Mortgage Investment Corporations
Introduction Excluding credit unions and pension funds, non-bank lenders are generally structured as investment funds or mortgage investment corporations (“MICs”) There are hundreds of MICs operating in Canada but only a few that are publicly listed Large publicly listed MICs include Atrium, Firm Capital, TREZ Capital & Timbercreek Romspen is one of the largest private non-bank lenders in Canada MICs pay no corporate income tax and act as a flow-through entity, provided 100% of its taxable income gets paid out as dividends MIC dividends received by investors are largely treated as interest income for tax purposes In order to maintain one’s status as a MIC, some key rules need to be complied with including: 1 Minimum 50% of assets invested in residential mortgages and/or cash 2 All MIC investments must be in Canada (or structured using SPVs if investments abroad) 3 Minimum of 20 shareholders with no shareholder owning greater than 25% of the share capital 1
Canadian MICs Overview CAPITALIZATION OVERVIEW (1) (C$ mms) Equity Market Capitalization Convertible Debentures (2) $1,300 $405 $365 $338 $1,300 $273 $136 $32 $99 $61 $94 $136 $333 $306 $273 $61 $245 PUBLIC FINANCING ACTIVITY (3) % of equity issued 100% 100% 92% 56% 100% by Atrium, Firm Capital, $683 (C$ mms) Timbercreek & $55 TREZ Capital $319 $291 $191 $93 $109 $210 $265 $69 $20 $21 $78 $41 $41 $26 $101 $58 $31 $33 2010 2011 2012 2013 2014 Others Source: Company filings, FactSet 2 Note: Timbercreek includes both Timbercreek MIC and Timbercreek Senior MIC; TREZ Capital includes both TREZ Capital MIC and TREZ Capital Senior MIC. 1. Includes convertible debentures. 2. Reflects investment portfolio size. 3. Includes common equity and convertible debenture offerings.
Canadian MICs Overview (cont’d) INVESTOR YIELDS 10.1% Average Current Yield: 8.0% 8.8% 7.7% 7.8% (1) 7.7% 6.9% 6.8% Current Yield Average Current Yield OWNERSHIP OVERVIEW Retail Institutional Insider 0% 0% 0% 0% 4% 2% 8% -- 0% -- 1% 30% 5% 9% 100% 99% 100% 97% 95% 83% 66% Canadian public MICs have an average yield of ~8.0% and are largely owned by retail investors Source: Bloomberg, company filings, FactSet 3 1. Including special dividend paid.
Assets Under Management (C$ billions) $1.8 $1.3 $0.9 $0.5 (1) (1) (2) Source: Company filings 4 1. Metrics reflect asset managers’ AUM figures, including mortgage investment allocations. 2. Includes investments managed by Canadian Mortgage Capital Corporation under Atrium and Dream CMCC Capital Fund.
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