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David Bergart paid nearly $400,000 for four units in Sapphire Tower, the condo/hotel that controversial Toronto developer Harry Stinson meant to build on a parking lot near Bay and Richmond.

But it wasn't a typical deal. Instead of putting down a deposit, as is the norm when buying a condo from blueprints, the Thornhill, Ont., environmental technologist paid in full for his one-bedroom units in what was once touted as Canada's tallest residential skyscraper.

To early investors like him, Mr. Stinson made an irresistible offer. "If we invested in multiple units, we'd get 50 cents on the going sales rate, meaning if the units were selling for $100,000 we got them for $50,000," explains Mr. Bergart, 57, over a recent lunch at a Chinese restaurant. "I thought it was a terrific deal."

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As did 19 others collectively known as the Special Investors Group. A diverse mix of Canadians and foreigners, some from as far away as the Cayman Islands and Florida, they range in age from 30 to retirement age - doctors, lawyers and other professionals, some of whom took out loans or spent their life's savings to get in on Sapphire Tower. And now, they may lose their

money.

Since July 20, Sapphire Tower Development Corp., saddled with a nearly $28-million debt, is being restructured under the Companies' Creditors Arrangement Act. It is not clear whether the Special Investors will ever see a dime. Most are now in shock over what they thought was a solid investment, but that over the last few weeks has begun to look as risky as junk bonds.Mr. Bergart is not alone among the investors in expressing guilt, embarrassment and anger toward Mr. Stinson.

"I wasn't investing in the stock market; I was investing in bricks," says another investor, a University of Toronto professor in his late 40s. He is out $1.2-million. "I have always avoided speculative investing. ... I'm in it for the long run and not the quick return. Real estate is that kind of investment. I have a family. This was supposed to be for them."

"People sold their own properties to buy into this venture," adds Mr. Bergart. "And I think they're also hurting greatly. No one could not be hurt about that kind of money. These are doctors, lawyers, professionals. They don't want their lives in the newspaper so that their neighbours can say, 'What? Are you a dummy?'"

Mr. Bergart, on the other hand, is not afraid to show his investing face in public. He is generally calm and collected, even in the face of losing $400,000 after buying a promissory note from Mr. Stinson personally and his companies, which would be exchanged for actual condo units when the project was finished. As the group's self-appointed spokesman, he sums up why many like him got involved in Mr. Stinson's unconventional condo with its equally unconventional financing schemes: "He's got an impressive track record," observes Mr. Bergart. "His property at 1 King West is one of the best hotels for room rates and percentage of bookings in the city."

Still, Mr. Bergart's deal was very different from a typical residential real estate investment. "I'm frankly surprised that people have put this much money down against plans, but there was obviously a lot of interest in the project," observes the Sapphire Tower receiver, BDO Dunwoody president Uwe Manski.

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Real estate agent Brad Lamb, whose agency handles many new-construction condominiums that draw small investors, is less charitable. "These people thought they were getting something for nothing," he says of Mr. Bergart's group. "But they knew what they were doing. They were putting a large amount of money down in order to get a discounted price on units, and in return Harry got to use their cash.

"If their money was in trust in the first place, as is usually the case when you buy an apartment - meaning the builder can't touch that money - then they wouldn't have lost a dime. If consumers don't follow the rules, then I'm sorry, you deserve what you get."

Even Mr. Stinson believes that the investors knew they might be in for a ride. "I think there is something to be said that a high return implies a high risk," says Mr. Stinson. "But you can't throw that back in their face. You can't say you don't care."

In fact, Mr. Stinson says that he is deeply concerned for his investors. That is why, he adds, he recently turned down a $21-million offer on his property from Toronto developer Murray Goldman, because it would have meant a shortfall, and a shortfall would be shouldered by none other than his "third tier" of investors. "I can relate to them," he says. "I'm in the same position. I'm behind them. I'm even further along. If I'm going to sell the property, I obviously don't want to take out money first."

The project is now in the hands of a court-appointed receiver entrusted with trying to get the best possible price for its assets. The arrangement creates aranking of creditors against the company, and the Special Investors - whose cash got Mr. Stinson's project started - are not at the top of the list. In fact, "they are the ones in the weakest position because they don't have a mortgage registered," observes Mr. Manski. "They are the last in line." According to Mr. Manski, the project is carrying an accumulated debt of between $27-million and $28-million.

And it's one recent move by Mr. Stinson, Mr. Bergart says, that has him and his fellow investors "infuriated." According to Mr. Manski, in the last six months, Mr. Stinson has registered two mortgages totalling $525,000 on the Sapphire Tower property in the name of his lawyer, Arthur Jacques. Mr. Stinson is adamant that the mortgages reflect Mr. Jacques's services around the project's planning and refinancing, but they also mean that Mr. Jacques will be paid before the Special Investors. Mr. Bergart asked Mr. Stinson to equally guarantee the debts of his group, and was refused.

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But, Mr. Stinson counters, he had no other option: "How do I pay my lawyer, given that I don't have any money? From the property."

Mr. Stinson has reluctantly given up control of Sapphire Tower, citing his ongoing legal problems at 1 King West as the main reason. (Since April, theatre and art impresario David Mirvish has been publicly fighting Mr. Stinson for return of a $12-million loan after Mr. Stinson was granted protection from his creditors. The battle escalated this week when their respective lawyers took to the courts to argue Mr. Mirvish's motion to have Mr. Stinson removed from 1 King West and have a receiver appointed to take over.)

Interest costs and their own legal fees notwithstanding, Mr. Bergart and his fellow investors are owed at least their investments totalling $7-million.

Sapphire Tower has gone through a series of changes since they first invested. It began as an 81-storey building, modelled on the hybrid condo-hotel at 1 King West. But after several changes - and objections that it would cast a shadow on nearby Nathan Phillips Square - Mr. Stinson's plan shrank to a more sedate 62 storeys, and a mixture of small and family-size units, some as large as four bedrooms. "Still, it is a beautiful building," says Mr. Bergart. "It should be built. But, that said, no one who went into this project thought that it would be anything but built. All of us did due diligence before we invested."

Mr. Stinson says the result will be unhappy for him as well. "In this case there won't be any money for me. Even if there is a bit of profit, it will go to them. It didn't work out this time."

Mr. Bergart reacts with raised eyebrows when he hears of Mr. Stinson's apparent concern for his financial well-being. He bites into a fortune cookie, looks at the paper hidden inside and laughs. It reads: Be prepared for the truth.

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"You want to know the truth?" he asks. "If he had been a first-time developer, I would have been extremely more cautious. He had, as I said, a track record. I think some investors think he's underhanded. But they haven't talked to him as much as I have. I think he's as honest as a person can be - in business."

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