A Mortgage Investment Corporation (MIC) is an investment and lending company specifically designed for mortgage lending in Canada. Owning shares in a MIC enables investors to participate in income from a diversified and secured pool of mortgages. Shares of Keystone MIC are qualified investments under the Income Tax Act (Canada) for RRSPs, RRIFs, DPSPs, or RESPs, FHSA, RDSP and TFSAs.
WHAT IS A MORTGAGE INVESTMENT CORP?
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The Issuer:
Keystone Mortgage Investment Corporation (the “Corporation”) is a mortgage investment corporation incorporated under the Business Corporations Act (Canada).
The Corporation is not a reporting issuer or equivalent in any jurisdiction and its securities are not listed or posted for trading on any stock exchange or market.
Securities Offered:
An unlimited number of Class “A” Non-Voting Preferred Shares (“Class A Preferred Shares”) of the Corporation.
An unlimited number of Class “B” Non-Voting Preferred Shares (“Class B Preferred Shares”) of the Corporation.
An unlimited number of Class “F” Non-Voting Preferred Shares (“Class F Preferred Shares”, and collectively with the Class A Preferred Shares and the Class B Preferred Shares, the “Preferred Shares”) of the Corporation.
Type of Transaction:
The offering of Preferred Shares in the capital of the Corporation (the “Offering”) is a private placement to be made pursuant to an offering memorandum in reliance on one or more of the prospectus exemptions as set out in National Instrument 45-106 Prospectus Exemptions.
Price Per Security:
$10.00 per Preferred Share.
Minimum Subscription Amount:
There is no minimum or maximum offering. The Corporation will offer an unlimited number of Preferred Shares on a continuous basis.
The minimum subscription amount for each of Class A Preferred Shares, Class B Preferred Shares and Class F Preferred Shares is as follows:
25,000 Class A Preferred Shares ($250,000.00)
2,500 Class B Preferred Shares ($25,000.00)
2,500 Class F Preferred Shares ($25,000.00)
Selling Agent:
The Corporation has entered into a dealer agreement with each of Parvis Investment Services Inc. and Indigoblue Capital Corporation and may authorize other registered dealers to sell the Preferred Shares, from time to time. The Corporation may pay a commission to registered dealers or a referral fee up to a maximum of 5.0% of the aggregate purchase price of the Class A Preferred Shares and Class B Preferred Shares sold. No commission is payable on Class F Preferred Shares, but the Corporation may enter into referral arrangements with wealth advisors in respect thereof.
Proposed Closing Dates:
Closings will occur on a continuous basis as subscriptions are received and accepted at the discretion of the Corporation. Generally, it is expected that all accepted subscriptions will be effective on the last day of each month and settled within three business days.
Use of Proceeds:
The proceeds of the Offering will be used to invest primarily in residential, commercial, construction and other mortgages in accordance with the Corporation’s investment policies.
Targeted Dividends:
The board of directors of the Corporation may from time to time declare and authorize the payment of dividends in its sole discretion. The Corporation targets cumulative preferential cash dividends at a projected annual rate of 9.5% for Class A Preferred Shares, 9.0% for Class B Preferred Shares, and 9.5% for Class F Preferred Shares. Dividends, if any, are payable monthly in arrears, no later than the 15th day of the month following the applicable month in which such dividends were declared.
The priority of payments of dividends is as follows:
(1) First. Holders of the Preferred Shares are entitled to receive, pari passu and rateably, as and when declared by the board of directors out of monies of the Corporation properly applicable to the payment of dividends, preferential cash dividends at a projected annual rate of 5.0% per annum of the issue price of the Preferred Shares, respectively (the “Initial Preferred Share Dividends”).
(2) Second. Following payment of the Initial Preferred Share Dividends to each applicable holder, holders of the Class A Preferred Shares and the Class F Preferred Shares are entitled to receive, pari passu and rateably, as and when declared by the board of directors out of monies of the Corporation properly applicable to the payment of dividends, preferential cash dividends at a projected annual rate of 4.5% per annum of the issue price of the Class A Preferred Shares and the Class F Preferred Shares, respectively (the “Classes A and F Priority Dividends”).
(3) Third. Following payment of the Classes A and F Priority Dividends to each applicable holder, holders of the Class B Preferred Shares are entitled to receive, pari passu and rateably, as and when declared by the board of directors out of monies of the Corporation properly applicable to the payment of dividends, preferential cash dividends at a projected annual rate of 4.0% per annum of the issue price of the Class B Preferred Shares (the “Class B Catch-Up Dividends”). For greater certainty, no dividends may be declared or paid on the Class B Preferred Shares, following payment of the Initial Preferred Share Dividends, until 9.5% cumulative dividends have first been paid on the Class A Preferred Shares and Class F Preferred Shares.
