I’ve looked briefly at Mortgage Investment Corporations (MICs) [MICs are essentially mortgage funds] before but the accredited investor requirement or high minimum investments deterred me from investigating them any further. The High Net Worth section in today’s Globe and Mail included a column on MICs that pointed out that the existence of publicly-traded MICs. Publicly-traded MICs have several advantages: (1) No minimum investment or accredited investor requirements (2) Better liquidity and (3) Better disclosure by virtue of being a listed company. All the MICs listed here are qualified investments in a RRSP, RRIF, RDSP, TFSA and RESP. Since, MIC distributions are mostly classified as income, it is best to hold these investments in a tax-deferred account.

Timbercreek Mortgage Investment Corporation (TSX: TMC)

Primarily residential and retail mortgages in Ontario, Alberta and Quebec.
Current yield of 7.79%. Distributions paid monthly.
No leverage.
Fees: Management Fee of 1.2% per annum.
Performance fee of 20% over hurdle rate (2-year Government of Canada Bond Yield plus 450 basis points).

Firm Capital Mortgage Investment Corporation (TSX: FC)

Mostly conventional first mortgages in Ontario.
Current yield of 7.64%. Monthly distributions.
Fees: 75 bps manager fee. 10 bps mortgage banker fee. Performance fees charged on mezzanine and equity investments.

MCAN Mortgage Corporation (TSX: MKP)

Current yield 6.86%. Quarterly distributions.
Unable to locate prospectus.

I don’t own any of these names personally and I have tended to avoid alternative asset classes. I’ve started looking into MICs as many investors are interested in the relatively high income that these investments produce. If you own any of these names or other MICs, I’d be interested in your take in the comments section.

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This article has 25 comments

  1. From the linked article,
    “Our sweet spot is short-term loans around 9 per cent,”
    “Terms are two years or less.”
    WHO pays 9% on mortgage loans for two years and less? Where do they find these people?

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  3. @ledtim: My understanding is most of MIC loans are mortgages that developers take out to get their project off the ground. I have seen private real estate investors offering close to double digit returns on loans secured by property, so it is not really surprising. Of course, IMO the higher returns imply the risk involved in this asset class.

  4. I have bought both Timbercreek and Firm Capital in the last 6 months. These stocks form a small component of registered accounts (since they pay interest income they are better in registered accounts), and I am pleased with both so far. I think over the next several years they will be a much better investment than bonds because their returns will tend to go up as interest rates go up.

    I caveat though. These companies tend to issue new shares periodically to get more capital, and at least with TMC they seem to always issue the shares at $10. Keep an eye open for new issues, and if one is coming, don’t buy the shares at a premium because they will drop back down close to the issue price.

  5. The Globe article doesn’t really discuss what factors will impact the price of these investments. Can you say a bit more about what their risk profile is?

    I’m wary of Ontario commercial real estate. The people I know in the industry are very pessimistic about the next few years, for a variety of reasons, but mostly because of the current provincial energy policy. It’s hard to justify new business investment of a reasonable commercial footprint when you’re looking at energy costs increasing over the next eight years at more than double the rate of energy inflation in other provinces. Combine that with rising interest rates….

  6. The prospectus gives a complete list of potential risks for these companies, but the major one is the risk of mortgage default. Ultimately these are mortgages (usually 1st mortgages), and the security is the property being mortgaged. Typically the ratio of the mortgage to property value is reasonably low for both these companies. There is definitiley more risk than the banks take with residential mortgages, but with a Canadian default rate of 0.42% that’s still not a lot of risk.

  7. @jamm: Good tips on TMC and FC. The default rates seem to be higher for MIC mortgages. I recall reading in one of the prospectus (I forget which one) that default rates are much higher — in the 5% range — substantially higher than typical homeowner mortgages. Not sure if that is typical or unique to the MIC. It is very hard to get a handle on these MICs from the prospectus. For MKP, I couldn’t even find out what the expense structure is.

    @Viscount: The prospectus covers the laundry list of risks:


    Default would be the major risk. A major real estate downturn would devastate the value of projects in the construction phase. Especially at this point in time when we are coming off a major bull cycle in real estate.

  8. I’ve owned all 3 of them in the past and I currently own 2 of the 3. Although they are mortgage pools, you also have to think of them as businesses and like any business, you have good and bad management teams… In my humble opinion…

    I think highly of the management team of MCAN as they seem to manage well through thick and thin. I am a long time holder of MCAN shares, I’ve had their shares in my portfolio for nearly a decade.

    The jury is still out on Timbercreek, as another poster alluded, when they go to the well to sell equity to raise money, they seem to mis-value the equity. I only recently made the plunge into Timbercreek.

