When fund manager Jean-Francois de Clermont-Tonnerre’s Canadian investments started to go into freefall he decided to take drastic action…
One day nearly a decade ago, Jean-Francois de Clermont-Tonnerre was looking at the performance of his Canadian investments. He did not like what he was seeing on the screen. How could things have turned so bad, so quickly? He needed answers and if there was a problem, he resolved to find a solution.
Clermont-Tonnerre, a financier based in the UK and France, had put his clients’ money into some pooled investment funds that specialised in Canadian real estate mortgages. The investments were initially going well but by 2010, thanks to the after-effects of the global financial crisis, things were looking pretty shaky.
“Unfortunately, many of the mortgages that my group of investors had backed turned out to be toxic,” said Clermont-Tonnerre, speaking to the Canada Standard. “This forced me to ‘triage’ the loan book, meaning I had to sell what I could and restructure other parts of our holdings.” One group of mortgages was on a development that looked particularly troubled and the underlying asset was land that would need to be sold for the investors to recoup any money, although probably less than 20% of their original investment. That would mean having to swallow a seven-figure loss.
It was at this point that Clermont-Tonnerre suggested that rather than take an 80% hit on the investment, his investors should inject further funds and develop the land themselves. They could then sell it at a higher price at some time in the future.
“I approached the investor group and managed to convince them to inject a further C$15 million,” says Clermont-Tonnerre.
So in 2012, a new entity called Storm Mountain Development Corporation was created from this fresh funding. The company is now owned and run by its management team. The investors were guaranteed a 12% return on their new investment and would hopefully get more of their initial investment back if the development was successful. And worked it has!
Storm Mountain has been developing a number of projects of which The Foothills near Lantzville, a coastal community on the east side of Vancouver Island, is the biggest. The first phase was launched in April 2017 and 51 lots were sold on the first day they were offered. The remainder sold within the following three months, generating C$24 million in gross sales revenue.
Earlier this year another 26 new lots on the 1,800-acre site were released and once again these sold well. The result is that most of the investors have recouped their original investments and can now look forward to considerable profits in the coming years. Clermont-Tonnerre and his co-investors have a 15 to 20-year master plan in place for the project, which from nearby Nanaimo is a 1.5-hour ferry ride to Vancouver.
You get the impression that Clermont-Tonnerre has enjoyed his time as a property developer. “We have demonstrated that there is a big demand for these properties because they are in a beautiful part of the world,” he says. “By taking on the risk of developing this project ourselves, our investors have avoided a fire sale and we have created a great new community in British Columbia.”