee and its counsel.

3. Attached hereto as Exhibit "A" is a copy of each invoice issued by Osler for the

period between Apirl2I,2018 and September 30,2018 (the "Approval Period") setting out

Osler's fees, reimbursable expenses and applicable taxes for the relevant period, along with a

summary of the activities undertaken by Osler in connection with such invoice. I confirm that

these accounts accurately reflect the services provided by Osler in this matter for the Approval

Period and the fees and disbursements claimed by it for the Approval Period.

4. Attached hereto as Exhibit "B" is a schedule of the accounts rendered by Osler to

the Trustee for the fees and disbursements incurred by Osler in connection with the activities

summarizeil in Exhibit A undertaken in these proceedings during the Approval Period.

5. Attached hereto as Exhibit "C" is a schedule summarizing the respective years of

call and billing rates of each of the professionals at Osler that rendered services to the Trustee, the

hours worked by each such individual and a blended hourly rate for fees incurred during the

Approval Period.

6. Attached hereto as Confidential Exhibit "D" (the "Confidential De Lellis

Exhibit") are true copies of the full accounts rendered by Osler to the Trustee for activities

undertaken during the Approval Period. The Trustee is seeking a sealing order with respect to the

I Capitalized terms used and not otherwise defined in this affidavit have the meanings given to them in the Third

Report of the Trustee dated November 19, 20 I 8.

210

-J-

Confidential De Lellis Exhibit due to the fact that the information contained in Osler's detailed

invoices includes privileged and commercially sensitive information regarding the projects and

BDMC generally, and the disclosure of that privileged and/or commercially sensitive information

could have a material adverse effect on the recoveries that may ultimately be available to Investors

in these proceedings.

7 . To the best of my knowledge, the rates charged by Osler throughout the course of

these proceedings are comparable to the rates charged by other law firms in the Toronto market

for the provision of similar services. I believe that the total hours, fees and disbursements incurred

by Osler for the period between April 21,2018 and September 30,2018 are reasonable and

appropriate in the circumstances.

SWORN BEFORE ME at the City of Toronto,in-the Province of Ontario on November 19,2018

for Taking ffidavitsiurid(\(J/!

Michael

2LL

THIS IS EXHIBIT 6(A'' REFERRED TO IN

THE AFFIDAVIT OF MICHAEL DE LELLIS

SWORN BEFORE ME ON THIS 19TH DAY OF NOVEMBER, 2018

forTaking Affidavits

gntutQn*-,t-.-.A

2L2

Exhibit A

213OSLER, HOSKIN & HARCOURT LLPI First Canadian PlacePO BOX 50

Toronto ON M5X lB8CANADA416.352.211 I nrain4 I 6.862.6666 facsim i le

FAAN Mortgage Administrators Inc.

20 Adelaide Street East

Suite 920

Toronto, ON MsC 2T9

CANADA

Attention: Naveed Manzoor

Oslun

GSTAIST No.: 127983217 RT0001'

Invoice No.:Date:Client No.:

Contact:Direct DialE-mail:

12749369

May 28,2018

232833

Michael De Lellis(41.6)862-s997

[email protected]

For professional services rendered for Building & Development Mortgages Canada Inc'

Administrat or (F # 1,189997) -

OURFEEHEREINREIMBURSABLE EXPENSES

HST @ 13%

53,173.50

772.41

7,012.98

TOTAL (CAD): 60,958.89

PAYMENTDUE ONRECEIPT

We nre committed to protecting the enaironment. Please prooide your email ntlelress to [email protected] to teceioe

inaoices nntl reminder st ntements electronically.6r)><REMITTANCE ADVICE

Canadian Dollar EFT and Wire Payments:

TD Canada Trust751 3rd Street S.W.

Calgary, Alberta T2P 4K8

Transit No: 80629-0004

Account No: 5219313

SWIFTCode: TDOMCATTTOR

Entail payntafi rlet ails t o P nlm ents@os ler.cortt'

refetenciltg ittooice nnnbet(s) being paid,

Cheoue Pavrt'rents:

Osler, Hoskin & Harcourt LLPFINANCE &ACCOLJNTING(RECEIPTS)

1 First Canadian Place

PO BOX 50

Toronto. Ontario M5X 188

Canada

Please retun ranittatce advice(s) tttithclrcque,

Amount: 60,9s8.89 cAD

Invoice No.:Client No.:

72149369

232833

osler.com

21,4

Invoice dated May 28. 2018

For services rendered for FAAN Mortgage Administrators Inc. in its capacity as Court-appointed

trustee of Building & Development Mortgages Canada lnc. for the period between April 21, 2018

and April 30, 2018:

. Bowmanville: Engaged regarding Bowmanville enforcement proceedings, including

foreclosure and power of sale; attending to construction lien matters.

. Brookdale: Engaged regarding potential settlement of outstanding litigation and

postponement to new {inancing arrangements; attending to construction lien matters.

o Kemp: Attending to postponement and subordination request.

. pivot: Negotiating and otherwise attending to partial discharges to facilitate sales and

repayment of senior loans.

o General: Engaged with the Trustee extensively regarding multiple matters, including

projects not referred to above, the scope of appointrnent order, case strategy, cost

iecoveries and contributions from third parties, and sources and uses for funds of lenders

under syndicated mortgage loans advanced through BDMC (such individual lenders, the,,Investors"); attending to land registry and extra-provincial registration matters; attending

to various project matters including reviewing loan agreements and packages, considering

and responding to postponement requests, partial discharge requests and enforcement

proceedings; engaged regarding lnvestornotices and Investor communications; responding

io Investor inquiries; and conducting legal research with respect to various matters.

215OSLER, HOSKIN & HARCOURT LLPI First Canadian PlacePO BOX 50Toronto ON M5X lB8CANADA416.362.21I I nrain4 16 -862.6666 facsimi le



Suite 920

Toronto, ON MsC 2T9

CANADA


ost ER

Invoice No.Date:Client No.:

Contact:Direct Dial:E-mail:

L2766637

june 28, 2018

232833

Michael De Lellis(476) 862-s997

[email protected]

GSTAIST No.: 121983217 RT0001

For professional services rendered for Building & DeveloPment Mortgages Canada Inc'

Administrat or (F #1.1'89997).