    Firm Capital was – in the past – structured as an income trust and they were mostly lending to Toronto area construction firms. They have been in a state of flux as they had to both convert from an income trust structure to the MIC structure and there are changes required to their portfolio of investments that had to happen for them to fully qualify. When they were still an income trust, they looked like they may have been distributing more than 100% of their income. Anyways, the combination of all of these reasons caused me to sell off my holdings to wait until the smoke clears and see what this business finally looks like… So, I’m currently out of Firm Capital but they’re still on my watchlist.

    • Thanks for your input Phil. All these names are new to me, so it is good to hear from long-time investors who are familiar with these names. Do you know of any sources where I can find fee information for MCAN?

  9. I don’t really understand how this works. How come you end up with such a return on your investment. Why would developers pay you a 7% yield when they can take the money from a bank for a lot less?

  10. @ Leon:
    My wife was a bookkeeper for a couple private MICs, and the answer to your question is that due to the increased risk of the type of mortgages (highly leveraged, highly speculative), small/unproved developers cannot get enough capital through the banks. As mentioned above, they get funding from MICs to get their projects off the ground, and are willing to pay the higher interest costs in order to bring their products (vacation properties, commercial properties, or whatever) to market sooner.

    Look at the bank’s variable rates for short/open terms, and you’ll see that they are usually higher than the 5 year/closed rates. In the end, a higher rate over a shorter period can give a lower total interest cost than a longer term at a lower rate.

  11. @CC. These MICs all have the same disclosure requirements as traditional corporations, so you can find all of their filings in SEDAR.


    In case you didn’t know, SEDAR = System for Electronic Document Analysis and Retrieval… It’s a mandatory repository of all public documents released by all public companies. It’s the Canadian version of EDGAR used by all US companies including ADRs.


      CARECANA is trying to distract your attention from their bad mortgage decisions and sinking redemption rate with a flurry of proposed changes with misleading rationalizations. They are making no attempt to explain why suddenly from Sept to Oct they reduced the redemption rate by over 6% (equal to one entire year’s interest) without showing any accounting. Instead they are trying to rush through a whole lot of remixing and rebranding changes before Xmas, at our expense for thousands of pages of documents expedited to us out of our pockets.

      Remixing mortgages reblending and rebranding their companies doesn’t do anything for the bottom line. How can they reduce management fees by this mélange when clearly they have not enough and good management to properly vet their loans? However it may help management escape their responsibility for the existing losses. Vote no to more name changes that don’t fix bad mortgages and allow dilution even elimination of responsibility. The ingenuous promise of better accounting will start from the fait accompli of the redemption loss of Sept to Oct. 2012

      If you have Dividend Reinvestment, take the cash instead as they are reinvesting it at par, but redeeming below par and you are paying tax at par to Revenue Canada. Start that today as they will take 3 months to change it which reveals the true state of the businesses. No one outside would buy a share for a $1, when they can only redeem it for 90cents. This is the real reason for listing on the TSX, so they can sell for 90 cents or less shares equal to the ones we paid a $1 for, so diluting the value of our shares further, and reducing their obligation to return to par. They say it makes it easier to get your money; who wants to sell immediately at a whopping loss ? Vote no to TSX listing that will permanently devalue your shares and dilute their responsibility to return to par.

      If CareVest really had our interests at heart they would reduce the dividend and rebuild the capital with it, as this is much more tax efficient for us. (0% tax vs up to 50%). Instead they have been obviously keeping the interest rates high to fool new investors if any don’t notice the reduced redemption rate. With the obstacle removed by proxies 2&3 they can sell more shares we paid a $1 for at .90, increasing the number of claimants more than the size of the pot.

      In their proxy pitch Carevest agents never say anything about the reduced redemption, which is hidden on the back page of your statement. Whilst the front page is in mythical dollars based on par value. The statements, agents and company changes are all highly misleading. They will do anything rather than explain in writing where the missing money of ours has gone, and what they are (not) doing to get it back. Instead they are really trying to permanently devalue the shares, as in the reduction of stated capital which they are trying to disguise as mere bookkeeping. To say the change will not affect the retraction value is highly misleading because they have just reduced it, so this 90 cents on the $ is locked in to be permanent. Don’t agree to the writeoff of your own capital. Vote no.

      You must vote no generally to censure management for their bad performance and for further wasting our money with these attempts to get us to agree to loss of our capital and absolve themselves of responsibility.

      Dr. Simon Farthing

      Email me at ut038@yahoo.com

  12. 2 non-publically traded MICs based in Western Canada with good long-term track records are Fisgard Capital (Victoria) featuring mostly residential mortgages, and Carevest Capital (Calgary) with mostly commercial mortgages. Carevest has 3 different types of pools: one for 1st mortgages only; one for seconds (with higher yields and more risk) and a blended pool. The accredited investor tests in most western provinces are less onerous than those in Ontario. I own both Fisgard and Carevest.

