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Post by Moderator on Dec 31, 2019 16:55:07 GMT
![]() Posted on behalf of marley
Starting in 2015 a “small group of investors” - ten that grew to over 100 in 2019 - asked HarbourEdge management for more information on the mortgage and real estate investments in the fund and requested Investor Meetings where management could explain the status of the portfolio and the financial statements.
2015: A portfolio manager provided HarbourEdge with a notice of their intention to recommend to their clients that they sell their HarbourEdge Shares and re-invest into other risk adjusted asset classes.
Fact check: On October 29, 2019 the Information Circular states that on September 3, 2015 “A portfolio manager with substantial shareholdings under management places a very substantial redemption request because of a concern with the mortgage portfolio default rate.”
December 9, 2015: Management announces a “Temporary suspension of redemptions for 12- 18 months”
Fact check: At the end of 2019, after 48 months the redemption suspension is still in place
May 10, 2016: Early Liquidity Opportunity is offered to all Shareholders at 85% plus all dividends declared. ($60 million with $52 from the portfolio manager’s clients)
March 13, 2017: Independent valuations reduced the cost base of these mortgages and assets by $34.7 million.
HE promises: “In time, we fully expect to recover most, if not all, of the accounting write downs we took at year end.” and “We will continue to sell select assets and place the proceeds back into HMIC.”
Fact check: The Assets Taken in Settlement of debt increased from $30M in 2015 to $95M in 2019 PLUS “accounting write downs” of $21.9M for properties taken as settlement of debt due to appraisals required by the Auditor. The $21.9 million write down would have been larger ($31.0 million) had HarbourEdge not taken an “accounting gain” of $9.1 million reflecting the 15% discount for the ELO.
November 20, 2017: HarbourEdge abandoned the normal continuation of MIC business by selling HRAC assets and started building the narrative for restructuring HMIC into two different business segments – mortgage lending and real estate development based on the argument that investors already own the real estate. Clearly no investors knew they were investing in a speculative land development and construction business when they bought shares in HMIC.
November 9, 2018: Email update on the delay of Financial Statements and ELO. This is the first update in 9 months of silence, i.e. between Feb 7 and Nov 9, 2018 the Investors only received dividend announcements.
December 30, 2018: Harbour Edge launches first attempt to reorganize by splitting the fund in two independent entities: a MIC (HMIC) and a construction development company (HRAC)
March 29, 2019: Harbour Edge advises the original reorganization plan needs to be revised because “a small group of vocal investors object to the share exchange, which would result in every investor owning common shares in HRAC” (construction development company) which would not have met suitability tests under Securities Regulations.
May 2, 2019: “Two investors raised serious concerns which could have resulted in legal expenses" so Harbour Edge issues new proposed reorganization plan that, instead of splitting HMIC into two independent entities, exchange each HMIC share into a Class A preferred share (financial assets) and a Class B preferred share (assets taken as settlement of debt or real estate)
May 23, 2019: marley submitted 19 page legal brief, based on the OBCA, stating that a Shareholder Vote is required for major changes such as these and that HRAC shares would not qualify on a suitability basis.
Continued communication with HE and responses blaming a “small group of investors” for delaying their plan and claiming there was no requirement for a vote.
Investors Objective: bring Harbour Edge to the table for discussion and negotiation and an investor meeting.
August 11, 2019: Harbour Edge announces that Shareholder Vote will be held, documents to come
August 19, 2019: small Investors group submit request for shareholder list and are required to do that by a “Statutory Declaration” at a cost of $1,200
August 21, 2019: receive shareholder list, including numbered companies, with number of shares held and with postal addresses and custodial addresses, but no email addresses in random order. Management claims law does not require disclosure of email addresses
- Work on assembling Mailing List commences; arduous task pre-formed by two investors with many manual mailings to seek email addresses
- Mailing List completed October 16, 2019
October 30, 2019: Harbour Edge sends out Information Circular and Plan of Arrangement (240 pages) with no financial statements to support their proposal and a notice that vote to be held in Cassel Brock’s offices on November 22, 2019
November 1-19: small group retains a lawyer and holds a meeting in Collingwood to plan strategy for response to Information Circular.
Three Communiques are written with guidance of lawyer on issues and concerns and distributed to 90 + investors for whom email addresses were found covering these issues:
- Assets taken as settlement of debt increased by $14.7 million to $95.3 million in 2019 where they will be “parked” in Class B Units holding non-performing assets. This is a real estate construction and development portfolio, not the income generating mortgage fund investors thought they had invested in
- Mortgages on which dividends are paid are down by $24.1 million to $102 million resulting in lower interest income and dividends.