OURFEE HEREIN

REIMBURSABLE EXPENSES *

HST @13%

1.64,41,0.00

1,,159.65

21,,487.00

TOTAL (CAD): 1820s6.65* brcludes non-taxable expenses of285.00 CAD

PAYMENT DUE ON RECEIPT OF INVOICE

Wenrecomtnittedtoyrotectingtheenaironment. [email protected]

inooices nnd reminder st nt efients electronically.S)}{REMITTANCE ADVICE



Calgary. Alberta T2P 4K8


Account No:5219313SWIFTCode: TDOMCATTTOR

Email payntett details to [email protected] inztoice unnbe4s) being paid.

Cheoue Pavments:

Osler, Hoskin & Harcourt LLP

FINANCE & ACCOUNTING(RECETmS)1 First Canadian Place

PO BOX 50

Toronto, Ontario M5X 1BB

Canada

Please retanr renitttnrce acloice(s) withclteqte.

Amount: 182056.65 CAD

Invoice No.:

ClientNo.:72166637

232833

oslel'.com

2t6

Invoice dated June 28. 2018


trustee of Building & Development Mortgages Canada Inc. for the period between May 1, 2018

and May 31,2018:

. Bowmanville: Ongoing engagement regarding Bowmanville enforcement proceedings;

reviewing and considering potential refinancing, including projected recoveries on

alternative scenarios and attending to documentation.

. Brookdale: Engaged regarding ongoing litigation issues and potential settlement of same;

attending to construction lien matters; attending to Court matters; considering available

alternatives to enhance Investor recoveries and taking steps to pursue same.

' . Dunsire: Reviewing receivership and sales process materials; considering strategy to

improve investor recoveries; engaged with the receiver and its counsel regarding Investor

recoveries.

. Pivot: Negotiating and otherwise attending to partial discharges to facilitate further sales

and repayment of senior loans.

. General: Engaged with the Trustee extensively regarding multiple matters, including

projects not referred to above, case strategy, and cost recoveries and conkibutions from

iruia parties; preparing various letters to borrowers and other lenders, including demand

letteri and stay letters; engaged regarding interest reserve accounts and other frrnds held by

BDMC; preparing for interim stabilization measures motion; preparing proposed interim

stabilization order and related motion materials; engaged regarding preparation of the

Trustee's First Report; attending to various project matters, including reviewing loan

agreements and Investor packages; reviewing and engaging in negotiations with respect to

postponement requests and partial discharge requests; engaged extensively regarding

enforcement prociedings taken against multiple projects; attending to land registry and

regulatory issues; engaged regarding notices to borrowers, brokers and Investors regarding

key issues and responding to Investor inquiries'

2t7OSLE& HoSKIN & HARCOURT LLPI First Canadian PlacePO BOX 50

Toronto ON M5X lB8CANADA416.362.21II main4 16.862.6666 facsimi le



Suite 920

Toronto, ON M5C2T9CANADA


OslrR

Invoice No.Date:Client No.:


12776432

July 31, 2018

232833

Michael De Lellis(41.6) 862-s997

[email protected]

GSTA{ST No.: 121983217 RT0001

For professional services rendered for Building & DeveloPment Mortgages Canada Inc.

Administrat or (F #1,1,89997).

OURFEEHEREINREIMBURSABLE EXPENSES

]HSi @12%

154160.00

940.96

20,423.12

TOTAL (CAD): 777,524.08

PAYMENTDUE ONRECEIPT

We are committeil to protecting the enaironment. Please proaitle your email ncldress to WJnents@gstelgSLto teceiae

inooices tmd reminiler stntements electronically.6'><REMITTANCE ADVICE





Account No: 5219313

SWIFT Code: TDOMCATTTOR

Email p aynrent details t o pnyn ent [email protected]

referntcing inaoice nnnber(s) being paid.

Checue Parrments:

Osler, Hoskin & Harcourt LLPFINANCE & ACCOUNTING(RECEIPTS)


PO BOX 50

Toronto, Ontario MsX 188

Canada

Please refimr rentittance adoice(s) zuith

cheqte.

Amount: 177,524.08 CAD

Invoice No.Client No.:

12176432

232833

osler.com

21,8

Invoice dated Julli 3 1. 20 1 8


trustee of Building & Development Mortgages Canada Inc. for the period between June i, 2018

and June 30,2018:

o Bowmanville: Continued engagement regarding Bowmanville enforcement proceedings

and potential refinancing.

r Brookdale: Continued engagement on construction lien matters and potential settlement

and refinancing discussions; reviewing applicable motion materials, budgets and projected

recoveries; analyzing priority issues'

. Dunsire: Continuing review and engagement regarding receivership and sales process;

ongoing efforts to improve investor recoveries.

. Bradford Bond Head: Reviewing loan documentation; reviewing and negotiating

postponement agreement to new financing arrangements to pennit ongoing development

of the project.

o Peter Street: Engaged in negotiations regarding postponement request; reviewing and

considering various project specific matters and potential Investor recoveries in connection

with same.

o pivot: Reviewing, corresponding, and attending to unit sales and partial discharges to

facilitate repayment of senior loans.

o General: Engaged with the Trustee extensively regarding multiple matters, including

projects not refered to above, case strategy, cost contributions from third parties, demand

letters, interest reserve accounts, interim stabilization measures, and regulatory issues;

engaged with Chaitons LLP with respect to proposed Representative Counsel appointment;

continuing preparation and finalization ofproposed Interim Stabilization Order and related

motion materials, including Trustee's First Report; engaged in in depth review of projects

and preparation of project-by-project status updates; attending at Court with respect to

motion for approval of Interim Stabilization Order; attending to various project matters,

including reviewing loan agreements and Investor packages, considering and preparing

notices to borrowers, brokers and Investors, reviewing and negotiating postponement

requests and partial discharge requests; responding to various enforcement proceedings;

responding to Investor inquiries.

