Private Matters Today - Winter 2020

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CANADA’S LEADING SOURCE FOR ALTERNATIVE LENDING AND MORTGAGE INVESTING EDUCATION

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USING ALTERNATIVE INVESTMENTS TO GENERATE INCOME

PEACE OF MIND WITH A SUITABLE TITLE INSURANCE POLICY

THE VALUE OF BUILDING RELATIONSHIPS

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1 • PRIVATE MATTERS TODAY • WWW.PMTODAY.CA

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YOUR MORTGAGE INVESTMENT CORPORATION

ACCOUNTING, AUDIT, TAX & ADVISORY SPECIALISTS

1918

300

40

12

Year Founded

# Employees

# Partners

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Kathy Steffan, CPA, CA Partner, Toronto ksteffan@welchllp.com

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Derek Chu, CPA, CA Senior Manager, Toronto dchu@welchllp.com

Toronto 647.288.9200 | 36 Toronto Street, Suite 1070 | welchllp.com

CONTENT 06

USING ALTERNATIVE INVESTMENTS TO GENERATE INCOME Matthew Simpson, Vice President, RT Funds and Associate Portfolio Manager, Raintree Wealth Management Inc., discusses the advantages of alternative investments. The article breaks down how investors can generate income through alternative investments to reach their financial goals while diversifying overall portfolio risk.

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PEACE OF MIND WITH A SUITABLE TITLE INSURANCE POLICY John Rider, Senior Vice President, Retail and Commercial Title Insurance, Chicago Title Insurance Company, Canada, discusses the benefits of a title insurance policy for a homeowner and outlines coverages and protections that title insurance policy offers.

THE VALUE OF BUILDING RELATIONSHIPS Prakash Bector, VP, Sales & Marketing at Private Matters Today has garnered various perspectives from successful key players in the market place to analyze the value of building relationships and how such relationships add to the bottom line of a business.

02 Welch LLP 07 Moskowitz Capital 09 Indigoblue Mortgage Investment Corporation 11 Markland Wood Golf Club 12 Indigoblue Legal Professional Corporation

2019 was a pivotal year in the alternative lending and investment industries. While the first half of the year was marked by a steady demand and supply of alternative capital, the latter half witnessed a surplus of private capital in relation to the demand.

The demand for private mortgages has been steady on account of various measures introduced over the last ten years to tighten the supply of mortgages through federally, and to a lesser degree, provincially regulated financial institutions such as banks, trust companies and credit unions. It has been well documented that the Canadian alternative lending market is markedly different and arguably safer than what was witnessed in the US through the financial crisis. Perhaps, it is

EDITOR’S NOTE

therefore not surprising to see more investors divert capital from traditional markets over to the private equity side. Supply of capital into the private lending space is a healthy sign for the borrowers in such an ecosystem, providing investor expectations can quickly align regarding the returns. The lending philosophy of the institutional alternative lenders like

What’s ahead?

In 2020, we rather expect the flow of capital into the alternative space to continue putting further pressure on rates that private lending institutions are able to command. We also anticipate some level of consolidation, which was well predicted in the past as the smaller lenders especially in the Mortgage Investment Corporation space struggle to ward off portfolio drag. As the competition in the private lending space heats up, the importance of a fund deployment strategy becomes paramount to survival, especially for the small to medium sized funds. We have dedicated this issue of Private Matters Today to the importance of forging key relationships.

The competitive dynamic in the marketplace will favour suppliers who have forged strong relationships with the partners who help such firms deploy their capital. As always, we have reached out to influential leaders in the industry to provide their opinions and interpretations of relationships and the requisite strategies to strengthen them.

Equitable Bank, Home Trust and others further exacerbates the supply of capital problem

Happy reading!

for investors.

