Future of Winnipeg's SkyCity condos questioned after RCMP raid
'Can't speculate on its impact,' says CentreVenture after raid of Fortress Real Developments headquarters
Some investors are questioning whether the tallest building in Winnipeg will ever get off the ground after the RCMP raided the headquarters of the company behind SkyCity Centre last week.
RCMP executed a search warrant at six properties in the Greater Toronto Area, including Fortress Real Developments' headquarters in Richmond Hill, Ont., last Friday as part of an ongoing investigation into syndicated mortgage fraud.
Fortress is the developer of the SkyCity Centre 45-storey mixed-use condo project on Graham Avenue in Winnipeg.
Winnipegger Debbie Stone bought a suite in the SkyCity development the minute it hit the market in 2015, but now she's questioning whether it will even be built.
"I'm actually not surprised from all the things I've read over the last couple of years," said Stone.
"I'm just wondering how it affects the SkyCity building and whether they will be cancelling the project and refunding everybody's deposit."
'I'd like to just get my money back'
When she put down her deposit, she was told to plan for an October 2019 move-in, which was perfect since it coincided with her retirement date.
As years passed without any signs of construction, Stone started to doubt whether her dream condo would become reality. The raid by the RCMP's Integrated Market Enforcement Unit at Fortress's office has done nothing to reassure her.
"At this point, I think I'd like to just get my money back and make other plans," she said, adding that could mean moving to Toronto.
Stone is among hundreds of buyers who put down a 10 per cent deposit for a SkyCity condo. In February, a Fortress spokesperson said 55 per cent of the 380 residential units were sold. The price for the units ranges from $200,000 to more than $600,000.
CentreVenture, the city's arm's-length downtown development agency, sold the St. Regis Hotel to Fortress in 2015, on the condition that it would be demolished to make way for a parkade and retail development. This would comprise the first phase of the SkyCity development. According to the original agreement, construction had to begin by 2017.
CentreVenture gave Fortress a one-year extension last April because work had not yet started on the Smith Street hotel. The property has sat vacant and boarded-up since last summer.
It's unclear how last week's RCMP raid will affect progress on the project.
"We have just been made aware of this event through the media and can't speculate on its impact related to Fortress's redevelopment of the St. Regis site. We will be awaiting more information in the coming weeks," said CentreVenture CEO Angela Mathieson in a statement.
Fortress did not respond to requests for comment about the raid.
Winnipeg Mayor Brian Bowman responded to the news of the raid in an emailed statement.
"Mayor Bowman will not comment on an active police investigation, and does not have information related to such," wrote Bowman's spokesperson.
He was quick to add Winnipeggers will not be left holding the bag for a $6.5-million grant for SkyCity approved by the city last spring.
"With respect to the tax increment financing grant, risk to taxpayers has been mitigated by ensuring no grant will be paid unless the project is completed within four years of obtaining construction financing, and full occupancy and final assessment is attained," the statement from Bowman said.
"If these conditions are not met, no grant will be provided."
Fortress currently owes municipal taxes on the St. Regis Hotel. As of January 2018, $72,279 in city taxes was still outstanding, according to the city's assessment records.
"In terms of the taxes, they have been budgeted to be paid from the construction financing which is anticipated in the next 60 to 90 days," wrote Fortress spokesperson Jenni Byrne in an email to CBC at the end of March.
Byrne stated a long-term agreement was signed with a national parking operator for the St. Regis.
Co-developer bails
Fortress's co-developer, Edenshaw Developments, severed its ties with Fortress last November.
"We have no association with Fortress. That relationship ended last year," said David McComb, president and CEO of Edenshaw.
"It just ended because the project was not moving forward," he said.
Edenshaw's name is still up on Fortress's website, despite the fact they terminated their relationship.
"We requested several times to take it down so I'm hoping that it is down by now. So we've made the request both verbally and written over the past several months," said McComb.
Brokerage breaks the silence
FDS Broker Services, which markets syndicated mortgages — in which a borrower finds more than one private lender to invest money in a property instead of going to the bank — for Fortress Real Developments, issued a written statement to investors on Friday.
"The RCMP executed search warrants at the offices of several companies associated with real estate projects and syndicated mortgage investments involving Fortress Real Developments," read the unsigned statement by FDS.
"Our company, FDS Broker Services Inc., was one of the offices that was attended. No charges have been laid against FDS Broker Services Inc., its directors or any current staff. We are fully cooperating with this investigation."
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With files from Bartley Kives and Nicole Brockbank