2t9OSLE& HOSKIN & HARCOURT LLP

1 First Canadian PlacePO BOX 50Toronto ON M5X 188CANADA416.362.2111 main416.862.6666 facsirnile



Suite 920

Toronto, ON MsC 2T9

CANADA


OslrnInvoice No.:Date:

ClientNo.:


72186824

August 27, 2018

232833

Michael De Lellis(41.6) 862-5997

[email protected]

GST/HST No.: 121983217 RT000L

For professional services rendered for Building & Development Mortgages Canada Inc.

Adrninistrat or (F # 11,89997).

OURFEE HEREIN

REIMBURSABLE EXPENSES *

HiST @13%

75,176.50

696.00

9,878.06

TOTAL (CAD) 85,690.56* brcludes non-taxable expenses of349.00 CAD

PAYMENT DUE IJPON RECEIPT

We are committed to protecting the enoironment. Please proaide your email aililress to Wymgnl;@9flg-.mryto receiae

inuoices antl remintler stntements electronically'ffiREMIfiANCEADVICE




Transit No:80629-0004

Account No: 521.9313


Email paynant details to [email protected] inooice nunber(s) bebry paid.

Cheoue Pavments:

Osler, Hoskin & Harcourt LLPFINANCE & ACCOUNTING(RECEI['TS)


PO BOX 50

Toronto, Ontario M5X 188

Canada

Please rchrn rernittsnce ailoice(s) withcheque.

Amount: 85,690.56 CAD

Invoice No.:

ClientNo.:12\86824

232833

osler.com

224

lnvoice dated Aueust 27" 2018


trustee of Building & Development Mortgages Canada lnc. for the period between July 1, 2018

and July 31,2018:

. Brookdale: Engaged extensively with respect to sales process and stmtegy; researching

case law on priority issues and related matters; considering projected recoveries, analyzing

priorify issues, construction liens and related matters.

. Danforth: Engaged in negotiations regarding postponement to new financing to permit

further development of the project; conducting diligence and negotiating agreements in

connection with same.

r Peter Street: Continuing to attend to postponement request and consideration of various

issues in connection with same.

. Eden: Engaged regarding cost ovemrns and projected recoveries in respect of same;

multiple discussions and correspondence with relevant parties; analyzing potential

remedies.

o Braestone: Engaged regarding outstanding debt and potential offer for early repayment ofsyndicated mortgage loan debt.

. Harlowe: Engaged regarding outstanding debt and potential offer to repay syndicated

mortgage loan debt.

r Pivot: Reviewing, corresponding, and attending to unit sales and partial discharges to

facilitate repayment of outstanding debt.


projects not referred to above, potential fee recoveries from borrowers, land registry

-utt".., privacy issues, rescission rights and regulatory issues; conducting in-depth review

of all projects; reviewing waterfall arrangements with respect to certain projects; assisting

with ritention of appraisers and related legal documentation; engaged with Chaitons LLP

with respect to various project matters; attending to various project matters including

reviewing relevant loan agreements and packages, postponement requests and partial

discharge requests; attending to various communications with stakeholders, including

responses to Investor inquiries; responding to multiple enforcement proceedings and

actions; conducting legal research with respect to various matters, including priorities,

remedies and other actions to enhance Investor recoveries'

22rOSLE& HOSKIN & HARCOURT LLPI First Canadian PlacePO BOX 50Toronto ON M5X 188CANADA416.362.2111 main416.862.6666 facsimile



Suite 920

Toronto, ON MsC 2T9

CANADA


ost-ER

Invoice No.:Date:Client No.:


12196872

September 26,2018232833

Michael De Lellis(4L6) 862-s997

[email protected]

GST/HST No.: 121983217RT0001.


Adrninis trat o r (F # 11899 97).

OURFEE HEREIN

REIMBLIRSABLE EXPENSES

}{ST @13%

127,1.88.50

506.47

L6,600.35

TOTAL (CAD): 't44,295.32

PAYMENT DUE LIPON RECEIPT

We are committed to protecting the environment. Please proaide your email acldress to ptluenlt@qslq-eorlto receiae

inooices ancl remincler statements electronically.6DREMITTANCE ADVICE


TD Canada Trust751 3rd Streei S.W.



Account No: 5219313


Etnail paymant details to pgyUents@94e1's9ru'

referercitrg itrztoice nunber(s) being paid'

Cheoue Pavments:



PO BOXsOToronto, Ontario M5X 1B8

Canada

Please rehLnr remittance adaice(s) u.tith

cheque.

Amount: 1,44,295.32C4D

Invoice No.:

Client No.:72196872

232833

osler.com

222

Invoice dated September 26. 2018


trustee of Building & Development Mortgages Canada Inc. for the period between August 1, 2018

and August 31,2018:

. Brookdale: Engaged extensively with respect to sales process and strategy to preserve

value for investors; researching case law on priority issues and related matters; considering

projected recoveries; analyzing priority issues; developing sftategy.

. Danforth: Continued engagement regarding requested postponement to new financing to

permit fuither development of the project; negotiating agreements in connection with same;

engaged regarding obtaining Investor consent'

r Georgetown: Reviewing loan documentation and conducting diligence with respect to

postponement request; considering risks to investors'

o Peter Street: Continuing to attend to postponement request matters, including new lender

security, and consideration of various issues and risks to Investors in connection with same.

. Eden: Engaged with respect to Investor losses and avenues to recover funds; engaged

regarding demand for PaYment.

o Braestone: Engaged regarding outstanding debt and potential payout of syndicated

mortgage loan debt.

. Harlowe: Engaged regarding outstanding debt and potential payout of syndicated mortgage

loan debt.

o Pivot: Continuing to attend to unit sales and partial discharges.

o Solterra: Reviewing proposed plan of subdivision consent and postponement documents

required in resPect of same.


projects not referred to above, litigation and construction lien stay letters, land registry

^uit"rr, privacy issues, rescission rights and regulatory issues; continuing to conduct in-

depth ."ui"* of *n projects; continuing to analyze waterfall arrangements for certain

projects; engaged with Chaitons LLP with respect to various project matters; attending to

various matters in an effort to advance projects and enhance Investor recoveries, including

reviewing loan agreements and packages, reviewing and negotiating various postponement

requests, partial discharge requests and similar requests; engaged regarding enforcement

proceedings; responding to stakeholder inquiries and attending to other communications,

including responses to Investor Form Letter, Investor inquiries and Investor Voice matters'

223OSLE& HOSKIN & HARCOURT LLPI First Canadian PiacePO BOX 50Toronto ON M5X 1B8CANADA416.362.2111 main416.862.6666 facsimile



Suite 920

Toronto, ON MsC 2T9

CANADA


OSLER

Invoice No.Date:

ClientNo.:


12206781.