Harry Singh MBA, CRM

EDITORIAL Harry Singh ART DIRECTOR / DESIGNER Nina Salehpoor PRODUCTION MANAGER Sanjay Ramwani

CONTRIBUTORS

Matthew Simpson John Rider

Clayton Shim-Chim Sanjay Ramwani Alex Lavender

FOR CONTENT & ADVERTISING PLEASE CONTACT: Prakash Bector, VP Sales & Marketing

416-400-3977 x 20 info@pmtoday.ca

Prakash Bector

Private Matters Today Inc. is a national publishing company. We produce a national print and digital publication to providing educational content surrounding the alternative lending and investments industry. Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor.

The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate; however, the publisher assumes no responsibility for errors or omissions. Private Matters Today ​is edited by Harry Singh, who is also President & CEO of Indigoblue Group of Companies and the Ultimate Designated Person for Indigoblue Capital Corporation.

MARKET INTELLIGENCE

1

2

BOC OVERNIGHT RATE

1.75%

1.36%

5 YEAR BOND YIELD

3.95%

INFLATION RATE

1.70%

ANNUAL GDP GROWTH RATE

3

BANK PRIME

2.40%

BANK OF CANADA BENCHMARK

5.19%

DEBT TO INCOME RATIO Q3 2019

174%

HOUSING STARTS

213

(THOUSAND UNITS MONTHLY)

Source: www.tradingeconomics.com/indicators . Effective as at February 21, 2020

$150,000

INVESTING WITH INDIGOBLUE MIC

UNEMPLOYMENT RATE

Growth of $100.0002 : $147,146

Return with monthly DRIP1 over 5 years: 47.15%

$125,000

$136,207

5.6% 5.5%

5.5% 5.5%

5.5% 5.4%

Year 2

Year 3

Year 4

Jan 2019

Year 5

5.6% 5.4%

Apr

1- DRIP – Dividend reinvestment plan 2- Return data is based on the target annualized return of 7.75% and for illustrative purpose only.

Hypothetical or simulated performance is not indicative of future results

Jul

Oct

Jan 2020

5.2%

Source: www.tradingeconomics.com/canada/unemployment-rate

MORTGAGE ARREARS RATE

CREDIT CARD ARREARS RATE

0.6%

5%

0.5%

4%

0.4%

3%

0.3%

2%

0.2%

1%

0.1% 2009

5.8%

5.7% 5.7%

$115,500 Return with cash dividends over 5 years: 38.75%

$108,031 $107,750

$100,000

5.7%

$123,250

$116,708

Year 1

5.8% 5.8% 5.8%

$131,000

$126,081

6%

5.9%

$138,750

0 2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2009

2010

2011

2012

2013

2014

2015

2016

2017

Source: www.cba.ca

600,000 550,000 500,000 450,000

Source: www.creastats.crea.ca/natl For information purposes only. Private Matters Today is not responsible for accuracy of the information above. Subject to change.

5 • PRIVATE MATTERS TODAY • WWW.PMTODAY.CA

JAN 2020

2019-Q4

2019-Q3

2019-Q2

2019-Q1

2018-Q4

2018-Q3

2018-Q2

2018-Q1

2017-Q4

2017-Q3

2017-Q2

2017-Q1

2016-Q4

2016-Q3

2016-Q2

2016-Q1

2015-Q4

2015-Q3

2015-Q2

2015-Q1

2014-Q4

2014-Q3

2014-Q2

400,000

2014-Q1

Number of Transactions

NATIONAL RESIDENTIAL REAL ESTATE SALES ACTIVITY

2018

2019

U

SING ALTERNATIVE INVESTMENTS TO GENERATE INCOME Matthew Simpson, Vice President, RT Funds and Associate Portfolio Manager, Raintree Wealth Management Inc.

‘Alternative Fixed Income’ is a term

real estate, private equity / debt,

investors, however, active trading isn’t their

you may have heard recently in discussions

commodities and hedge funds. Of the four,

goal and the volatility of publicly traded

with investment managers. ‘Alternative’ is

we believe real estate and private debt

investments is a risk and not an opportunity.

the term used by the investment industry to

offer the best potential for income for retail

Private real estate may help reduce that

describe any investment that is not one of

investors.

volatility. Private REITs and Mortgage

the ‘traditional’ investments – stocks, bonds or cash. Alternative investments range from real estate, to private debt or collectibles like art, wine or sports cards. Professional money managers and institutional investors (those who manage money on behalf of pension funds, endowments, sovereign wealth funds, etc.) have increasingly turned to alternative investments to achieve return objectives for their clients. Why? Traditional

Real estate has recently become more accessible to retail investors through a combination of technological innovation, product innovation and regulatory change.