(4) Fourth. Following payment of the Class B Catch-Up Dividends, each Preferred Shareholder shall be entitled to receive, pari passu and rateably, along with holders of Common Shares, as and when declared by the Board of Directors out of monies of the Corporation properly applicable to the payment of dividends, any other cash dividends. For greater certainty, no dividends shall be declared or paid on the Preferred Shares and the Common Shares, following payment of the Classes A and F Priority Dividends, until 9.0% cumulative dividends have first been paid on the Class B Preferred Shares.
Redemption Rights:
The Preferred Shares are redeemable after 12 months following the subscription date and upon an advance notice of 90 days.
The right to redeem is qualified by the provisions of the Corporation’s articles relating to such redemptions, including, among other things, adherence to notice provisions, quarterly limits on the number of securities that may be repurchased, and limitations necessary for the Corporation to maintain its status as a mortgage investment corporation under the Income Tax Act (Canada) (the “Tax Act”).
In addition, redemptions may be subject to early redemption penalties based on the period of time the Preferred Shares are held for and a processing fee of $350.00 per redemption request, according to the chart below. As a result, you might not receive the amount of proceeds that you want.
Refer to the Offering Memorandum for Redemption Penalties
The board of the directors of the Corporation may, in its sole discretion, waive all or any part of the early redemption penalty in the case of any particular holder of Class A Preferred Shares or Class B Preferred Shares.
Income Tax Consequences:
The Preferred Shares will be qualified investments for inclusion in registered plans subject to the Corporation maintaining its status as a mortgage investment corporation under the Tax Act.
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Read the Memorandum here.
MEET THE KEYSTONE MIC TEAM
Experienced team with over 25 years of local market knowledge.
RYAN MACNEIL, PRESIDENT
Ryan has arranged more than 1,700 private mortgages in Atlantic Canada, totalling over $340M in mortgage funding. Ryan leads the team at Keystone MIC and its administrator, Keystone Capital Group.
ZACK MUIR, DIRECTOR, CREDIT & RISK
Zack has over 15 years of underwriting experience for major Canadian banks, lenders and private lenders prior to cofounding Keystone. Zack’s detailed adjucation has led to delinquency rates well below industry averages.
NEAL ANDREINO, DIRECTOR, INVESTOR RELATIONS
Neal has a diverse background in entrepreneurship, including a real estate portfolio of over 100 units, a successful podcast host, and is a top performing Realtor. Neal’s extensive network generates consistent leads for Keystone.
FAQs
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MICs are regulated by the Income Tax Act (Canada), which requires any corporation seeking to qualify as a MIC to meet certain conditions, including the following:
The corporation must be a Canadian corporation;
The corporation’s only undertaking is the investing of its funds, and it does not manage or develop real property;
Debts must be secured by real property located within Canada;
The corporation must have at least 20 shareholders where no single shareholder holds more than 25% of any class of shares of the Corporation;
The corporation is required to hold at least 50% of its assets in the form of money or debts secured on residential property; and
In addition to the 50% test above, the corporation must maintain a prescribed debt to equity ratio and must limit holdings in real property to under 25% of the cost amount of all of its property.
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For income tax purposes, the returns the investors receive, other than capital gains dividends, are treated as interest income. This would differ for shares held in a registered plan. We strongly encourage you to seek professional tax advice on the income tax consequences that apply to you.
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Yes!
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Values can fluctuate, but investors in a MIC are not burdened by ownership costs and do not feel an immediate impact of property values dropping. Assuming borrowers making their payments, the return is fixed over the life of a mortgage.
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Investors can choose to take advantage of the Dividend Reinvestment Plan (DRIP) and thereby benefit from compounding their return. Investors can also choose to receive their monthly dividends as cash.
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Keystone Capital Group (“Keystone Capital” or “KCG”) will be the administrator/manager of Keystone MIC, and this will be Keystone Capital’s sole focus. Keystone Capital will charge a management fee of 2.0% annually on the total portfolio, which is in line with industry standards.
Keystone Capital is (i) a registered mortgage administrator in Nova Scotia and New Brunswick, and (ii) a registered mortgage lender in Nova Scotia and a registered credit grantor in New Brunswick.
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See Item 10 (page 41) in Keystone MIC’s Offering Memorandum which outlines all potential risks.
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Keystone MIC has authorized registered dealers, Parvis Investment Services Inc. and Indigoblue Capital Corporation, to offer MIC’s shares for sale. Please contact steven@parvisinvest.com or marcus@indigoblue.ca for a copy of the Offering Memorandum.