Capital Direct I Income Trust’s (“trust”, “fund”) portfolio size (gross mortgage receivables) hit a record high of $200 million at the end of Q3-2019 (September 30, 2019), up 8% YTD.
Revenues grew 14% YoY in 2019 (9M) to $16 million. Net income grew 20% YoY to $11 million – the highest ever since inception.
Primary focus remains on mortgages to owner-occupied residential units in Vancouver and Toronto. The fund maintains a lower average loan size of $121k relative to its comparables’ average of $347k.
At the end of Q3-2019, second mortgages were at 59% (58% at the end of 2018), while the Loan-to-Value (“LTV”) remained flat at 54%.
We estimate that the trust’s investors received a dividend (weighted average of all unit types) of 7.42% p.a. in 2019 (9M), versus 7.66% in 2018, due to a lower use of debt.
In 2019 (9M), the trust reported approximately $0.31 million in realized losses, or 0.16% of the total portfolio versus $0.42 million (0.24% of the portfolio) in 2018.
With the Vancouver market showing signs of stabilization, we have a cautiously optimistic outlook for new originations in 2020. Toronto’s residential market remains strong. This is likely to be partially offset by a lower interest rate environment.
We expect investors’ yield in 2020 to be in the 7% – 8% p.a. range depending on the type of units held.
