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Alternative Investments

TDAM Mortgage Investments

At a glance

The purpose of the strategy is to provide institutional investors a sustainable, long-term income stream by investing in a diversified portfolio of Canadian commercial mortgages. We believe a mortgage investment's stability derives from the quality of the underlying commercial real estate, the financial and managerial strength of the borrower, and the continuity of income paid by tenants occupying the mortgaged property.

Mortgage Investments: Providing Predictable and Stable Income

  1. Fully Integrated Alternatives Platform: Wehave been managing both mortgages and real estate since 1988. Our integrated platform provides an information advantage across the entire real estate life cycle to help reduce risk and improve underwriting.

  2. Aligned with Client Interests: We align our interests with those of our clients and seek to remove potential conflicts of interest by returning all processing fees that are paid by the borrowers to the strategy as income.

  3. Relationship Driven Execution: Over 90% of the strategy's assets are with repeat borrowers while over 50% of investments are sourced off-market

  1. Internal Mortgage Servicing: Our internalized mortgage servicing function is an integral component of managing risk in the strategy as it allows us to control the end-to-end mortgage investing and servicing process. 

Philosophy and approach

  • We focus on commercial mortgage investments that provide predictable and stable income. We add value by having expertise in real estate as well as the properties that secure the mortgages. This enables us to underwrite and structure the loans advantageously for our clients. Finally, we use multiple loan types to enhance yield, manage duration and return placement fees to the fund as additional income.

    Our investment process consists of:

  • Top-down Analysis: From a top-down perspective, diversification is the key risk control. Ultimately, our goal is to achieve broad diversification by geography, sector and property type, loan type, borrower and maturity, so that no single event can shock the portfolio. Duration and yield curve positioning are actively managed to maximize yield given our economic outlook and interest rate projections.

    Our Mortgage Team uses fundamental and technical analysis to monitor the macroeconomic environment for changes in market and industrial trends. Capital flows are tracked and their effect on fixed income and real estate prices are carefully assessed.

    Bottom-up Analysis The Mortgage Team adheres to a robust underwriting process to assess the risk profile of each potential investment opportunity and determine whether it is a good fit for the conservative nature of the portfolio. Each mortgage is reviewed from the bottom-up, starting with a detailed analysis of the underlying real estate, which is further confirmed by a third-party appraisal.

  • Model: All investment decisions are placed into a proprietary portfolio modelling system to provide clarity on availability of capital and visibility to any potential compliance issues. The model also provides forecasted diversification and cash flow analysis, allowing the Mortgage Team to dynamically focus on investment decisions that optimize risk-adjusted returns and meet the requirements of the portfolio, both at present and into the future.

    Execution Our ability to source mortgage investments has been largely the result of the industry relationships developed over 30 plus years of real asset experience and a demonstrated ability to execute with consistency and integrity. The Mortgage Team receives new investment opportunities from the broker community, as well as directly from borrowers. As a result of these strong relationships, over 90% of the portfolio reflects repeat business from long-term strategic relationships.

ESG

Environmental, Social and Governance (ESG) integration aligns with our philosophy of seeking investments in sustainable, long-term assets through a risk-managed process. We strive for a fully integrated ESG engagement process in our investment products.

Our Alternatives Team seeks to integrate best-in-class sustainability practices across all real estate, infrastructure, and mortgage investment and portfolio management processes. This includes acquisitions, developments, capital planning and ongoing operations. We believe our sustainability strategy is fully aligned with our cultural focus on risk management, disciplined processes and sustainable returns.

We adhere to the following commitments, which also apply to management partners and related external service providers:

Environmental Impact We are committed to minimizing the environmental impact of our investments by staying attentive to resource utilization and waste. Some of those efforts include reducing energy and water use, reducing greenhouse gas emissions, considering renewable energy sources, minimizing waste output, focusing on waste diversion, using sustainable materials and equipment, and pursuing third party certification standards relating to sustainable practices wherever possible.

Health and Welfare We are committed to improving the health and welfare of our tenants, residents, suppliers and the communities in which we operate. Efforts toward this end include ensuring assets meet or exceed all health and safety regulation, requiring sustainable and responsible contracting principles to be used by our management partners, and fostering community involvement.

Integrity and Accountability To encourage the continuous improvement of sustainability best practices and to support our values of integrity and accountability, we are committed to promoting sustainable practices and embedding sustainability considerations into our disciplined investment processes and policies. We will continue to measure our progress towards these commitments. Both the Real Estate and Infrastructure teams are participant members of the Global Real Estate Sustainability Benchmark (GRESB).

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