    • Hi dale

      I have 135,000 dollars in carevest they now tell me i can redeem only at there Feb 2014 discretion.I just discovered they have been paying low interest to ua all for almost 2 years due to loans made to commecial developers not paid. When I started Brenda Marcellus told me I could get all my money back with only 1 month notice.I’m quite distraught over this what do you suggest ?

  13. @Phil S
    “I am a long time holder of MCAN shares, I’ve had their shares in my portfolio for nearly a decade.”
    Interesting, only because of this post did I learn of these MICs (not that I looked so hard).
    Do you happen to have a blog where you write abbout your investments 🙂 ?

  14. I have owned Fisgard and Carevest for about 4 years. Over the longterm years, their % returns have dropped very gradually. fisgard returned about 5.5% last year and Carevest about 7%.

    I am happy about investing with them. However, I am shifting some of my money out soon as |I learn more about the world market investing scene. Remember that the retruns are treated as interest income, so it is best to keep these types of products within registered accounts.

  15. I have also held MCAN for a long time in a tax-deferred account and it has been one of my best long term performers. In addition to the regular quarterly/monthly income payments, MIC’s are required to pay out the majority of their remaining taxable income to shareholders each year so you usually receive an additional “bonus” payment in the first quarter which can be significant depending on the company’s prior year performance. The major shareholders of MCAN are the big 5 banks which seems to add some stability to the share price.

    I also hold some FC, although not as for long as MKP. I have no qualms about either of these two and look to hold these “forever” for income purposes, plus some slow steady growth.

    I am not familiar with TMC but will now take a look at how it compares to MKP and FC.

  16. What percentage of your total investment portfolio would you think a retired person over 65 years old should consider investing in MICs? What per cent might be appropriate if such a person has only RRSPs and LIRA as investments? That is, no unregistered investments other than a TFSA?

    Thanks for any comments.

  17. I forgot to ask “Has anyone who has invested in a MIC every lost any money?


  18. hello I am looking for an updated status on MIC’s publicly traded in 2014. Any MIC’s that anyone recommends, there are about a dozen MIC’s and I am wondering if anyone has any tip on which MIC to invest those days (? speaking of publicly traded MIC’s…thanks a bunch

  19. I have invested in Carevest Mics since 2004. It was conveniant bettween capital projects to park money there. After the vote I was the first to redeem all shares to invest in my own project because the in/out door was slamed shut.Of my 500000 investment with them they only paid out 466000. Thanks carevest now the old man is gone your a ship of thieves. Your not made of the same stuff. If I get to calgary , I,ll be coming to see you.

  20. since my last comment in 2011, I have pulled all my money out of the two mic’s that I owned. With the low interest rates at present, and my expectation that they will remain that way, the future does not look ás rosey as before. I was invested with Carvest and Fisgard. Fisgard actually did not give 100 percent return, I did not receive the 5% on the final year, more like 4%. They had some excuse, but I am just thankful to receive what I did. It could have been far worse. I will not be investing there until conditions change.

  21. This is an investment for lying down and avoiding.

    The scum at Carvest are blatantly screwing all investors including my 78 year old mother. What? A 10% cap on redemption, paid over 12 months in reducing payments since your 100% investment is declining. What a crock.

    When I was first told it could be 2 weeks to 2 years to redeem her investment I told mother “you’re being defrauded, get your money out.” And so the long decline began.

    It started with lies (she never received the interest promised) and has further deteriorated with no contact, four day redemption period at Valentine’s day (isn’t that special?) and more lies and lack of contact.

    Of course they never went public, far too much reporting required, too much transparency for a scamming rip off scheme like this one. Better to just mush everything around, charge fees, distract disgruntled investors with “an action plan.” Run, everyone, run!

    I am turning over every rock I can find to find someone who will take some action but since they are a private fund, they can make their own rules.

    So sad our laws and enforcement are so useless to protect people from scammers like theses. The only people getting rich at Carvest are the ones at the top of this ponzie scheme.

    Long past time we give all of these thieves the cold shoulder. Get your money out, tell anyone you know how insideous and reprehensible these low lifes are.

    Can’t believe they still have a web site inviting new investment. Better to keep your cash under the bed and pick bottles for the interest.

    • William Roberts

      I was interviewed by the ASC and it was pointed out to me that their list of mortgages had the same mortgage number in different MICs,.Curiously I have not heard back from the ASC who where going to interview CareVest on the state of affairs of the business.CareVest do,s not put these lists out to investors anymore.Gee I wonder why.