October 19, 2018

232833

Michael De Lellis(41,6) 862-5e97

[email protected]

GSTAIST No.: 721983217 RT0001


Administrat or (F S 1189997).

OUR FEE HEREIN

REIMBURSABLE EXPENSES "HST@ 13%

206,1,62.00

2,212.89

27,086.',1.4

TOTAL (CAD): 235,451..03* Includes non-taxable expenses of 20.00 CAD

PAYMENT DUE UPON RECEIPT

We are committecl to protecting the enaironment. Please prooide your emnil aildress to pAyruUs@gsleLgm to recehte

inooices antl reminder statements electronically.#REMT.ITANCE ADVICE



Calgary, Alberta T2P 4K8Transit No: 80629-0004

Account No: 5219373

SWIFTCode: TDOMCATTTOR

Enail paymai details to [email protected]'

referancing inztoice nnnber(s) behtg paid.

Cheoue Pavments:



PO BOX 50Toronto, Ontario M5X 188

Canada

Please rettrnt remittance adoice(s) zoith

cheqtte.

Amount: 235,461.03C4D

Invoice No.:Client No.:

12206787

232833

osler.com

224

Invoice dated October 19. 2018


trustee of Building & Development Mortgages Canada Inc. for the period between September l,2018 and September 30, 2018:

. Brookdale: Continued engagement with respect to sales process; analyzing construction

lien issues; considering projected recoveries and strategy to preserve value for Investors;

reviewing and considering next steps with respect to asset purchase agreement, vesting

order and related motion materials.

. Danforth: Ongoing negotiations with respect to request to extend maturity date and

postpone to refinancing transaction.

r Georgetown: Engaged regarding borrower's notice of intention to file a proposal; engaged

with Proposal Trustee and borrower's counsel regarding multiple matters, including sales

process; reviewing motion materials and attending Court.

o Peter Street: Ongoing engagement regarding postponement request; reviewing and

considering BDMC agency arrangsments and related matters with other lenders; engaged

in negotiations regarding outstanding issues with respect to various properties and

proposed'new charge; reviewing Planning Act considerations; drafting allocation ofproceeds agreement.

o Eden: Continuing to engage regarding status of BDMC loan and Investor recoveries.

. Halo: Reviewing loan documentation; considering postponement request in light of expired

loan agreement and potential strategies to maximize recoveries to Investors; conducting

diligence and engaged in negotiations regarding potential refinancing.

o Braestone: Engaged regarding outstanding debt and potential payout of syndicated

mortgage loair debt, including documentation of offer and seeking Investor consent.

. Harlowe: Engaged regarding outstanding debt and potential payout of syndicated mortgage

loan debt, including documentation of offer'

o Prescott: Reviewing, corresponding, and attending to registration matters with respect to

partial discharges.

. Solterra: Reviewing proposed plan of subdivision consent and postponement documents;

reviewing partial discharge requests.

. General: Engaged with the Trustee extensively regarding multiple matters, includingprojects not referred to above, land registry matters, rescission rights and regulatory issues;

continuing to conduct in-depth review of all projects; engaged regarding waterfallarrangements; engaged with Chaitons LLP with respect to various project matters;

attending to various project matters, including ongoing loan administration functions such

as notices to borrowers, brokers and Investors, responding to postponement and partial

discharge requests, and addressing enforcement proceedings; hosting meetings withInvestor and Investor groups (including Investor Voice); responding to Investor inquiries;preparing materials for October court motion with respect to proposed Realized Property

Order, including Second RePort.

225

THIS IS EXHIBIT "B" REFERRED TO IN


SWORN BEFORE ME ON THIS 19TH DAY OF NOVEMBER, 2018

for Taking

J Usr\ry- eri $-:r'erq-r'

226

EXHIBIT B

Date of AccountFor Billing Period

EndingFees

Expenses /Disbursements

Taxes Total

May 28, 2018 Apil2L - 30, 2018 $53,173.50 $772.4t $7,012.98 $60,958.89

June 28,2018 May 31,2018 $164,410.00 $ l,159.65 $21,487.00 $ 187,056.65

July 31, 2018 June 29, 2018 $ 156,160.00 $940.96 $20,423.12 $177,524.08

August 27,2018 July 31, 2018 $7s,176.s0 $696.00 $9,818.06 $85,690.56

September 26,2018 August 31, 2018 $127,188.50 $506.47 $16,600.35 $144,295.32

October 19,2018 September 30, 2018 $206,162.00 $2,2r2.89 $27,086.14 $23s,461.03

Total s782,270.50 $6,288.38 $102,427.65 $890,986.53

227

THIS IS EXHIBIT "C" REFERRED TO IN


THIS 19TH DAY OF NOVEMBER,2018SWORN BEFORE

A for Taking Affidavits

c)u-*r'"ru- qfu,[$./\-,

228

EXHIBIT C

Blended Rate(excluding expenses / disbursernents and HST)$782,270.50 = 1130.60: $69r.91

Name Year Call(if applicable)

