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Post by nemesis on Sept 15, 2020 12:09:45 GMT
Why would any new investor be incentivised to invest in this MIC/TRUST. I don't understand that.
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pat
New Member
Posts: 6
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Post by pat on Sept 15, 2020 12:54:39 GMT
Why would any new investor be incentivised to invest in this MIC/TRUST. I don't understand that. I don't have any idea. Maybe something to discuss at the meeting?
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pat
New Member
Posts: 6
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Post by pat on Sept 16, 2020 17:18:35 GMT
In the last update received today, HE indicates in two places (page 3 and 4) that "There will be a minimum redemption of $1M/monthly based on available capital" which contradicts the statement made in 3 places in the Information Circular, including in the Declaration of Trust: “total amount payable by the Trust in respect of such Units tendered for redemption in the same calendar month must not exceed $1,000,000 (the “Monthly Limit”).
I am totally confused: is $1M/monthly the Minimum paid to redemptions or the Maximum? I’ll place an inquiry, but in case somebody finds out first, please, please, share the finding
Thx
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Post by rationalinvestor on Sept 16, 2020 17:41:42 GMT
Why would any new investor be incentivised to invest in this MIC/TRUST. I don't understand that. Breaking the current fund into separate HMIC and HRAC means that the interest rate would be high for just the HMIC. In a simplified example: - the current fund delivers 4% on 100% of your investment. Let's say you invested $1,000. The return is $40
- assume for the moment the performing part provides all the return and is included in the HMIC.
- HE's earnings and distribution will still be $40. However, the $40 would be on just the HMIC value ($550). So that would be 7.3%.
From a new investor point of view, the key question is whether they'll be attracted to a return of 7.3% made up of clean assets. From a previous investor's point of view, you have to decide if you want to redeem at NAV (.895, I think). So in this simple case, you can view the $40 as the return on $492 (89.5% of $550). That works out to an 8.1% return. You need to decide if you have a better use for that money that would deliver a similar risk/return profile. I realize there's more to understand than just this simplified version but I suspect it covers the bulk of the story. Questions I have include: - the HRAC properties do have a return that's funding cleanup of assets before selling. How much of that is in the 4%?
- If the HMIC is made up of clean assets, why is NAV so low, at .895?
You'll probably have more questions. But 7.3% return on an HMIC made up of clean assets is not a bad investment for new people. And in terms of your redeeming your interest, you can choose to do so at whatever pace is enabled (a bit of confusion on that one). But understand that if you do redeem, you will take a 10+% haircut on that portion (the low NAV). You should rationally decide whether it's worth your retaining that investment or redeeming and investing 9¢ on the dollar in something you think is better. Everyone will place a different weight on whether they trust this management in the future and they can make their individual decisions.
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Post by thebigshort on Sept 16, 2020 19:25:28 GMT
Why would any new investor be incentivised to invest in this MIC/TRUST. I don't understand tha From a new investor point of view, the key question is whether they'll be attracted to a return of 7.3% made up of clean assets. From a previous investor's point of view, you have to decide if you want to redeem at NAV (.895, I think). So in this simple case, you can view the $40 as the return on $492 (89.5% of $550). That works out to an 8.1% return. You need to decide if you have a better use for that money that would deliver a similar risk/return profile.
If I would look to invest for dividends in lenders, then HarbourEdge would not top up my list. I would consider Romspen that is the biggest MIC in Canada, professionally managed, and consistent performer with dividend >7%, never drowned as HE return did. Perhaps I would have a look at the Big Canadian Banks that are on the cheap right now, e.g. Scotiabank dividend is at 6.5%. The nice thing about the bank stock is that: - you only pay tax on half of the dividend income - Canadian banks are consistent performers that increase the dividends and provide growth, which MICs don't If I would be young again...
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Post by nemesis on Sept 16, 2020 19:30:44 GMT
In the last update received today, HE indicates in two places (page 3 and 4) that "There will be a minimum redemption of $1M/monthly based on available capital" which contradicts the statement made in 3 places in the Information Circular, including in the Declaration of Trust: “total amount payable by the Trust in respect of such Units tendered for redemption in the same calendar month must not exceed $1,000,000 (the “Monthly Limit”). I am totally confused: is $1M/monthly the Minimum paid to redemptions or the Maximum? I’ll place an inquiry, but in case somebody finds out first, please, please, share the finding Thx I also noticed this today and we certainly need clarification on it.
