Syndicated mortgages have been the subject of much litigation recently, but according to a Toronto-based lawyer, they can still be a worthwhile investment.
Brinn Norman, general counsel for Hi-Rise Capital Ltd., laments syndicated mortgages’ tarnished reputation, but says it’s the consequence of an opportunistic few running roughshod over a specialized segment of the mortgage industry that isn’t fit for everyone.
In fact, Norman is emphatic that a very specific investor should be brought into the fold. Hi-Rise Capital deals solely in syndicated mortgages, and one of the reasons the company has been so successful in such a niche field is its commitment to removing unsuitable investors from collaborating on deals.
“We go way above and beyond what’s required under the Mortgage Brokers Act laws,” said Norman. “We have ‘know your client’ forms that go above and beyond so that we understand what portion of someone’s overall portfolio they’re thinking about allocating to this stuff. We really try to narrow down on a lot of stuff, and to be honest, we reject a lot of investors because we don’t think it’s right for them.”
Norman says that syndicated mortgages should be considered only when they’re part of balanced portfolios, and only after exhaustive risk assessments. Unfortunately, unethical players entered the market and oversold syndicated mortgages, omitting the risk assessment process and overexposing investors.
Syndicated mortgages, added Norman, only work for certain investors, and only for certain development projects.
“In our world, we focus on the downtown Toronto core because in any economy, and in any market condition, there’s always going to be this incredible demand, and that’s where we see prices will always be going up—or will certainly never decline at the rate they do in other areas,” he said.
In addition to some bad apples, Norman suspects many investors hit hard by the decade-old crash tried in vain to make back their losses through syndicated mortgages.
He also sees lenders and investors alike pulling away from syndicated mortgages because of how litigious they’ve become, however, Hi-Rise proved once again that the funding model can be successful with the right players.
“At the end of the day, it all comes down to the projects that the syndicated mortgages are investing in,” said Norman. “We work with a developer who has incredibly high-quality projects. Assets are incredibly valuable right in the downtown Toronto core. One just sold, 40 Widmer, and it set a record for the highest price per square foot.”
Perhaps, then, with more developments like that, a reversal of fortunes could be in the cards for syndicated mortgages.
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