Timbercreek Financial (TF.TO)

(Top Pick Aug 07’13, Up 6.20%) Short term financing for apartments or developers that don’t want to go to the banks. 10-15% discount to NAV.

A mortgage REIT. They are smart people. The return is safe. You should be income focused. It should react well in a rising rate environment. It is not exciting, however.

A mortgage investment company. Trades at a discount. 75% of their book is first mortgages. They are at about 44% loan to value. If real estate falls apart they still get all their money back. This is almost equivalent to a bond.

A mortgage lender. Restructured because they used to be a mortgage fund and they had to become a Corporation. They lend short-term, which banks don’t want to do. They get about an 8% yield and is trading at a discount to NAV. Even if interest rates rise, this is a perfect entity because it resets itself every year or two to higher funding rates. Lends to hospitals, apartment buildings, more stable entities. Yield of 8.72%.

Has underperformed and got hit by the interest-rate movement. Focuses on mortgage lending to multi-dwelling apartments or hospitals, short-term lending that banks don’t want to get into. Used to be a closed end mutual fund but is now a corporate entity so the trailer they had to pay to advisors has been eliminated. Trades at a big discount to its NAV which probably trails back up in 6-12 months.

This is a fund that is about to be turned into a corporate entity. He thinks they are the best in class to becoming experts. This is a more senior lending where you have a lot more loan-to-value protection. They lend on short-term lending agreements to hospitals or apartment buildings where there is less risk.

Generally does not own funds, but found he is not an expert nor has exposure in mortgage lending space. These guys have that expertise. Traded off because of interest sensitivity. They don’t just keep re-issuing their fund, but are buying it back. Less than 3% MER if not bought retail. They lend to hospitals or for short terms. 7% distribution.

(Top Pick Apr 25/12, Up 1.43% Total Return) It earns a 6% yield so you don’t get much price action out of it. It is secured mortgages that are well diversified. [Mr. Gardner said on the show that he thought distributions were on top of the return listed, but the BNN news letter lists this figure under total return.]

A pure yield vehicle. Throws off about 8.5% on his costs. Very akin to a mortgage REIT where you have to underwrite the portfolio every quarter, so it is a portfolio of loans. They do not own commercial real estate. Unless you got the time and the expertise to underwrite the loans, he would not recommend it.

Owns this in his bond portfolio. Well diversified. Their loan to values are generally 60% leveraged so you need a drop of more than 40% to take a hit. A great investment in your tax-free account.

A mortgage investment corporation. Doesn't own any physical real estate. They lend short-term to people who are improving or redeveloping primarily residential but also commercial real estate. Yield of about 7.75%.

A mortgage investment Corporation. Does not own real estate but owns a portfolio of loans that they generally originate and then recycle. This requires due diligence and you have to stay on top of it so he generally does not recommend it to retail investors. If you're happy with an 8% overall return, you can be a buyer.

Short term lending. One of the best managers of buying and servicing mortgages. Incredibly stable. 6% yield. Well diversified. Strong management.

Timbercreek Mortgage (TMC-T). Invests in short-term loans, 9-18 months. If you own, you have to stay on top of the portfolio Because it turns over relatively quickly. 9% yield.

Mortgage investment. Good, stable cash flow. Yield of about 9%. The average term on their mortgages is 8-12 months. Construction and short-term financing. Good management. Strictly a yield play for him and he is not looking for capital appreciation.