To be sure, real estate is not a new investment class. What is new is the ability for retail investors to access and own real estate like never before. Pooling (accumulating capital from a group of investors) has enabled

Investment Funds (MIFs are pools of capital used to fund mortgages) offer retail investors the ability to invest directly in a real estate asset without being exposed to the same degree of volatility. Mortgage Investment Corporations (MICs) are a subset of MIFs that invest only in residential mortgages and tend to have lower default rates than commercial mortgages.

mass market investors to participate in

Private debt funds lend money to businesses

owning much larger assets than they would

to fund their ongoing operations. Instead of

otherwise be able to buy on their own.

using real estate as collateral as with MIFs,

Real estate can be bought on public stock

they often use other assets to ‘secure’ their

exchanges through vehicles such as Real

loans. Private debt companies generally

Estate Income Trusts (REITs). The downside

extend loans for specific purposes that

is that public REITs behave much like stocks,

traditional lenders like banks won’t. Also

fluctuating in value depending on market

like MIFs, private debt offers investors the

The most common alternative investments

moods. This can create opportunities for

opportunity to generate a consistent income

used by professional money managers tend

investors and traders who make money by

or ‘yield’.

to fall in four broad categories:

deciding when to buy and sell. For most

fixed income (bonds, preferred shares, etc.) looks a lot like cash these days, generating very low yields by historical standards. It has become increasingly difficult for managers to construct a sufficiently diversified portfolio that will achieve their clients’ financial goals using only traditional investments.

6 • PRIVATE MATTERS TODAY • WWW.PMTODAY.CA

There are several ways investors can add

investment advisors continue to focus only

where he or she can and cannot help that

income-oriented alternative investments to

on traditional investments (stocks, bonds and

client. Beware of the advisor who says their

their portfolios. They can research and seek

cash), investors choosing to diversify into

client should not invest in real estate simply

out individual managers to create their own

alternative investments may need to enlist

because his or her firm does not offer real

portfolios of alternative investments. This can

the help of another advisor who specializes

estate investments. That advisor is likely

be more cost effective, but also takes a lot of

in alternative investments. While it is possible

putting his or her own interests ahead

time, emotional fortitude and expertise. They

for any advisor to access the expertise

of the client’s.

can also enlist the help of an advisor that

and knowledge required to create a well

specializes in alternative investments. Lastly

designed portfolio of alternative investments,

and more recently, professional managers

some of the largest and most established

specializing in alternative investments have

investment firms have not made alternative

created funds of alternative investments,

investments a focus of their businesses. This

Raintree Wealth Management Inc.

focusing on one or more of the main

is often because developing or acquiring

www.raintreewm.com

asset classes.

the expertise, processes and knowledge to

However you decide to add alternative investments to your portfolio one thing is clear: a portfolio of traditional investments only is no longer adequate for a modern asset allocation strategy. Since many

deliver alternative investments is expensive and merely shifting money from one manager to another does not generate much additional income for these firms.

A good advisor is one who recognizes what is best for his or her clients and also recognizes

Matthew Simpson

P

EACE OF MIND WITH A SUITABLE TITLE INSURANCE POLICY John Rider, Senior Vice President, Retail and Commercial Title Insurance, Chicago Title Insurance Company, Canada

Title insurance is the cheapest and best

homeowner from. It covers matters such

insurance a borrower will ever buy. Period.

