CareVest MIC alternative Timbercreek Mortgage Investment Corporation

Looking for an alternative to CareVest MIC? We recently completed our redemption / retraction of CareVest shares and are looking for an investment in the same space - here is what we found.

Timbercreek Mortgage Investment Corporation trades on the TSX under TMC.  This MIC invests in a diversified pool of high quality mortgage loans attractive yields that are directly secured by residential (including multi-residential), office, retail and industrial real estate properties across Canada.  The current yield is 8.5% - this is after increasing the distribution from 6.3 to 6.7 cents per share last November.

Avenue Investment's Paul Gardner commented last week "The shares have been depressed due to selling of shares by financial advisers that no longer receive a trailer commission since they (TMC) now are a corporate entity and not a closed end fund."  See chart below.

TMC - traditionally a stable, low-beta stock - is definitely oversold now - it boasts attractive, stable monthly distributions, strong and improving fundamentals and liquidity that you cannot get in other locked-in MIC products.

But the strong fundamentals have not changed for Timbercreek Mortgage Investment Corporation. For example as of Q3 last year:
  • Net mortgage investments were up 43% year over year to $392.8 million
  • The Company advanced 13 new mortgage investments, received full repayments on 10 mortgage investments and partial pay downs totaling $52.8 million, resulting in net mortgage investments of $392.8 million as of September 30, 2013.
  • The weighted average interest rate earned on the mortgage investments at September 30, 2013 increased year over year to 6.71%.
  • The weighted average term to maturity was 2.4 years so that about 80% of mortgage investments mature by December 31, 2015, or earlier.  No need to worry if rates go up because with these short lending terms TMC can quickly cycle into lending at higher rates.
The portfolio continues to be well diversified across Canada's largest provinces as follows: Ontario (59.7%), Quebec (16.8%), Alberta (11.9%) and B.C. (6.6%), and the loan-to-value on the mortgage portfolio at September 30, 2013 was 45.1% - this is well below the 70% loan-to-value limit in the Company's asset allocation model.  This is significantly lower than some of the CareVest products.  More importantly, compared to CareVest, during the period, no mortgage investments were in default and as a result management has determined that no provision for mortgage losses is required for the Period.

"We continue to take a very conservative approach when it comes to managing the Company and are focused primarily on lending against properties where we are comfortable that there is adequate income to service the debt - rather than land and construction," states Andrew Jones, Managing Director, Debt Investments of Timbercreek Asset Management Inc., the manager of the Company. He adds that 100% of the portfolio is focused in first mortgages and over 91% of mortgages in the portfolio are secured by income-producing properties - this helps investors sleep at night.

TMC shares are up 3% this week on high volumes as investors recognize the value in this MIC and as the shares recover from the "financial advisor" sell off.  But since it is still well below recent highs ($10.93 in June 2011), you could see some nice appreciation in the short term, on top of the steady yield.

TMC could climb back up to the highs of 2010, 2011, 2012 and 2013 since the fundamentals are the same.