FREQUENTLY ASKED QUESTIONS
The Canadian residential mortgage market surpassed $1.6 trillion dollars in 2016. It has been growing at an annual growth rate of 7% compounded every year for the last 10 years. The Banks and Trust Companies focus on 80% of the market. Due to tighter restrictions due to the recent B20 regulation, the Banks and Trust Companies have restricted their lending practices.
In the province of Ontario, the Financial Services Regulatory Authority of Ontario (FSRA) licenses and regulates all mortgage brokers, agents, administrators, and MICs
All property investments are subject to elements of risk. Property value is affected by general economic conditions, local real estate markets, the attractiveness of the property to tenants, competition from other available properties and other factors. While independent appraisals are required before, MICs may make any mortgage investment, the appraised values provided therein, even where reported on an "as in" basis, are not necessarily always reflective of the market value of the underlying property, which may fluctuate.
The MICs income and funds available for distribution to security holders would be adversely affected if a significant number of borrowers were unable to pay their obligations. Upon default by a borrower, MICs may experience delays in enforcing its' rights as lender and could incur costs in protecting it investment.
Additional risk considerations include:
- Lender inexperience through credit cycles
- Lender does not have any workout experience
- The province in which the MIC invests is an important consideration with respect to the real estate market and the ability to enforce lender rights
- Size of the mortgage
- Term of the mortgage
- Loan-to-value
- Proportion of the MICs assets in first vs. second vs. third mortgages
- Proportion on the MICs assets in residential vs. commercial vs. land
For further information of risks associated with investing in a MIC please refer to page 29 in the Offering Memorandum.
For income tax purposes, the returns that investors receive are treated as interest income, not as dividends. Please seek professional tax opinions.
Yes.
It is important to note that MIC investors are buying preferred shares in a dividend paying Corporation as opposed to units of a fund
While the real estate values may change, investors do not have the same concerns as owners about possible value losses. If the financing opportunities are well selected, the return is fixed over the life of the financing.
- Nick Kyprianou has over 30 years of experience as a mortgage lender having built Home Trust's portfolio from ~$200 million to ~$16 billion across Canada managing through multiple credit cycles
- Account managers and partners have deep workout experience
- Average mortgage is ~$425,360 with a maximum term of 12 months
- Currently loan-to-value is approximately 67.93%
- RiverRock does not invest in third mortgages and currently limits its portfolio to first mortgages and second mortgages
- 100% highly marketable residential homes, 87% owner occupied
RiverRock constantly monitors default rates, consumer leverage ratio and interest rate changes. While unsecured debt levels (credit cards, car loans, etc.) may be approaching critical levels, in RiverRock’s current portfolio, the average homeowner has ~32% equity, providing multiple exit avenues for RiverRock to avoid potential impairment. Having worked through full credit cycles (early 90's) Nick Kyprianou has seen that even during a housing downturn, homeowners ensured they paid their mortgages.
Investors can choose to take advantage of the automatic dividend reinvestment plan (DRIP) and gain the benefit of compounding their return. Alternatively, investors can receive their monthly dividends by cash. As of February 1, 2023, target yield has increased to 8.3% from 7.50% (cash yield of 8% from 7.25%).
RiverRock MIC has a credit facility of $110,000,000 with Royal Bank of Canada (RBC) with the option to increase the facility to a maximum of $140,000,000. RiverRock currently utilizes ~$85,000,000 in leverage to fund the portfolio.
Please note that although NAV is calculated monthly, it remains static as there are no capital gains in the underlying mortgages and all net-of-fee income is distributed monthly. Shares will be redeemed at the original purchase price provided no impairments to the portfolio.
An investor wishing to subscribe for Offered Shares must ensure that a duly completed and executed subscription agreement (a “Subscription Agreement”) in the form provided by, or on behalf of, the Corporation is received by the Corporation (or its agent) by 4:00 p.m. (EST) within two (2) business days prior to the applicable Subscription Date in order for the subscription to be
processed as of such Subscription Date.
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Please speak to your financial advisor regarding your interest in investing in RiverRock
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Your advisor will have you fill out our Subscription Document
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Upon completion of the Subscription Document, your advisor will post the trade on FundServ
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Dealers/Advisors are required for all initial purchases to deliver a copy of the completed Subscription Agreement on the date the order is placed to RiverRock MIC via:
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Email to subdocs@riverrockmic.com
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Please see page II in the Offering Memorandum for detailed subscription process.
A Subscriber wishing to retract all or any portion of his/her Class A1, Class F, or Class N Shares on a Retraction Date must submit written notice of such intention to the Corporation a minimum of six (6) months prior to the Retraction Date (which period may be varied or waived by the directors of the Corporation in their sole discretion).
Please see page III in the Offering Memorandum for detailed retraction process.