Billine rate Hours Worked

Code, Jacqueline 1998 2018: $865 10.30

Dacks, Jeremy 1999 2018: $865 129.40

De Lellis, Michael 2003 2018: $860 253.60

Erickson, Justine 20t6 2018: $465 165.20

Gillott, Roger 1996 2018: $865 2.50

Herceg, Suzanne 2018 S440 3.40

Kardash, Adam 1994 2018: $910 1.30

Leung, Kevin 2016 2018: $465 3.60

Nielsen, Ryan 2009 2018: $685 21.50

Riesterer, Patrick 20tl 2018: $650 416.10

Roberts, Nancy r996 2018: $930 31 .50

Rua, Maria 2018: $325 0.80

Storm, Lorna 2018: $2i0 17.10

Whitlock, Riley 2014 2018: $560 13.70

Total Hours: 1130.60

229

THIS IS CONFIDENTIAL EXHIBIT "D" REFERRED TO IN


SWORN BEFORE ME ON THIS 19TH DAY OF NOVEMBER,2Ol8

A Affidavits

fiCiSaa-:-'-

230

Exhibit D

THIS EXHIBIT IS REDACTED IN ITS ENTIRETYAND IS SUBJECT TO A REQUEST FOR A SEALING ORDER

FICNC\


Applicant

-and- BUILDING & DEVELOPMENT MORTGAGES CANADA INC

Respondent

Court File No. CV-l8-596204-00CL


(COMMERCIAL LIST)

Proceeding commenced at Toronto

AFFIDAVIT OF MICIIAEL DE LELLIS(sworn November 19, 2018)

OSLER, HOSKIN & HARCOURT LLP1 First Canadian Place, P,O. Box 50Toronto, ON M5X lB8Phone: 416-362-2111Fax: 416-862-6666

Michael De LellisJeremy DacksPatrick Riesterer

(LSO# 48038U)(LSO# 41851R)(LSO# 60258G)

Lawyers for FAAN Mortgage AdministratorsInc., in its capacity as Court-Appointed Trustee

232

Court File No.: CV-18-596204-00CL


COMMERCIAL LIST

THE HONOURABLE MR. WEDNESDAY, THE 28TH

JUSTICE HAINEY DAY OF NOVEMBER, 2018

BETWEEN:


Applicant

-and-


Respondent

APPLICATION UNDER SECTION 37 OF THEMORTGAGE BROKERAGES, LENDERS AND ADMINISTRATORS ACT, 2006, S.O. 2006,

c.29 and SECTION 101 OF TIJE COURTS OF JaSTICE ACTi R.S.O. 1990 c. C.43

BRAESTONE SETTLEMENT APPROVAL ORDER

THIS MOTION, made by FAAN Mortgage Administrators Inc. ("FAAN Mortgage"),

in its capacity as Court-appointed trustee (in such capacity, the "Trustee"), of all of the assets,

undertakings and properties of Building & Development Mortgages Canada Inc. (the

"Respondent") pursuant to section 37 of Ihe Mortgage Brokerages, Lenders and Administrators

Act, 2006, S.O. 2006, c. 29, as amended (the "MBLAA"), and section 101 of the Cottrts of

Jr.tstice lcf, R.S.O. 1990, c. C.43, as amended, for an Order, inter alia, (i) approving and

ratifying the Settlement Agreement dated as of October 77, 2078 (the "Braestone Settlement

)

)

)

I'\L{c6$-{

o

.,'L- 233

l'q-{6I-{

o

Agreement") among Braestone Development Corporation ("Braestone"), the Trustee and

Olympia Trust Company ("OTC"); (ii) ordering Braestone to pay $10 million to the Trustee

pursuant to the Braestone Settlement Agreement; (iii) ordering Braestone, the Trustee and OTC

to comply with the Braestone Settlement Agreernent; (iv) authorizing the Trustee to make a

further distribution of Realized Property to Investors; and (v) approving the Trustee's activities,

and the fees and disbursements of the Trustee and its Legal Counsel, was heard this day at 330

University Avenue, Toronto, Ontario;

ON READING the Third Report of the Trustee dated November 19,2018 (the "Third

Report"), the affidavit of Naveed Manzoor sworn November 19,2018 and attached as Appendix

..8,,to the Third Report (the "Manzoor Affidavit") and the affidavit of Michael De Lellis sworn

November 19,2018 and attached as Appendix"g" to the Third Report (the "De Lellis Affidavit"

and, collectively, with the Manzoor Affidavit, the "Fee Affidavits"), and on hearing the

submissions of counsel for the Trustee, Chaitons LLP, in its capacity as Representative Counsel,

counsel for The Superintendent of Financial Services, counsel to Braestone and such other

counsel as were present, no one appearing for any other person on the service list, as appears

from the affidavit of service of Justine Erickson sworn November O, 2018, filed;

SERVICE AND INTERPRETATION

l. THIS COURT ORDERS that the time for service of the Notice of Motion, the Motion

Record and the Third Report is hereby abridged and validated so that this Motion is properly

retumable today and hereby dispenses with further service thereof.

2. THIS COURT ORDERS that all capitalized terms used but not defined herein shall

have the meanings given to them in the Third Report and the Braestone Settlement Agreement'

3. THIS COURT ORDERS that (i) the Braestone Settlement Agreement be and is hereby

approved in its entirety, with such minor amendments as the Trustee and the other parties to the

Braestone Settlement Agreement may agree upon to permit the completion of the transaction

contemplated thereby; (ii) Braestone is hereby directed to pay $10 million forthwith to the

Trustee in accordance with the tenns of the Braestone Settlement Agreement (such funds the

"Braestone Realized Property"); and (iii) the execution of the Braestone Settlement Agreement

APPROVAL OF THE BRAESTONE SETTLEMENT AGREEMENT

a--l- 234

I'\|.{

c6$-{

o

by the Trustee and OTC is hereby ratified and approved, and the Trustee and OTC are hereby

authorized and directed to comply with all of their obligatiotts under the Braestone Settlement

Agreement.

4. THIS COURT ORDERS AND DECLARES that upon the delivery of a Trustee's

certificate to Braestone substantially in the form attached as Schedule "A" hereto (the "Trustee's

Certificate"), all of Braestone's obligations to Building & Development Mortgages Canada Inc'

("BDMC"), OTC, and the individual lenders (the "Braestone Individual Lenders") under the

Loan Agreement dated as of December l, 2012 between BDMC and Braestone (the "Loan

Agreement"), the Security and the Loan Documents (each as defined in the Loan Agreement)

(collectively, the "Braestone Loan Obligations") and all security interests granted to BDMC,

OTC or the Braestone Individual Lenders in and to the assets of Braestone to secure the

Braestone Loan Obligations and related registrations on title (the "Loan Encumbrances") are

hereby released, extinguished, expunged, discharged and deleted and that none of the Trustee,

BDMC, OTC or any Braestone Individual Lender shall have any claim against Braestone in

respect of the Braestone Loan Obligations or the Loan Encumbrances; provided, however, that

Braestone shall not be released from any obligations under the Braestone Settlement Agreement.

