RE:InvestSmarter Keeps Pumping this Risky Stock Did you read my detailed EAI explanation below? There are no further cashflowing assets for sale (Non-Core 76 Stafford is for sale, that is about it, and its vacant). Did you read my most transparent article below regarding EAI debt? A lot of the EAI debt is going from 0 income to positive income starting in 2025. Maple House, Aalto II, and Common at Zibi will produce 6-7M income annually by mid 2025, from almost nothing in Q3. Cherry House, Lebreton, 2 Zibi Buildings are all under or near start of construction, which will remove the EAI debt and replace with 10 year fixed rate CMHC financing per part 3 below. These will all produce very healthy NOI from 0 NOI today. These land loans are also gone as soon as we start construction as the land loans are replaced with the 10 Year CMHC financing at rates around 3%.
Our land loans are going to be almost all paid off over the next 24 months, leaving almot no EAI debt other than debt that is generating income (and a couple small land loans are still likely as brightwater is build to sell). We will be left with a huge landbank of high quality land that we can build at our own pace, and the land will be fully paid off. The only EAI debt will be producing positive and healthy NOI.
You may also notice we wiped out ~100 Million in EAI debt (mostly Ivy Condos), as we borrowed money to complete construction of a few buildings. In 2025, we will wipe out all the EAI debt from Brightwater Towns and The Mason, as they complete Mid 2025. And at the same time, these developments will provide millions in net income returns to MPCT. This is how construction works. MPCT and their partners borrow money with a return of 15-17%. If you dont borrow the money, you dont get these returns.
" we're often looking at 15% or 17% returns" - Mr. Cooper, Q3 Call
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One issue is that some do not actually understand MPCT's EAI debt strategy. It's not normal for a REIT, so hopefully this will help those understand. Generally NAV of fully developed assets fluctuate, especially in weaker markets or office sector. However, EAI assets were NOT adjusted up via FMV adjustments in the first place, and below explains how our EAI debt works and why our EAI assets are worth materially more than it shows on our balance sheet.
For anyone not understanding EAI debt in MPCT, this is the best way to help understand. Canadian REITs are not heavy developers. MPCT is moving from being a developer of its own properties, to holding no land loans (but still owning a huge amount of valuable undeveloped land) and owning a portfolio of very high quality purpose built rentals. This is done through the process below. In the end, the land loans will be paid off, then we will have a massive paid for land bank of properties to build for the next 20+ years. As each development completes, we start producing more and more income. This will snowball.
EAI debt is placed under 3 types of debt stages:
1) Build to Hold, Completed projects:
This debt is completed projects, and produces income. Generally these assets are around 75% Loan to Value(LTV) once stabilized. They started off at 100% LTV in part 2. Most of this debt is non-recourse CMHC debt that is 10 year loans with interest rates under 3%.
This is good debt, as it is completed and adds value with a reduced debt ratio when completed FMV is adjusted at this stage as the properties get fully stabilized. This debt is also fixed for 10 years, so it's very stable and predictable. A couple examples of this are Maple House & Birch House.
2) Construction debt in development:
This debt is generally close to 100% Loan to Value when started as we apply for construction loans, and lasts the entire length of time for construction. As construction builds, we build equity and value so the final result is the build is worth more than its current stage here. We have a 15-20% development yield. There are 2 main types of development.
a) "Build to SELL" general construction debt for Brightwater Towns, and Forma are examples. These will be repaid when the projects are completed and the presale buyers take possession. We dont start building these until the vast majority is pre-sold, reducing risk. Brightwater Towns is 98% presold as example.
b) "Build to HOLD" construction debt through CMHC planned to end up being our purpose built rentals. Some examples are Cherry House and Dream Lebreton. These will have the lowest risk, and how 49 Ontario, Quayside, Zibi purpose built rentals, etc will have for debt. CMHC is non-recourse government backed with very low interest (usually at the Canadian 10 year bond rate) This debt will start at ~100% of the construction cost value including land, but when the project is done being built, the building ends up in part 1), where its worth more than when we started building it, ending around 75% LTV in most cases.
Before it gets to part 2, it was in part 3, as a land loan. When it reaches Part 2 it is now good debt, as it's going to start generating income when completed and the higher land loans are absorbed into lower cost debt. Each time we start a building, a portion of the land loan is paid off, and moves to this stage 2 debt.
3) Land Loan debt:
This is the most expensive debt, and we are getting rid of it each time we start building. Zibi will be repaid soon with the 3.27acre (10%) land sale and new building starts (even though we will end up holding a lot of valuable land with no debt on it). Quayside will have a big land loan chunk taken out when we start Quayside Phase 1 (Q3 said in the next 12-18 months), Brightwater, as we start each building will have a piece of the land loan debt wiped out. This debt sitting here not being built on is all variable land loan debt, so as interest rates drop, this debt gets less expensive. This is the main reason why MPCT took a big hit when rates went up, our cost to carry this debt rose. Now it's reversing quickly, and you can hear how much Mr. Cooper sounds on the earnings call.
All the assets are held at cost. So we spend millions rezoning land, and improving land, yet we do not increase the value of the projects on our EAI balance sheet until they reach completion milestones. There is immense unrecognized value under EAI meaning the assets are worth incredibly more than stated. This can be visualized in Dream Impacts Adjusted NAV in their investor presentation. This is a better realization of "NAV" showing that our current book value is very low.
Presentation is linked here:
https://dream.ca/wp-content/uploads/2023/09/DRM-Investor-Day-Presentation-website.pdf
Also you an read here which I outline some of the details:
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36266982
When you begin to understand EAI debt the way it's planned through, the risk profile falls very quickly and it actually becomes an asset, not a dangerous liability. We are close to paying down all our land loans. Then we will be holding only valuable income generating properties, buildings in development, and a PAID FOR land bank full of developments we can build at the best pace for the business.
Source Q3 Earnings Call Transcript:
If you find my explanation hard to understand, you can read it in Mr. Cooper's words here:
Do your own DD. Do not trade MPCT as the liquidity is low. Plan to hold the shares you buy as it is not easy to get in/out of a low liquidity REIT.
Please give my research a thumbs up if appreciated.
MPCT Research Below:
New Toronto Rental Program Incentive (Development Charge Waiver for 49 Ontario). This will save us ten's of millions on our developments in Toronto.
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36292877
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36290006
Scarborough Junction, The Hidden Gem
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36281186
2025 MPCT-UN Catalysts & Path To No Land Loans
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36245063
MPCT 2026 Forecast with Slide Presentation Images
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36266982
Huge Increase to NOI over the next 12 months. Details:
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36263654
Our Developments, with Pictures
https://stockhouse.com/companies/bullboard?symbol=t.mpct.un&postid=36235736
Q3 2024 Commentary (Not Official)
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36279263
Insider Purchase Bhalla, Amar, ($50,000) Units on September 26
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36253768
Links to MPCT Property Development Photos
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36224127
Government is doing everything in MPCTs Favor.
https://stockhouse.com/companies/bullboard?symbol=t.mpct.db&postid=36226580
I will add to this, No GST on new apartment builds, as well as CMHC loans are non-recourse. Dream is one of very few on CMHCs fast approval regular developer program. Plus, Toronto's new rental incentive program waiving development charges
Predator2018 wrote: Be honest and more transparent so that non sophisticated investors wont lose money on a sinking ship.
This is a high risk sinking ship. The risk of not being able to stabilize the condos to generate more than $30 million for just annual interest payments on debts & EAI obligations is high.
MPCT wil continue to selloff cashflow assets to pay debt and debenture interest until stabilization.