An interview with ROBERT GOODALL, President, Chief Executive Officer and Founder of Atrium Mortgage Investment Corporation (TSX: AI, Forum)
For the uninitiated please briefly describe Atrium Mortgage Investment and the services it provides.
We are a mortgage lender filling the lending gap caused by the limited number of financial institutions operating in Canada. We lend in major urban centres where the stability and liquidity of real estate is at the highest level. We focus on loans that cannot be placed with financial institutions but which represent an acceptable underwriting risk. Our mortgages are secured by all types of residential, multi-residential and commercial real property located in Canada, subject to compliance with our investment policies. Atrium’s strategy is to grow in a controlled manner by diversifying geographically, and focusing on those real estate sectors with the lowest risk profiles.
What differentiates Atrium Mortgage Investment from the competition?
We have nine experienced mortgage originators in five offices across Canada. We only lend in markets where we have local offices and local real estate knowledge, namely Ontario, B.C. and the Prairies. In doing so, we can react very knowledgably and quickly to new lending opportunities. We focus on relatively liquid real estate markets in major metropolitan centres in Canada. We believe that our strategy results a much stronger mortgage portfolio. As a result, we have an unblemished track record in 14 years of operation.
What is the core strategy in regards to your investment portfolio and what steps to you take to mitigate risk in those investments?
Our investment objectives are to preserve our shareholders’ equity and to provide our shareholders with stable and secure dividends from our investments in mortgage loans. Our primary strategy is to operate within conservative risk parameters by lending in major metropolitan centres in Canada where we have a local office, and only in relatively liquid markets, where the underlying real estate can readily be sold. In addition, we ensure that the loan-to-value ratio is low – in other words the value of the real estate securing the loan is significantly greater than the amount that we are lending. The strength of our portfolio can be seen in that 96% of our mortgages are at a loan-to-value ratio of less than 75%.
Atrium Mortgage Investment’s last quarter brought in record revenues year-over-year, up 16% to $9.6 million, as well as ringing in record earnings, up 10% to $5.8 million. How do you plan to keep up this growth rate in the coming quarters?
The growth rate in the future will depend on the economic environment. We are not committed to growth unless the right lending opportunities are available. The safety and security of our assets is our primary concern. We deliver steady and secure dividends to our investors – our focus is on safety rather than growth for the sake of growth.
What are the major milestones investors can expect for the remainder of this fiscal cycle?
Atrium is a flow-through investment vehicle. We offer an opportunity to invest in mortgages and we pay out all our interest income and fees, less the cost of administering the mortgages.
We’re really a form of fixed income investment – an alternative to bonds except our yields are much higher. So we don’t think in terms of milestones, instead we offer stability and security. We have had historic milestones, such as when we opened four more offices two years ago to expand the company geographically, but at the moment, we don’t really want milestones in the sense of major changes, we instead have continual steady growth.
To that end, we pay a monthly dividend of $0.07. In addition, after the year-end we pay a special dividend to the extent that our earnings exceed dividends paid. Last year, the special dividend was $0.07 per share. For the first six months of this year we have earned about $0.05 per share more than we have distributed as dividends. At the year-end, the total excess earnings will be paid out as a special dividend.
Who are the key players on your executive team, and what skills and experience do they bring to the table to assist Atrium Mortgage Investment reaching its milestones?
As well as being President, CEO and founder of Atrium Mortgage Investment Corporation, I founded Canadian Mortgage Capital Corporation in 1994, which provides us with experience in all aspects of real estate-based lending. Prior to founding Canadian Mortgage Capital and Atrium, I spent seven years with Royal Trust, the last three years as National Managing Director of the Real Estate Finance Group with a portfolio of $1.4 billion in commercial and multi-residential real estate loans, including fixed and floating rate mortgages, construction loans and high ratio mezzanine loan facilities. My experience during the weak real estate markets of the 1990s has helped make me a very careful lender.
Jeffrey D. Sherman has been Chief Financial Officer of Atrium since we went public in 2012, and is also a director of Trimel Pharmaceuticals Corporation where he chairs the audit committee. He has had extensive involvement with public and private companies focussing on organization change, risk management, and operational improvement. Mr. Sherman is also a well-known author and speaker; he has written over 20 books on strategy, risk management, cash management, and related topics.
Five of our mortgage originators have over 25 years of experience each in the industry, and previously held senior executive positions at various Canadian financial institutions, including CIBC, National Trust, Bank of America, GE Capital, Royal Trust and several smaller trust companies. These individuals were lending during the last real estate recession in the early 1990s and know the problems that can arise by lending too aggressively.
What are Atrium Mortgage Investment’s current challenges in the market?
The drop in the price of oil has made Alberta a much more challenging market, after years of leading the country in growth. As a result, we are currently doing less business in Alberta. We are also exposed to investors’ perceptions about real estate in Canada in general. When there is nervousness that affects our share price, even though there may be no direct impact on our regular dividend. Many of our investors treat Atrium like a GIC, they buy it, enjoy the regular monthly and special dividends, and ignore the market fluctuations.
What are the key reasons investors should add Atrium Mortgage Investment to their portfolio now?
Atrium gives you the benefit of a high-income interest-rate type security with the convenience and security of shares traded on the TSX.
In summary:
· Consistent, high yield and reliable monthly dividend: a rate of $0.84 annually currently ($0.07 per month)
· Special bonus dividend paid every year: $0.07 last year
· Steady dividend growth year after year
· Safety of assets
· Quality and experience of management
Where do you see Atrium Mortgage Investment in the next five years?
Our primary goal is to continue to provide a consistent and attractive dividend yield to our shareholders, as we have for the last 14 years.
FULL DISCLOSURE: Atrium Mortgage Investment Corporation is a Stockhouse Publishing client.