5. THIS COURT ORDERS AND DECLARES that upon the delivery of the Trustee's

Certificate, the Braestone Realized Property is and shall be deemed to be "Realized Property" as

defined in the Order of this Court dated June 26, 201 8 (the "Interim Stabilization Order") and

that all of the Braestone Individual Lenders' rights and claims under the Loan Agreement, the

Security and the Loan Documents shall attach to the Braestone Realized Property and shall have

the same nature and priority as they had prior to the consummation of the Braestone Settlement

Agreement, including pursuant to the Appointment Order and the Interim Stabilization Order'

6. THIS COURT ORDERS that upon the registration in the Land Registry Office for the

Registry Division of Simcoe (#51) of an Application for Vesting Order in the form prescribed by

the applicable Land Registry Office and attaching a copy of this Order and the executed

Trustee's Certificate, the Land Registrar is hereby directed to delete and expunge from title to the

real property identified in Schedule "B" hereto (the "Real Property") all of the Loan

Encumbrances listed in Schedule "C" hereto.

-4-

7. THIS COURT ORDERS that upon the delivery of the Trustee's Certificate, the release

agreement in the form attached as Schedule "D" hereto ("Release Agreement") to be given to

the Trustee, BDMC, OTC, and each Braestone Individual Lender who loaned funds through

BDMC or OTC to Braestone pursuant to the Loan Agreement and all related Loan Documents,

each of their respective officers, directors, agents, employees, and each of their respective

successors and assigns (collectively, the "Releasees") by Braestone on behalf of itself, its

affiliates, and their respective shareholders, agents, directors, officers, employees, and each of

their respective successors and assigns (collectively, the "Releasors") shall be binding and

effective on the Releasors in favour of the Releasees.

8. THIS COURT ORDERS AND DIRECTS the Trustee to file with the Court a copy of

the Trustee's Certificate, as soon as practicable after delivery thereof.

REALIZED PROPERTY

9. THIS COURT ORDERS that upon the delivery of the Trustee's Certificate, the Trustee

shall make a further distribution to Investors in an amount equal to l0% of the Realized Property

held on the date of the Appointment Order, including the Realized Property obtained with

respect to the Victoria Medical SML Loans pro rata to the Investors entitled to such funds, such

that, when combined with the distributions made pursuant to the Interim Stabilization Order and

the Order of this Court dated October 30, 20t8 ("Realized Property Order"), 80oA of such

funds shall have been distributed on a pro ratabasis to the Investors entitled to such funds.

10. TIIIS COURT ORDERS that upon the delivery of the Trustee's Certificate, paragraph

3(b) of the Realized Property Order is hereby amended to provide that the Trustee shall distribute

80% of all other Realized Property obtained, including the Braestone Realized Property, pro rata

to the Investors entitled to such funds, whether received before or after the date of this Order.

TRUSTEE'S ACTIVITIES, FEES AND DISBURSEMENTS

I 1. TIIIS COURT ORDERS that the First Report, the Second Report and the Third Report

and all of the actions, conduct and activities of the Trustee as set out in therein, are hereby

approved.

235

I'q-{6I-{

n

-5- 236

-l-Jq-{6$-.{

o

12. THIS COURT ORDERS that the fees and disbursements of the Trustee and its counsel,

as set out in the Third Report and the Fee Affidavits, are hereby approved, as follows:

(a) The following fees and disbursements of the Trustee for the period from April 20,

2018 to September 30,2018 are approved: fees of $734,428.20 (plus applicable

taxes of $95,475.67 for an aggregate amount of $829,903.87); and

(b) The following fees and disbursements of Osler, Hoskin & Harcourt LLP, counsel

to the Trustee, for the period from April 20,2018 to September 30, 2018 are

approved: fees of 9782,210.50 and disbursements of $6,288.38 (plus applicable

taxes of $1 02,421 .65 for an aggregate amount of $890,986'53).

SEALING

13. THIS COURT ORDERS that the Confidential Manzoor Exhibit and the Confidential

De Lellis Exhibit shall be sealed, kept confidential and not form part of the public record, but

rather shall be placed, separate and apart from all other contents of the Court file, in a sealed

envelope attached to a notice that sets out the title of these proceedings and a statement that the

contents are subject to a sealing order and shall only be opened upon fuither Order of the Court.

AID AND RECOGNITION OF FOREIGN COURTS

14. THIS COURT HEREBY REQUESTS the aid and recognition of any court, tribunal,


effect to this Order and to assist the Trustee and its agents in carrying out the terms of this Order.

All courts, tribunals, regulatory and administrative bodies are hereby respectfully requested to

make such orders and to provide such assistance to the Trustee, as an officer of this Court, as

may be necessary or desirable to give effect to this Order or to assist the Trustee and its agents in

carrying out the terms of this Order.

15. THIS COURT ORDERS that the Trustee be at liberty and is hereby authorized and

empowered to apply to any court, tribunal, regulatory or administrative body, wherever located,

for the recognition of this Order and for assistance in carrying out the terms of this Order, and

that the Trustee is authorized and empowered to act as a representative in respect of the within

-6


Canada.

237

I'q-{6$-r

o

238

I'\aL{cldI-{

n

Schedule 3(A" -Form of Trusteets Certificate

Court File No.: CV-l8-596204-00CL


COMMERCIAL LIST


Applicant

-and-


Respondent

APPLICATION UNDER SECTION 37 OF THEMO RTGAGE BROKERAGES, LENDERS AND ADMINISTR,ATORS ACT, 2 OO 6, S.O. 2006,

c.29 andSECTION 101 OF TIdF] COaRTS OF JUSTICE ACT' R.S.O. 1990 c. C.43

TRUSTEE'S CERTIFICATE

RECITALS

A. Pursuant to an Order of the Honourable Justice Hainey of the Ontario Superior Court of

Justice fCommercial List] (the "Court") dated April 20, 2018, FAAN Mortgage Administrators

Inc. was appointed as the trustee (the "Trustee") of the undertaking, property and assets of

Building & Development Mortgages Canada Inc. ("BDMC").