as fraud and forgery, survey issues, zoning,

Okay, I know that I am biased given I work

work orders and permit issues where the

for Chicago Title Insurance Company

municipality forces a homeowner to fix such

Canada, but a big part of why I work here

problems. It covers the policyholder if there

is that I believe in the product. I know all

are any actual challenges to the “title” or

the arguments about insurance and how

ownership of the property (or the validity

expensive it is and when one tries to make a

of a mortgage on the property in case of

claim there are issues. I get it. The industry

a lender policy) but it goes well beyond

doesn’t have the best reputation – although,

that to cover many other issues. So, what

on that front, I have to tell you the last two

happens if a client buys a house and their

times I dealt with other insurance companies

neighbour subsequently complains that the

(Car accident and Life insurance policy –

client’s garage is 3 feet on to her property?

not mine thankfully), the service and speed

Well title insurance looks at the issue, tries

was stellar. In any event, Title insurance is

to get the neighbor to be reasonable and

different. Title insurance is the cheapest

settle but if she refuses and wants to be

insurance you will ever buy because it is a

“that” nasty neighbor, we always hear about,

1 TIME PREMIUM. That’s right. You pay the

the title insurer will pay to have the garage

premium, which across Canada the average

moved or the offending portion moved off

is $400 for a homeowner (GTA is higher

of the neighbor’s property. Title insurers see

because values are much higher). One

all sorts of claims around building permits,

only pays that premium once to cover the

unpaid taxes, construction liens, and sadly

entire life of a mortgage (which includes any

and rapidly increasing fraud and forgery

assignments to another lender) or the length

where someone fraudulently discharges

of time one owns the property. So, if one

and/or places a new mortgage on title to a

buys a house today and owns it for 50 years,

property they don’t own. This causes a total

the coverage will still apply. Luckily for title

mess for the homeowners and the lenders

insurance companies, Canadians on average

involved and sorting out the mess can be

own their homes around 5 years, so we

very costly. The beauty of title insurance,

actually get to insure properties more

in this scenario, is that the title insurer pays

than once.

the legal fees to sort it out and if the lender

So, what is title insurance and what does it cover? Title insurance covers a homeowner for a myriad of issues relating to a property that home insurance can’t cover for and a lawyer/clerk/notary can’t protect a

8 • PRIVATE MATTERS TODAY • WWW.PMTODAY.CA

ultimately loses priority or the validity of its mortgage or property, title insurer pays you or the lender the loss without deducting the legal fees incurred to remedy the situation.

While no one loves insurance, as one pays for it and usually doesn’t need it, its value is

often appreciated when there is possibility

mortgage professional can categorically

of a material loss, but the homeowner

and without hesitation recommend it to a

doesn’t have the right insurance in place.

homeowner for protection against perils

Title insurance is such a simple, inexpensive

described above and for peace of mind.

John Rider Chicago Title Insurance Company, Canada www.chicagotitle.ca

and invaluable insurance to have that any

Title Insurance Tips for Mortgage Industry Professionals: When requesting a Title Insurance Policy, certain answers in the Order Form will trigger a file to go to underwriting for further review.

If the solicitor acting on the file provides the information the insurer needs and uploads the appropriate documents, the file will be processed more efficiently.

Issues Requiring Additional Information

Information Required • Title Search

Recent activity on title (last 6 months)

• Explanation of recent activity • Questions in order form answered completely confirming lawyers acting on

Private Lender

both sides and if the private lender has ever submitted any claims.

Late Order

• Explain why the order was not made on the closing date • Copy of title and an explanation of the risk associated with the issue.

Title Issues (encroachments, non-converts, old mortgage can’t be discharged, uncertain legal descriptions, issues in the

• Talk to underwriting about issuing identified risk coverage

chain of title, violation of a covenant or by-law, etc.)

