Michael Hapke, CEO of the Advanced Group of Companies, provides a detailed update on the performance of the company during the second month of the COVID-19 pandemic.
Mike discusses the Ottawa real estate market, current portfolio performance and qualitative data, and what he thinks is coming in the weeks and months ahead.
Good Day Everyone, this is Michael Hapke , President and CEO at the Advanced Mortgage Investment Corporation.
Today is Friday May 8th 2020 and my last update was on April 21st which is only 17 days ago but given we’ve entered a new month I wanted to take a few minutes to update everyone on Advanced Mortgage Investment Corp’s performance for the completed month of April.
When I recorded the first update in April I figured maybe 20 or 30 people would take the time to listen to the message but I was shocked to see that my message was played over 140 times.
Now admittedly I don’t know if its just my team clicking on it over and over to make me feel good or if investors are genuinely interested in what I have to say. Never the less somebody is listening so I will carry on!
I’ll jump right into performance because I’m sure that’s what most investors or potential investors are most interested in.
At the end of March and going into the first week in April we had banked a fair bit of cash in the portfolio as we took time to pause and asses the prevailing winds and really take that deep dive into our mortgage portfolio to look for potential issues.
As discussed in the last voice recorded message of April 21st we had identified no files that concerned us, which continues to still hold true today however that assessment has allowed us to move forward with great confidence and as a result April has turned out to be one of our best months on record.
Between April 21st and today we have had no additional requests for deferrals of mortgage payments nor have we had any NSF payments. All of our mortgage payments are collected on the first of the month and we’ve had none in the month of April or May now so that is great to see. We do recognize that NSF payments can happen and that does not necessarily indicate a problem, but not having any for two months is great to see.
I’d like to breakdown some of the April figures,
We are happy to report that over the past month we have seen some great activity with a number of Grade A mortgage requests coming in. In each case where we were funded a mortgage, we were able to take reserve payments of 3-12 months which simply allows us to guarantee payments for a set period of time, should the borrower experience a covid related incident. This just gives us some extra added security which borrowers certainly understand at this time.
All of the mortgages have also been registered for at least 105% of the borrowed amounts and in some cases 115% which has become our new normal. This is a very important strategic move that is worth noting because this makes sure we are ALWAYS secured even if we need to defer a payment for a borrower at a later date.
In the month of April, we were able to funded just over $2.5 million in Ottawa mortgages. The breakdown was $2.3 million dollars in 1st mortgages and $211 thousand in second mortgages which brings our portfolio percentage of first and seconds to 76% in first mortgages and 24% in in seconds mortgages. Our weighted average credit score remains very strong at 705. And our weighted average loan to value currently sits at 70.93 percent.
With respect to our annual targeted rate of return, based on what we are seeing I’m still confident projecting a compounded rate of return of mid 7’s.
As often mentioned, Advanced Mortgage Investment Corporation invests only in local residential real estate so let’s take a closer look at how the Ottawa Real Estate market is doing.
In April the Ottawa real estate market understandably had considerably less transactions in fact they are down approximately 56% but as we all know its not the number of transactions that is of concern for us. We know this number will change quickly once some restrictions are lifted. The good news story is that demand for listed properties remains strong and in fact in the month of April many properties were still selling for over list price with multiple offers. For April, Year over year we have seen a 6.8% increase in values and year to date we have seen an increase of 15.1%. and those numbers are just for single family homes not including the condominium market. Just out of interest the condo market also did well with similar growth, its just not a sector that we tend to focus on as we prefer single family dwellings in our AMIC portfolio.
So, it goes without saying but we’ll say it anyways, we will continue to monitor the Ottawa real estate market on a daily basis and be sure to adjust lending activity accordingly but all in all we do like what we’ve been seeing. We also believe that once restrictions are lifted or relaxed, we will see a flurry of activity as the pent-up demand for homes works with way through the system.
For April and including the May raise of capital we brought in an additional $600 thousand in new money of which $90 thousand of that was from one of my own related companies. I mention that because I do think its important that people know that between friends, family business associates and staff, we make up approximately 47% of the portfolio. As it currently stands and if all the paperwork comes back on-time we should be around $1mm or more, raised for the month of June.
As you may recall we continually raise funds but only accept the funds at the beginning of each month so we are just wrapping up our May’s raise now and then the next one starts on June 1st.
We have lots of good quality business to do so if you are interested in looking at adding to your current holdings we’d be happy to review that possibility with you over the phone or via video conferencing and I also wanted to add that some of our current investors have also been making some personal introductions of friends and family to us and we are extremely grateful for those as there is no greater compliment as far as we are concerned.
In all we are very happy with every aspects of the portfolio and are extremely humbled with the level of confidence our investors have demonstrated as well.
Please remember to visit us online at advancedmic.com or follow us on Facebook or LinkedIn at Advanced Capital Corporation.
As always, I’m just a phone call away at 613-656-0866 or by email at mikeh@advancedmic.com
Keep well and I will speak with you soon.