The First Source Mortgage Fund is a diversified portfolio of commercial, income producing real estate, and construction mortgages focused in the Greater Toronto Area and select other Southern Ontario markets.
- The investment strategy and process are unchanged from the highly successful historical operations of the First Source syndication model.
- Fund objective is capital preservation with strong risk-adjusted cash flow to investors.
- Our differentiated structure aligns manager interests with investors: all mortgage interest AND fee income flows to Fund.
- Favorable tax treatment for corporate investors: All distribution to investors will be taxed as business income, reducing the effective tax rate on Fund income for some investors by as much as 27%.
- Corresponding units in the First Source Mortgage Trust will be eligible investments for registered funds (RSP/RIF/RESP/TFSA).
- Low fee structure with transparency on Fund fees and expenses.
Qualitative Criteria
- Property Type
First Source lends on a wide range of property types including retail, commercial, and industrial properties at various stages of their life cycle including development and construction. Each application is independently vetted against both qualitative and quantitative underwriting to generate a balanced and diversified portfolio. - Property Location
For many property types, location is the key to success. First Source lends where we have experience. Local intelligence is a very powerful tool in assessing property value, project viability and exit. - Exit Strategy
Lending money on real estate is both an art and a science. The art is in originating and structuring the loan. The science is knowing and understanding exactly how your loan will be repaid in advance of commitment. We underwrite to institutional standards with one or more exit strategies. - Borrower History and Experience
We prefer to deal with borrowers who have experience and a strong track record and surround themselves with only the best and most qualified consultants and service providers. We look for good character and solid reputations. We meet every borrower and inspect every property; we run background checks via multiple processes on every guarantor in assessing credit worthiness and we adhere to strict AML guidelines.
Quantitative Criteria
- First Mortgages
We only lend in a 1st position or as a quasi-first position (less than 20% of the portfolio) being a “B” or subsequent position in a structured first mortgage loan where we benefit from higher returns with little more risk than if we funded all of the mortgage as a simple first. - Loan to Value Ratio
We lend typically 50% to 65% Loan to Value and selectively higher to 75% leaving adequate borrower equity and a cushion in the event of any required enforcement. - Debt Coverage
We ensure that there is adequate debt coverage for every loan and the fund will retain 50bp as a loan loss reserve despite our 10 year history of 14bp losses on over $455 million.