B. Pursuant to an Order of the Court dated IDATE] (the "Braestone Settlement Approval

Order"), the Court approved and ratified the Settlement Agreement made as of Octobet 17,2018

(the "Braestone Settlement Agreement") among Braestone Development Corporation

("Braestone"), the Trustee and Olyrnpia Trust Company ("OTC") and ordered that all of

8 239

Braestone's obligations to BDMC, OTC, and the individual lenders ("Braestone Individual

Lenders") under the Loan Agreement, the Security and the Loan Documents (each as defined in

the Loan Agreement) (collectively, the "Braestone Loan Obligations") and all security interests

granted to BDMC, OTC or the Braestone Individual Lenders in and to the assets of Braestone to

secure the Braestone Loan Obligations (the "Loan Encumbrances") are hereby released,

extinguished, expunged and discharged and that none of the Trustee, BDMC, OTC or any

Braestone Individual Lender shall have any claim against Braestone in respect of the Braestone

Loan Obligations or the Loan Encumbrances; provided, however, that Braestone shall not be

released from any obligations under the Braestone Settlement Agreement; and that the release of

the Braestone Loan Obligations and the Loan Encumbrances is to be effective upon the delivery

by the Trustee to Braestone of a certificate confirming (i) the payment of $10 million to the

Trustee by Braestone; (ii) that the conditions precedent to the Braestone Settlement Agreement

as set out in section 9 of the Braestone Settlement Agreement have been satisfied or waived by

the Trustee; and (iii) the settlement has been completed to the satisfaction of the Trustee.

C. Unless otherwise indicated herein, terms with initial capitals have the meanings set out in

the Braestone Settlement Approval Order.

THE TRUSTEE CERTIFIES the following:

Braestone has paid and the Trustee has received $10 million pursuant to the Braestone

Settlement Agreement;

Braestone has provided the Release Agreement to the Releasees;

Braestone has certified that all of the representations and warranties contained in this

Braestone Settlement Agreement continue to be true as of the Effective Date;

Braestone continues to be, in the reasonable opinion of the Trustee, in compliance withall of the terms of the Braestone Settlement Agreement;

5 The other conditions set out in the Braestone Settlement Agreement have been satisfied

or waived by the Trustee; and

6. The settlement has been completed to the satisfaction of the Trustee.

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This Certificate was delivered by the Trustee at

-- ITIMEI on IDArE].

9 240

FAAN Mortgage Administrators Inc., solelyin its capacify as Court-appointed Trustee ofthe undertaking, property and assets ofBuilding & Development Mortgages Canadafnc., and in no other capacity

Per

Name:

Title:

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10 241,

Schedule "B') - Real Property

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PIN DESCRIPTION REGISTERED OWNER

s8s32-02r4 (LT) LOT 10, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

BRAESTONEDEVELOPMENTCORPORATION

58532-0215 (LT) LOT 11, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8s32-02r6 (LT) LOT 12, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8532-02n (LT) LOT 13, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8s32-0218 (LT) LOT 14, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE




s8532-0222 (LT) LOT 18, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE


s8s32-0224 (LT) LOT 20, PLAN 51M1 1 13; TOWNSHIPOF ORO-MEDONTE

s8s32-022s (LT) LOT 27, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8532-0226 (LT) LOT 22, PLAN 51M1 I l3; TOWNSHIPOF ORO-MEDONTE


s8532-0228 (LT) LOT 24, PLAN 5lMl113; TOWNSHIPOF ORO.MEDONTE


58s32-0244 (LT) LOT 40, PLAN 51M1 1 13, SAVING AND

11 242

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RESERVING FROM THE E IILLT2CON 9, ALL MINES AND MINERALS,WHETHER SOLID, LIQUID ORGASEOUS, WHICH MAY BE FOUNDTO EXIST WITHIN, UPON OR UNDERSUCH LANDS T/VV FULL POWER TOWORK THE SAME AND FOR THISPURPOSE TO ENTER UPON, USE ANDOCCUPY THE SAID LANDS OR SOMUCH THEREOF AND TO SUCHEXTENT AS MAY BE NECESSARYFOR THE EFFECTUAL WORKINGAND EXTRACTING OF THE SAIDMINERALS, AS DESCRIBED INORO17078; TOWNSHIP OF ORO-MEDONTE

58s32-0253 (LT) LOT 49, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

58s32-02s5 (LT) LOT 51, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8s32-02s6 (LT) LOT 52, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8s32-02s7 (LT) LOT 53, PLAN 51M1113; TOWNSHIPOF ORO.MEDONTE

s8s32-02s8 (LT) LOT 54, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

s8532-02s9 (LT) LOT 55, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE

58s32-0260 (LT) LOT 56, PLAN 51M1113; TOWNSHIPOF ORO-MEDONTE


s8fi2-A262 (LT) LOT 58, PLAN 5lMl113; TOWNSHIPOF ORO-MEDONTE

s8s32-027s (LT) PCL2-1SEC 51-ORO-9; LT 3 CON 9ORO BEING THE E 112 &W ll2;LT 2

CON 9 ORO BEING THE E 112 &W 112;

PT 1, 51R21804, EXCEPT PT 1,

51R28741& EXCEPT PLAN 51MIO7O &

12 243


51M1113; SAVING AND RESERVINGFROM THE E 1I2LT2 CON 9, ALLMINES AND MINERALS, WHETHERSOLID, LIQUID OR GASEOUS, WHICHMAY BE FOUND TO EXIST WITHIN,UPON OR UNDER SUCH LANDS T/WFULL POWER TO WORK THE SAMEAND FOR THIS PURPOSE TO ENTERUPON, USE AND OCCUPY THE SAIDLANDS OR SO MUCH THEREOF ANDTO SUCH EXTENT AS MAY BENECESSARY FOR THE EFFECTUALWORKING AND EXTRACTING OFTHE SAID MINERALS, ASDESCRIBED IN OROL7078; ORO-MEDONTE TOWNSHIP OF ORO-MEDONTE; SUBJECT TO ANEASEMENT IN GROSS OVER PT EIITLOT 2 CON 9 ORO BEING PT 1 ON PLstR40262 AS IN 5C1266952