- Proposal to move to Net Asset Value accounting – $0.90 a 10% “haircut” on the $1.00 a share investors paid for their shares.
- Dividends to be reduced by re-instatement of management fees of 2% of net assets ($4 million per year)
- No time line or projections given Redemptions
- Trust structure gives management expanded investment parameters – materially different from the secured mortgage portfolio we invested in.
- A major roadblock for redemptions is HarbourEdge’s insistence on using investor capital to continue its business as an active lender
- Schedule A listing HRAC’s assets is incomplete and difficult to reconcile. Portfolio needs forensic accounting to understand
- Poor governance – see Issues and Concerns Thread.
- Management has still not acknowledged fault for the poor financial performance and financial condition. Having “managed” HMIC during a strong real estate market, management wants to escape blameless and be released form all claims.
- In the days leading up to the vote, Management reinforced their argument that a vote Against the Plan of Arrangement is a vote for insolvency and forced liquidation – what we called a “False Dilemma”
- Small group of investors reach out to pension fund (largest investor) and secure their support to vote Against the Plan Of Arrangement
November 14, 2019: Harbour Edge finally issues Financial Statements for 2019
November 20, 2019: Harbour Edge announces Vote is adjourned as they did not get a sufficient number of shares to pass the Plan of Arrangement
November 28, 2019: meeting with HE management and small group of investors where investors table agenda stating preference to maintain the MIC structure and suggesting management open a new MIC for new investors and those who wish to continue with HEs management or hire a new manager while winding up the existing MIC
December 2, 2019: investors submit outline of meeting that reconfirms objectives
December 16, 2019: HE management responds by saying that they wish to continue with the proposed Trust structure on a going concern basis with limitations on redemptions and and opening fund to new investors.
December 20, 2019:
- In an email to HE management the Investors group reiterates their objectives for an Orderly wind down of MIC (ie. those investors who voted Against), and
- Recommends creating a new MIC to allow HarbourEdge to pursue its objective of continuing as an active manager to accept new money and money from those investors who wish to continue with HE management - but without continuing to hold hostage the capital of the redeemers. Investor Requirements stated:
- Move to a Trust defeated by the Vote. Remain a MIC.
- All mortgage maturities to be paid out as redemptions until redemptions fully paid out. Management choice to create new MIC for new money.
- No further commitments to real estate construction beyond those underway
- Need proformas for all properties under development
- Advisory Committee to have veto power over decisions
- Three investor Board members to constitute audit committee with power to approve audit and auditors.
- HarbourEdge to cease spending investor money on lawyers
December 21, 2019 to now: awaiting response from HE. |
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Post by disappointedinvestor on Jan 1, 2020 20:52:29 GMT
Many thanks to the "small group of investors" that also paid for a legal advice and send us the result of their effort to understand what the reorganization plan means for us.
Why is HarbourEdge silent? According to Tim Dwyer's email from Dec 10, 2019, they are working with the group that is in opposition to the Plan of Arrangement and the legal counsel "on amendments to the plan to satisfy all parties" (this makes me nervous, who are the parties?).
Now, that the group shared with us their proposal that fits my objectives, maybe we can hope that the new plan would be to wind down the fund's assets to investors (bad experiences with HarbourEdge makes me only cautiously optimistic)
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Post by nemesis on Jan 2, 2020 0:50:07 GMT
To be brutally honest, I do not believe there is good news to be had. Good news would be that investors would be made whole
and would be able to cash in their chips. I don't see that happening. Less bad news is probably the most we can hope for.
That would be an orderly wind up of the company and payouts of some sort to investors who want to exit (which is probably
most investors once they fully understand what is actually happening here). We are all going to take a haircut here - what
is up for debate is how much of a haircut. And can we move forward without taking actual legal action. Current management is pretty ego driven
and not receptive to investor actions that might significantly alter their authority and pay package.
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brad1
Full Member
Posts: 39
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Post by brad1 on Jan 2, 2020 21:21:36 GMT
nemesis Getting to know how HE “operates” (through lawyers), I don’t think we can get away from this mess without a loss and without going to Court. For me the most unacceptable is that my capital is held “hostage” while HE is preparing another version of the reorganization. I totally lost my patience. They had 3 versions in one year, and all of them failed. HE, remember Three-strike law?
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Post by disappointedinvestor on Jan 7, 2020 1:56:35 GMT
HE does not respond to investors requirements and does not seem interested to negotiate. Wow! Surprised? This is not how typical business people respond to investors requirements. They solve problems, boom, make investors happy and get back to work.
Not them! They drove the fund to the ground in the last 4-5 years. To be sure, that was the investors' fault: big redemption investors, vocal investors opposing the reorganization, investors voting against their arrangement, the list is never ending. HE would do such a great job if the opposition would stop from opposing them doing the best for all! (sounds familiar?)
