Magenta SharesWhy invest in Magenta?
Magenta shares represent ownership in a large, diversified, professionally managed residential mortgage portfolio.
Every Magenta mortgage is secured by quality residential real estate located in strong, urban real estate markets in Ontario, with a heavy overweighting of 1st mortgages secured by owner occupied single family homes.
Income Tax Act regulations require distribution of 100% of audited net income
Shares may be held in your RRSP, TFSA, RRIF or RESP
Share prices don’t fluctuate with the market –share price always equals $10.00 issue price
Monthly dividends paid in cash or in stock plus periodic incremental dividends
My quality of life would not remotely resemble what it is now, had I not invested in Magenta. I’ve realized my lifetime dream of owning a waterfront lot and a gorgeous two acre property.
|Strategy||Conservative: Over 90% first, residential mortgages located in Ontario.|
|Inception||June 1, 1994|
|Eligibility||RRSP, TFSA, RRIF, RESP|
|Auditor||Ernst & Young|
Mortgage Investment CorporationsHow a MIC works
MICs are special companies created by the Canadian Income Tax Act (Section 130.1) to enable investors to invest in a pool of mortgages. MICs may also borrow from a bank or other lender, so they can use both the shareholders’ capital and loan proceeds to fund its mortgage portfolio. Newly invested share capital, as well as the proceeds of repaid and discharged mortgages, are used to fund new mortgages.
As a MIC, Magenta is responsible for all operational aspects of managing the portfolio, including:
- Sourcing of suitable mortgage investments
- Adjudication of mortgage applications
- Negotiation of applicable interest rates, terms and conditions
- Instruction of solicitors
- Mortgage administration
Return On InvestmentHow a MIC generates returns
The Income Tax Act requires that one hundred percent (100%) of a MIC’s annual net income be distributed to its shareholders in the form of a dividend. Like any company, a MIC’s net income is equivalent to its revenues minus its expenses.
Magenta’s revenues are primarily made up of mortgage interest and fee income. Expenses may include the cost of administering the fund, the cost of the annual financial audit and other professional fees and loan interest.
Magenta distributes its income to shareholders in the form of monthly dividends. The dividend rate is based on an annual target return on investment (ROI) set on June 1, the first day of the fiscal year.
Magenta’s PortfolioHow we manage our mortgages
Magenta’s rigorous and proprietary mortgage adjudication process ensures that only high-quality mortgages that meet our elevated underwriting criteria are included in our portfolio. Our 28 years of consistent returns can be attributed to the three key features of a Magenta mortgage:
A High-Quality Home
We confirm real estate values through trusted, local partners. We also ensure the property can be sold, and the value of the loan recovered, in case of default.
A High-Quality Neighbourhood
We only lend in strong, stable real estate markets.
A Responsible Borrower
We concentrate on residential, owner-occupied, first mortgages that fall just outside recently elevated chartered bank lending criteria.
FAQFrequently Asked Questions
What is a private mortgage investment?
A private mortgage is a mortgage held by an individual, group of individuals, or private corporate entity, such as a Mortgage Investment Corporation (MIC), instead of a bank or other institutional lender.
The legal status of any mortgage is the same, regardless of who holds the mortgage. The mortgage borrower is legally obligated to repay their loan, at a stated interest rate, to the mortgage holder within a stated time period. The mortgage loan is secured by a charge on the underlying real estate owned by the mortgage borrower.
Private mortgage interest rates are typically higher than bank mortgage rates.
How does a MIC differ from directly held mortgages?
An individual investor may fund one hundred percent (100%) of an individual mortgage and hold the mortgage directly. In this scenario, the investor is solely responsible for sourcing and evaluating the mortgage investment, negotiating the interest rate and other terms and conditions applicable to the mortgage, instructing the solicitor preparing and registering the mortgage. In addition, the investor has to collect the payments and deal with any arrears or default problems that may arise.
Given the typical principal amount of mortgages in today’s real estate market, the investor would require a significant amount of capital to fund even a small mortgage portfolio.
A MIC on the other hand, allows individual investors pool their investments to fund a professionally managed portfolio of mortgages.
Key differences between direct mortgage investing and a MIC are summarized below.
|Investment Amount||Substantial to achieve even minimal diversification||Relatively small|
|Management||Individual investor wholly responsible||Professional manager|
|Return||Depends on mortgage type and the expertise and diligence of the investor||A professionally managed MIC, employing the prudent use of financial leverage (debt), should achieve higher returns, with lower risk|
|Risk||Depends on portfolio size and composition and the expertise and diligence of the investor||Portfolio size, and the underwriting and portfolio administration expertise of the manager, serve to reduce risk|
|Liquidity||Mortgage repaid at maturity provided borrower is capable of doing so||Shares may be retracted any time|
|RRSP/RRIF/TFSA Eligibility||RSP/RRIF Only; High trustee fees; Large principal amounts reduce flexibility||Yes; Minimal fees depending on the Trustee; Any share amount may be deposited; Greater flexibility|
How are MICs regulated?
All investment related activity is stringently regulated by Provincial Securities Commissions and all investment transactions must adhere to the regulations prescribed by the Canadian Securities Administrators (CSA).
Mortgage lending and administration is regulated by the Financial Services Regulatory Authority (FSRS) of Ontario.
All MICs must also comply with the rules prescribed in Section 130.1 of Canadian Income Tax Act.
Who can invest in Magenta shares?
Canadians and non-residents may subscribe for shares. Shares may be held individually, jointly, in trust, in a corporation, or in a self-directed RRSP, RRIF or TFSA.
How can I monitor my investment?
All shareholders receive a copy of the annual audited statements and an individualized statement reflecting dividend calculations and share-related activity, as well as quarterly management prepared financial statements.
Shareholders holding their shares outside of a registered plan also receive a T5, reflecting the amount of their annual taxable dividend. Activity pertaining to shares held within an RSP, RRIF or TFSA will also be reflected in the statements provided by the registered plan trustee.
We welcome shareholder inquiries at any time and are always happy to discuss company results and progress.