Mortgage Investment Corporations Introduction Excluding credit - - PowerPoint PPT Presentation

Mortgage Investment Corporations

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 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

• ut 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:  Minimum 50% of assets invested in residential mortgages and/or cash  All MIC investments must be in Canada (or structured using SPVs if investments abroad)  Minimum of 20 shareholders with no shareholder owning greater than 25% of the share capital

Introduction

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Source: Company filings, FactSet 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

CAPITALIZATION OVERVIEW (1) PUBLIC FINANCING ACTIVITY (3)

$1,300 $306 $333 $245 $273 $136 $61 $99 $32 $94 $1,300 $405 $365 $338 $273 $136 $61 Equity Market Capitalization Convertible Debentures

(C$ mms)

$58 $33 $101 $31 $26 $41 $20 $21 $78 $265 $210 $69 $319 $55 $41 $109 $291 $683 $93 $191 2010 2011 2012 2013 2014 Others 100% 100% 92% 56% 100%

(C$ mms)

% of equity issued by Atrium, Firm Capital, Timbercreek & TREZ Capital

(2)

3 10.1% 8.8% 7.8% 7.7% 7.7% 6.9% 6.8% Current Yield Average Current Yield Average Current Yield: 8.0%

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Source: Bloomberg, company filings, FactSet

• 1. Including special dividend paid.

Canadian MICs Overview (cont’d)

INVESTOR YIELDS OWNERSHIP OVERVIEW

Canadian public MICs have an average yield of ~8.0% and are largely owned by retail investors

100% 95% 66% 97% 83% 99% 100%

• 5%

30% 1% 9% 0%

• 0%

0% 4% 2% 8% 0% 0% Retail Institutional Insider

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$1.8 $1.3 $0.9 $0.5

(C$ billions)

Assets Under Management

Source: Company filings

• 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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