Maybe HE wants us to oppose, maybe they want us to take them to court and make everything come to an abrupt end, they want us to be responsible for the mess and the disaster. This way their reputation would remain intact in their home town. It just occurred to me! What are the odds?
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Post by nemesis on Jan 7, 2020 17:32:43 GMT
I also heard a few investor float the idea just yesterday - Mr. Dunn views himself as an experienced developer. Maybe he isn't that disappointed
that he has acquired these properties through impaired mortgages as he can now wear his developer hat. He believes he can make money on this, go ahead and give it
a try. Set up a development company and buy the properties from the MIC. And go forward to make millions... or not. Just don't use my money to do it.
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Post by forexloonie on Jan 7, 2020 20:26:09 GMT
I also heard a few investor float the idea just yesterday - Mr. Dunn views himself as an experienced developer. Maybe he isn't that disappointed that he has acquired these properties through impaired mortgages as he can now wear his developer hat. He believes he can make money on this, go ahead and give it a try. Set up a development company and buy the properties from the MIC. And go forward to make millions... or not. Just don't use my money to do it. Right on, nemesis Besides the many corporations Mr. Dunn already has (Dunn Capital, Dunn Corp Group of Companies, etc), there is also a recent addition - numbered corp #2680692 registered in ON on Feb 12, 2019 that acquired Lots 33 and 34 (West Covehead, PEI 209.99 acres) from HMIC! It seems suspicious to me. Check-it out in PEI public records PEI Lands ProtectionAnd to add more to Mr. Dunn "experience" in real estate development, specifically the ethical aspect of it, please read this CBC article from May 2017 where HarbourEdge behavior proves ruthless and insensitive (sounds familiar?) Moncton developer blocks longtime entrance to popular trail |
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Post by nemesis on Jan 7, 2020 20:32:27 GMT
That PEI lands protection document was brought to the attention of a number of investors.
No one could really figure out what it was about. I was then informed that it was a 'technicality"
I would like to hear someone spell out what this was all about.
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Post by forexloonie on Jan 7, 2020 20:46:22 GMT
To be sure, that was the investors' fault: big redemption investors, vocal investors opposing the reorganization, investors voting against their arrangement, the list is never ending. HE would do such a great job if the opposition would stop from opposing them doing the best for all! (sounds familiar?) Well, disappointedinvestor , on the list of investors' faults you missed a biggie: the defaults, the real estate properties that piled up to 45% of our assets! Remember the reorg plan from May 2019? This is what they said about two of those trouble maker investors: "Their concern was that they did not want to be invested in a real estate fund; only in a mortgage fund. Two investors raised serious concerns which could have resulted in an unnecessary legal expense to the fund. This is despite the fact that they are already invested in real estate"Some investors still think they are invested in a mortgage fund when in fact they have 45% in real estate assets and now HE must fix the mess for them! |
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Post by disappointedinvestor on Jan 13, 2020 16:22:55 GMT
I just realized, last time we heard from our fellow investor, Robert G. Mitchel was last year on Nov 22: “Our working group is preparing to meet with HarbourEdge management next week to discuss strategies for moving forward, and in order to begin developing an alternative arrangement that best serves the interests of all investors.” After being flooded with messages telling us to vote against, he got the meeting with HarbourEdge. I feel he should have had the courtesy to inform us on the outcome. I feel used  |
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worried
Junior Member
Super worried for my investment in HarbourEdge
Posts: 13
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Post by worried on Jan 13, 2020 19:38:33 GMT
I am not going to lie, hate to be ditched by our fellow Investor who sent us emails prior to the vote and asked us for proxies (?).
