Investing with First Source

The First Source Mortgage Fund is a diversified portfolio of commercial and development property 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
  • Targeted net return to investors of 7.5% per annum with monthly distributions. Average net returns per annum of 9.2% since F2007
  • Differentiated structure aligns manager 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

First Source’s strict underwriting standards and criteria have been established over the past decade.  The track record of the firm is a testament to the conservative underwriting and rigorous risk management processes. Management typically reviews 20+ investment opportunities for every 1 mortgage that is funded

Qualitative Criteria
Property Type: First Source lends on a wide range of property types from development land to retail, commercial and industrial properties at various stages of their life cycle. 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.

 

Origination strategy driven by strong relationships with mortgage brokers, agent partners, builders & developers.  First Source offers exceptional service, reliable funding and professional mortgage advice that adds value to borrowers

  • Knowledgeable underwriting team with deep local experience assess mortgage opportunities originated through broker and other channels
  • Mortgages that meet First Source lending criteria are thoroughly reviewed, underwritten and approved by members of the management team then committed, subject to rigorous due diligence prior to receiving a recommendation for funding

Disciplined and thorough due diligence process that includes:

On site inspections Expert third party reports provided by professionals including but not limited to:
Face to face interviews Appraisal reports
Building condition report Environmental reports
Reporting by a qualified quantity surveyor Specialized insurance adequacy reports
Regular budget and progress advance reporting by surveyor Planners reports
  • Review and Oversight by First Source Advisory Committee
  • Vigilant and pro-active management and monitoring of mortgage/project