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Schedule $C') - Loan Encumbrances

244

Resistration No. Date Tvpe of Instrumentsc1039835 2013 02 07 Charee/Mortsasesc1228105 2015 07 20 Transfer Of Charee

sc103984s 2013/02107 Transfer Of Charee

scr043202 2013103101 Transfer Of Charee

sc1047816 2013t03128 Transfer Of Charee

sc1053414 2013104129 Transfer Of Charee

sc1055391 2013105108 Notice

sc1055397 201310s108 Transfer Of Charee

sc1058805 2013t05128 Transfer Of Charee

sc1064131 2013106120 Notice


sc1069850 20131071ls Transfer Of Charge

sc1079799 20t3108123 Transfer Of Charge

sc1087288 2013109124 Transfer Of Charge

scl092496 20t31t0116 Notice

scl101397 2013lll/26 Transfer Of Charge

sc|to7522 2013lt2/20 Transfer Of Charge

scl113714 2014102/03 Transfer Of Charee



sc1159897 2014109115 Postponement Of Interest

sc1228105 20r5107120 Transfer Of Charee

sct23t5l2 20t5107130 Postponement Of Interest

sc129s590 2016/04113 Postponement Of Interest

scr33t 143 20r6108112 Application To Change Name-Instrument

sc1339671 2016109106 Postponement Of Interest

sct42I440 2017106119 Postponement Of Interest

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14 245

I

Schedule '(D" - Release Agreement

[Date]

TO: FAAN Mortgage Administrators Inc. (the "Trustee")

AND TO: Olympia Trust Company ("OTC")

Re: Release granted in connection with repayment and settlement of the Obligationspursuant to Braestone Settlement Agreement

Dear Sirs/Mesdames

Reference is made to the Loan Agreement dated as of December l, 2012 (the "LoanAgreement") between Braestone Development Corporation ("Braestone") and Building &Developrnent Mortgages Canada Inc. ("BDMC") and the related Security and Loan Documents.All capitalized terms used in this agreement (the "Release Agreement") shall, unless otherwisedefined herein, have the same meanings given to them in the Loan Agreement or the SettlementAgreement dated as of [date] among Braestone, the Trustee and OTC (the "SettlementAgreement").

Braestone hereby certifies that all of the representations and warranties contained in theSettlement Agreement are true and accurate as of the date hereof and that it is incompliance with all covenants, terms and provisions of the Settlement Agreement.

Braestone has paid the Trustee $10,000,000 pursuant to the Settlement Agreement and

waives any right of set-off or any other defence.

In consideration of the acceptance of $10,000,000 in full and final satisfaction ofObligations payable to BDMC by Braestone under the Loan Agreement in excess of516,020,120 and for other good and valuable consideration, the receipt and sufficiency ofwhich is hereby acknowledged, Braestone (on behalf of itself, its affiliates, and theirrespective shareholders, agents, directors, officers, employees, and each of theirrespective successors and assigns) (collectively, the "Releasors")) hereby releases,

discharges and acquits the Trustee, BDMC, OTC, and each lender or investor who loaned

funds through BDMC or OTC to Braestone pursuant to the Loan Agreement and allrelated Loan Documents, each of their respective officers, directors, agents, employees,

and each of their respective successors and assigns (collectiveiy, the "Releasees") fromany and all claims, demands, rights, liabilities, and causes of action, whether in law or inequity, whether known or unknown, that any Releasor, at any time had or has, or thatthey or their respective successors or assigns hereafter have or may have against the

Releasees directly or indirectly arising out of or in any way related to the LoanAgreement, the Loan Documents, the proceedings initiated by the Order of the OntarioSuperior Court of Justice (Commercial List) dated April 20,2018, or any transactionshereunder or thereunder.

2.

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This Release Agreement shall be effective immediately upon the delivery of the Trustee'sCertificate and may be relied upon by any of the Releasees, whether or not such Releasee is a

party to this Release Agreement or the Settlement Agreement.

This Release Agreement may be executed in any number of counterparts and by the differentparties hereto in separate counterparts, and may be executed and delivered by facsimile or .pdffile transmitted by email, and all such counterparts, .pdf files and facsimiles when so executed

and delivered shall be deerned to be an original and all of which when taken together shallconstitute but one and the same Release Agreement.

This Release Agreement shall be construed in accordance with and governed by the laws of the

Province of Ontario.

Yours truly,


By:

Name:

Title:

Accepted and agreed to by:

FAAN MORTGAGEADMINISTRATORS INC., solely in itscapacity as Court-appointed Trustee ofBuilding & Development Mortgages CanadaInc. and in no other capacity.

By:

Name:

Title:

246

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TIIE SUPERINTEI\DENT OF FINAIICIAL SERVICBS

Applicant

BUILDING & DEVELOPMBNT MORTGAGES CANADA INC.

RespondentCourt File No. CV-l8-596204-00CL

ONTARIOSUPERIOR COURT OF' JUSTICE

(COMMERCTAL LrST)

Proceedings commenced at Toronto

MOTION RECORD OF FAAII MortgageAdministrators Inc., in its capacity

as Court-appointed Trustee

OSLER, HOSKIN & HARCOURT LLPP.O. Box 50, 1 First Canadian PlaceToronto, ON M5X 1B8

Michael De Lellis (LSUC# 48038U)Jeremy Dacks (LSUC# 41851R)Patrick Riesterer (LSUC# 60258G)

Tel: 416.362.2111Fax: 416.862-6666

Lawyers for FAAN Mortgage Administrators Inc.,in its capacity as Court-appointed Trustee ofBuilding & Development Mortgages Canada lnc.

-and-

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