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T

HE VALUE OF BUILDING RELATIONSHIPS Prakash Bector, VP, Sales & Marketing, Private Matters Today

As we embark on a new decade, it is clear that consumer behaviour is changing at a feverish pace. Consumers are much savvier about obtaining information on their own, as there is a wealth of knowledge at their fingertips. Historically complex transactions like real estate, mortgage financing and investing can now all be done online and

Clayton Shim-Chim

others yet, it is seeing their parents grow

As I was thinking about the value of

them financially. Without the human touch,

relationships in this day and age, where anybody can google the information they want, what they can’t get, are the compassion and understanding that is inherent in human interaction. People care what you know once

much more efficiently. While the ease with

they know how much you care.

which these transactions are done has been

Many of the clients that I have acquired

simplified, are consumers necessarily better off in this new environment? Or is there still value in relationships that have traditionally played a key role in fulfillment of such transactions? Upfront price comparison tends to be the main, and often only, barometer consumers use when comparing products or services. While price is important, some of these complex transactions often involve many other factors that could end up costing

interaction, motivation, discipline, celebration and mourning with clients, you are just a number to a faceless company. Clients are loyal in the long run to service providers who are available during not only the good but the bad times to cheer them on, to care for them and their families in their

over the years know that they can get the

hour of need.

information they need online. They might

Sanjay Ramwani

even be able to get hold of risk tolerance questionnaires, or calculators to find out how

While the consumers have unprecedented

much life insurance they need. But what they

access to information via online resources,

will not get is someone who cares about

when it comes to purchasing complex

what matters to them. Without forming a

products and services, they invariably

relationship, it is difficult to understand what

turn to providers that either come highly

really matters to a client.

recommended or are known to consumers

a consumer much more down the line.

What separates a human financial advisor

Private Matters Today has reached out to

from all the self-service options that are

a few professionals in various industries to

available to today’s clients, is the ability to

get their take on the changing landscape

see beyond the numbers, into the heart and

and to see if they still see value in building

mind of the client and really understand

relationships in this new environment that

what matters the most to them. For some,

we are in.

its caring for an ailing spouse or child. For others, it is seeing their child grow and one day become a parent herself. And for

10 • PRIVATE MATTERS TODAY • WWW.PMTODAY.CA

old happy and being able to take care of

thorough a previous interaction. Information availability certainly has refined the questions and conversations that a typical consumer would engage in prior to purchasing a product or service, but unless the product or service in question is rather simple in nature, a consumer still seeks a connection with a human being that would validate and support their decision to purchase such a

complex product or service. On line reviews

to ensure they are completing the necessary

certainly help and provide some justification

steps. I am usually meeting with them every

for purchasing a product but services in

year, as we discuss the next steps in their

general tend to be more abstract and require

journey to lower their cost of borrowing.

further validation. In a world where products

Whenever I can inspire someone with hope

are minimally differentiated and services

and take them from a difficult place in their

by nature qualitatively defined by who is

life while repairing all past issues, I almost

providing them, relationships have never

invariably have won a client for life who is

been more important.

grateful and appreciative. These are the types of relationships I strive to create, because

Alex Lavender

relationships create referrals.

Relationships are one of the most important things in this industry for building long term success. The best possible lead you can get is a referral, which is a transfer of trust. Just think would you refer one of your home buyers to a realtor that you didn’t fully trust? I doubt it. If they don’t perform, you know that it can tarnish your reputation with that client.

In the alternative and private borrowing space, I believe relationships can be built on a much deeper level compared to a prime borrowing transaction. I pave the road map for my clients showing them how we will take them from a private lender to an Alt-A lender and finally end up with a prime lender. Along

Clayton Shim-Chim Financial Security Advisor Freedom 55 Financial

Sanjay Ramwani Chief Operating Officer Indigoblue Group of Companies

With the constant growth of the mortgage industry which has been progressively competitive, mortgage brokers often seek a competitive advantage. How do we create a competitive advantage? The industry is

Alex Lavender

rapidly changing with the advancements of

Mortgage Broker

technology and access to information and

Centum Home Lenders Ltd.

comparability for mortgages could never be easier. Consumers want to have the best experience and when they are looking for advice and recommendations, they are relying on their social circle. I believe the only true way to have a competitive advantage is by creating strong relationships and providing great customer service.

Prakash Bector VP, Sales & Marketing Private Matters Today

that journey, I am checking in as necessary,

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