With or without his advice I would have voted against, I don't trust HE management, level of trust in them is now in negative territories. Simple rule: if they push a plan, it must be bad for us. This is based on previous experience - 3 reorg plans that failed in 2019, all because of a few investors opposing. This is really confusing for me. The vote was lost because the plan did not get two thirds support. At least one third of share power voted against. That's a lot more than a few 🤔
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Post by thebigshort on Jan 13, 2020 22:20:22 GMT
I am not going to lie, hate to be ditched by our fellow Investor who sent us emails prior to the vote and asked us for proxies (?). With or without his advice I would have voted against, I don't trust HE management, level of trust in them is now in negative territories. Simple rule: if they push a plan, it must be bad for us I am afraid this is part of HE narrative: it’s not us, it’s the investors making trouble. One more: they need to demonstrate their openness to shareholders requests to have their new plan accepted by the court. I might not be a lawyer, but I believe they are not doing it right here (despite of the expensive legal advice we are paying for): talking to “select” investors is detrimental to other investors that are totally excluded from these talks. Although I voted against the plan and I don’t know any group of investors, let alone representatives! Someone in my position can complain to the court for being prejudiced and if the new plan favors some at my expense, I will. Don’t know why our fellow investor Mitchell never told us what happened in that meeting... "Defeat of the proposed Arrangement will allow for a substantive negotiation to achieve an orderly management of the assets in the best interest of the investors instead of Management." What happened to that? |
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Post by forexloonie on Jan 15, 2020 23:09:46 GMT
Jan 11, 2020 17:12:36 GMT -5 brad1 said: I came across this public document from Lanark County Council lanarkcounty.civicweb.net/document/99137/Economic%20Development%20-%2023%20Oct%202019.pdf?handle=33A43B7ED31E42D28500F3B1EEF44EADOn page 62, we find that Dunncap, the company that is founded by Larry Dunn, the chairman of HMIC, is now agent of HRAC that is part of HMIC. “The project was delayed due to a change in owner/developer. In 2019, Dunncap became the agent for HRAC, working on completing the conditions of draft condominium plan approval. The agent has noted that a Condominium is the highest and best use of the property.” This raises many questions: · How does this work? HRAC that is owned by HMIC hires DunnCap as agent, then DunnCap borrows money (from where?). · Was this conflict of interest disclosed somewhere? · Did HRAC conducted an RFO with several bidding offers? . How many competitors did DunnCap have in the bidding process?
For me, this type of transaction is self-dealing and there is no explanation that would make me happy. I assume that, behind the legal firewall, Mr. Dunn would defend the legality of this arrangement, but even if the legality could be stretched somehow, it is unethical by any standards of duty of care owed to shareholders.Here is a question for all HE Investors: do you feel comfortable that your funds are used to pay Dunn Capital Corporation? |
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Post by disgustedbeyond on Jan 16, 2020 2:15:56 GMT
For me , there is no surprise that Larry would “ finish “ complete , or develop to highest and best use on “ toxic “ properties . That was part of the selling feature Dwyer gave us when my cash was invested . It was an extra security feature , they did not have to hire out so to speak . Costs of course would be incurred . PROFITS were to be returned to the fund , but of course without the benefit of independent oversight , who knows and to what extent . In this particular property we are upside down . Should have blown it out the door from the onset instead of millions and millions dumped in . I only surmise that with earlier scenario ‘s this in part is why the “ large investor “ fund bailed . Years back , that and let’s see who can piss higher contest between them .
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Post by Moderator on Jan 16, 2020 14:46:18 GMT
One of the things management explained to me years ago was that they would often make money on a default, as they would: - get the property at a discount
- complete the development (they have the expertise)
- then sell at a higher price.
Honestly, I am shocked that HE management engaged in development activities (“complete the development (they have the expertise)”) that are prohibited for a MC In the Offering Memorandum under “Business Corporation” it is stated that “The only permitted undertaking of a Mortgage Investment Corporation under the Income Tax Act criteria is the investing of its funds and it is specifically prohibited from managing or developing real property.” And Yes, funds are needed to complete the development, hence investment that has different type of risk than a MIC. For me , there is no surprise that Larry would “ finish “ complete , or develop to highest and best use on “ toxic “ properties . That was part of the selling feature Dwyer gave us when my cash was invested . It was an extra security feature , they did not have to hire out so to speak . Costs of course would be incurred . PROFITS were to be returned to the fund , but of course without the benefit of independent oversight , who knows and to what extent . In this particular property we are upside down . Should have blown it out the door from the onset instead of millions and millions dumped in . I only surmise that with earlier scenario ‘s this in part is why the “ large investor “ fund bailed . Years back , that and let’s see who can piss higher contest between them .
I invested after reading carefully the Offering Memorandum, Purchase Agreement, Marketing materials, and completing investor due diligence and suitability with HarbourEdge Agent (Sean Dwyer). As HE Agent is registered with the OSC, I trusted it to deal fairly, honestly and in good faiths with its clients. Now, I find out that it is simply not true.
" The Corporation acknowledges in the Management Agreement that the Manager and its shareholders, directors and senior officers have, or may have, interests and dealings in other companies, joint ventures, limited corporations and/or MIC’s which are presently, or may in the future be, actively engaged in similar businesses as the Corporation. The Corporation agrees that neither the Manager nor its shareholders, directors or senior officers will be liable to the Corporation for any conflict of interest as a result of such other interests or dealings, and that such interests and dealings do not and will not constitute a breach of the Management Agreement, even if competitive with the business of the Corporation, and even if the business opportunity could have been pursued by the Corporation" |
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