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Post by nemesis on Sept 16, 2020 19:43:41 GMT
From a new investor point of view, the key question is whether they'll be attracted to a return of 7.3% made up of clean assets. From a previous investor's point of view, you have to decide if you want to redeem at NAV (.895, I think). So in this simple case, you can view the $40 as the return on $492 (89.5% of $550). That works out to an 8.1% return. You need to decide if you have a better use for that money that would deliver a similar risk/return profile.
If I would look to invest for dividends in lenders, then HarbourEdge would not top up my list. I would consider Romspen that is the biggest MIC in Canada, professionally managed, and consistent performer with dividend >7%, never drowned as HE return did. Perhaps I would have a look at the Big Canadian Banks that are on the cheap right now, e.g. Scotiabank dividend is at 6.5%. The nice thing about the bank stock is that: - you only pay tax on half of the dividend income - Canadian banks are consistent performers that increase the dividends and provide growth, which MICs don't If I would be young again... Yes, if I only knew then what I know now..... and younger would be an added benefit I am questioning the same thing that you are questioning - why would an investor think it is a good idea to invest in this (maybe Trust) MIC, if he or she knew that the MIC had been locked down for 5 years. Don't most investors want control of their funds in order to cash out of an investment if they are unsatisfied with the way it is being managed ... and the diminishing returns? I understand that there is no exit strategy from a trust.
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Post by nemesis on Sept 16, 2020 19:59:36 GMT
Why would any new investor be incentivised to invest in this MIC/TRUST. I don't understand that. Breaking the current fund into separate HMIC and HRAC means that the interest rate would be high for just the HMIC. In a simplified example: - the current fund delivers 4% on 100% of your investment. Let's say you invested $1,000. The return is $40
- assume for the moment the performing part provides all the return and is included in the HMIC.
- HE's earnings and distribution will still be $40. However, the $40 would be on just the HMIC value ($550). So that would be 7.3%.
From a new investor point of view, the key question is whether they'll be attracted to a return of 7.3% made up of clean assets. From a previous investor's point of view, you have to decide if you want to redeem at NAV (.895, I think). So in this simple case, you can view the $40 as the return on $492 (89.5% of $550). That works out to an 8.1% return. You need to decide if you have a better use for that money that would deliver a similar risk/return profile. I realize there's more to understand than just this simplified version but I suspect it covers the bulk of the story. Questions I have include: - the HRAC properties do have a return that's funding cleanup of assets before selling. How much of that is in the 4%?
- If the HMIC is made up of clean assets, why is NAV so low, at .895?
You'll probably have more questions. But 7.3% return on an HMIC made up of clean assets is not a bad investment for new people. And in terms of your redeeming your interest, you can choose to do so at whatever pace is enabled (a bit of confusion on that one). But understand that if you do redeem, you will take a 10+% haircut on that portion (the low NAV). You should rationally decide whether it's worth your retaining that investment or redeeming and investing 9¢ on the dollar in something you think is better. Everyone will place a different weight on whether they trust this management in the future and they can make their individual decisions. Could you tell me what you mean by 'clean' assets?
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Post by rationalinvestor on Sept 16, 2020 20:24:17 GMT
From a new investor point of view, the key question is whether they'll be attracted to a return of 7.3% made up of clean assets. From a previous investor's point of view, you have to decide if you want to redeem at NAV (.895, I think). So in this simple case, you can view the $40 as the return on $492 (89.5% of $550). That works out to an 8.1% return. You need to decide if you have a better use for that money that would deliver a similar risk/return profile.
