What is a MIC?
The MIC: a solid, real estate-secured alternative investment
High net worth individuals, family offices, wealth managers and institutional investors have long appreciated the benefits of mortgages as alternative investment vehicles: issuing a private mortgage produces regular income in the form of monthly interest. Risk is diversified, as a mortgage is secured both by real estate and by the personal covenant of the borrower.
Mortgage investment, simplified
Issuing a mortgage is, however, more trouble than most investors care to take. Due diligence, negotiation, paperwork and administrative tasks have kept the vast majority of investors away from mortgage investments.
A Mortgage Investment Corporation (MIC) underwrites a large diversified pool of mortgages in which accredited investors can invest. It is an exceptional alternative investment vehicle for those seeking solid, predictable monthly returns. The MIC is particularly suitable for registered investments such as RRSPs, RRIFs, and TFSAs. All net income is normally either disbursed to investors as a monthly dividend, or continually reinvested at the option of the investor.
MICs have a low correlation to stock market performance. For this reason, this class of alternative investment generates positive returns in most economic environments. A well-managed MIC should continue to generate enhanced monthly dividend yields even while equity markets underperform.
Demand for MICs as an alternative investment vehicle has risen sharply in recent years thanks to the market’s appetite for better risk-adjusted yield. Unlike traditional equity and fixed income markets, MICs are secured by hard assets in the form of real estate.
Choose steady income or steady growth
MIC investors choose one of two investment strategies:
Monthly disbursements – monthly interest dividends create a steady source of income. For example, an investment of $100,000 in the HarbourEdge MIC produced an average monthly dividend payment of $624.17 in the last 12 months ending June 30, 2016.
Dividend reinvestment (DRIP) – monthly dividends are reinvested to buy more shares in the fund, year over year. For example, $100,000 invested in the HarbourEdge MIC on September 1, 2005 would have grown to a value of $277,928 by June 30, 2016.
The HarbourEdge difference
HarbourEdge has earned the trust of investors throughout Ontario and across Canada. Most of our approximately 750 investors have found us by word of mouth—a testament to the strength of the alternative investment opportunity and the reputation and track record that the HarbourEdge MIC represents. Learn more about the advantages of the HarbourEdge MIC.
Criteria governing MICs
The HarbourEdge MIC is regulated by the Ontario Securities Commission and the federal Income Tax Act (ITA). Under ITA regulations, a MIC must distribute 100% of its annual net income to its shareholders in the form of a dividend. This dividend is taxed as interest income. It is for this reason that the MIC is such a suitable vehicle for registered investments such as RRSPs, RRIFs, and TFSAs.
Section 130.1 of the Income Tax Act (ITA) sets out the criteria governing an MIC, which act as safeguards for investors.
Among these criteria, at least 50% of the cost amount (as defined in the ITA) of the MIC’s assets must be comprised of:
● Loans secured on property as defined in the National Housing Act (Canada)
● Deposits with a bank or other corporation, any of whose deposits are insured, or cash
● Up to 50% of assets may consist of conventional mortgages or loans on existing or proposed retail, commercial or industrial properties
Another important criteria is that MICs submit to an external audit on an annual basis. For this purpose, HarbourEdge engages the services of Ernst & Young. Year-end audited financial statements are issued to investors.