If I would look to invest for dividends in lenders, then HarbourEdge would not top up my list. I would consider Romspen that is the biggest MIC in Canada, professionally managed, and consistent performer with dividend >7%, never drowned as HE return did. Perhaps I would have a look at the Big Canadian Banks that are on the cheap right now, e.g. Scotiabank dividend is at 6.5%. The nice thing about the bank stock is that: - you only pay tax on half of the dividend income - Canadian banks are consistent performers that increase the dividends and provide growth, which MICs don't If I would be young again... And that's why the new structure will be useful. Some of you will say "no way" and others will say that, now that the detritus has been cleared, it's in great shape. I have an investment in Romspen as well. Terrifically well managed. But they've also dropped returns to 4%. If you were going to have all your eggs in one basket, they're a good choice. Or, if you want to diversify, the big Canadian banks could be a choice as well … but stocks go up and stocks go down. Use TD as an example. They have a dividend yield of 5%, which would be roughly equivalent to 7-8% from HE. But TD's stock has declined 20% since the start of the year. Liquid, yes, but safe, no. Or you could keep your investment in HE, detritus surgically removed, and keep your 8.1%. Others still might enter at 7.3% as they search for yield. All would be reasonable decisions and can be made by each investor according to his/her needs
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Post by maryanne on Sept 16, 2020 20:42:50 GMT
In the last update received today, HE indicates in two places (page 3 and 4) that "There will be a minimum redemption of $1M/monthly based on available capital" which contradicts the statement made in 3 places in the Information Circular, including in the Declaration of Trust: “total amount payable by the Trust in respect of such Units tendered for redemption in the same calendar month must not exceed $1,000,000 (the “Monthly Limit”). I am totally confused: is $1M/monthly the Minimum paid to redemptions or the Maximum? I’ll place an inquiry, but in case somebody finds out first, please, please, share the finding Thx I also noticed this today and we certainly need clarification on it. thank you pat for noticing that so quickly and bringing it to our attn. A few Qs came in my mind right away: 1. The promise made in today's communique seems like a typo, because it does not make sense; HE makes the commitment to pay at least $1M/month, but it is obviously a promise that might not be kept is there is not enough available capital 2. What are the sources of the available capital? What part of the mortgage maturities if any will be used for redemptions? Now, that would be a great promise. Or the capital available for redemption is only financed by new investors? 3. In any case, what takes precedence is the Monthly limit from the Declaration of Trust and this is clearly stating that $1 M is the Maximum paid for redemptions if funds are available If HE wants to win votes on this promise of Minimum $1M redemptions/month, then they have to change the Declaration of Trust to be taken seriously
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Post by Moderator on Sept 16, 2020 21:13:40 GMT
I realize there's more to understand than just this simplified version but I suspect it covers the bulk of the story. Questions I have include: - the HRAC properties do have a return that's funding cleanup of assets before selling. How much of that is in the 4%?
- If the HMIC is made up of clean assets, why is NAV so low, at .895?
rationalinvestor , both are excellent questions. While the participation of the HRAC return in the dividend is unknown, it seems unlikely because the separation that must exist between MIC and HRAC The other question has been asked a few times on this Forum and had been partially answered: Back in 2016, Independent valuations reduced the cost base of both mortgages and assets by $34.7 million. It is important to note this represents a 44% decrease from the original appraised values upon which HE based their credit decisions. The deficit was distributed at the same % on both mortgages and HRAC assets. Part of the deficit was compensated by ELO being paid only 85% of the paid-up capital, but 10%+ is outstanding in HE Balance Sheet and now the reorganization would finally write it off at Investors' expense.
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Post by rationalinvestor on Sept 16, 2020 21:53:47 GMT
nemesisI mean that the non-performing loans have been removed and are now part of the HRAC. That doesn't mean some still can't go bad but it starts off with loans that managed to make it through the worst of the crisis. Is that interpretation correct? Or am I missing something?
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Post by nemesis on Sept 16, 2020 23:19:30 GMT
nemesis I mean that the non-performing loans have been removed and are now part of the HRAC. That doesn't mean some still can't go bad but it starts off with loans that managed to make it through the worst of the crisis. Is that interpretation correct? Or am I missing something? Honestly I don't know. I mean one hopes that the current mortgages are sound but do we have any information to back up that hopeful supposition. On the HRAC side I am aware that at least one property acquisition in Kingston is tied up in court so again, a lack of information is troubling.
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harry
Junior Member
Posts: 15
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Post by harry on Sept 17, 2020 5:19:37 GMT
And it is not clear to me what happens if a mortgage goes bad? Does the property get switched over to HRAC? Or does the HMIC get stuck with the property to sell or complete it's self, in which case we're back where we started!
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Post by Moderator on Sept 17, 2020 20:18:48 GMT
And it is not clear to me what happens if a mortgage goes bad? Does the property get switched over to HRAC? Or does the HMIC get stuck with the property to sell or complete it's self, in which case we're back where we started! harry, this is a very good question. If a mortgage goes bad as it did and it will in this business, the property is not switched to HRAC that, in the new structure, will be wound up. The properties taken as settlement of debt we'll stay in HMIC mixed with the mortgages, which in other posts are referred as "clean assets". The obvious results is that the current investors will have real estate in both HRAC and HMIC as they do today. Take a look at the the status provided in July 2020 and you'll find out on page 1-2 that HMIC already has defaults: - 6 mortgages out of 45 (13%) are in default - 4 files are currently in litigation, which we'll end up with new real estate assets taken as settlement of debt This example based on the updates received from HE clarifies the "clean assets" debate: the mortgages, also referred as performing assets because they generate our dividends, are clean at a certain moment in time, but for various reasons a perfectly "clean", performing mortgage could go wrong and then run into default.
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