June 09, 2010 10:52 ET

Firm Capital Mortgage Investment Trust Plans to Convert to Corporate Structure and Operate as a Mortgage Investment Corporation

TORONTO, ONTARIO--(Marketwire - June 9, 2010) - Firm Capital Mortgage Investment Trust (the "Trust" or "Firm Capital") (TSX:FC.UN) today announced that it plans to seek unitholder and regulatory approval to convert from an income trust into a corporation effective December 31, 2010. Firm Capital will then elect to operate as a mortgage investment corporation ("MIC").

If approved by unitholders, the conversion of the Trust to a MIC will be initiated, if necessary, in response to the Federal Government's announcement in October, 2006 that changed the way income trusts, such as Firm Capital, are to be taxed effective January 1, 2011.

Mortgage Investment Corporation

A mortgage investment corporation is a special-purpose corporation defined under Section 130.1 of the Income Tax Act (Canada). MIC's do not pay corporate-level taxes when all net profits are paid out to shareholders as taxable dividends every year. Canadian individual shareholders who hold their shares outside of registered plans (such as RRSPs, RRIFs or RESPs) will have dividend payments taxed as interest income.

The following criteria must be continually met to achieve MIC eligibility:

  • at least 50% of its assets must consist of residentially oriented mortgages and/or cash;

  • it must not hold any foreign assets, including investments secured by real property located outside of Canada;

  • shares of the MIC must be widely held, whereby no person may own more than 25% of the issued and outstanding shares;

  • it must not engage in operational activities outside of the business of lending and investing of funds.

Requirement for Conversion

The trustees and management of Firm Capital believe that the proposed conversion of the Trust is in the best interests of unitholders given it will allow the net income of Firm Capital to be distributed to unitholders (future shareholders) without the income being taxed at the trust level as would be the case as of January 1, 2011 under the current SIFT legislation.

Conversion Process

The Board of Trustees of Firm Capital has retained legal and accounting advisors to ensure that the best interests of unitholders and the Trust are achieved through the conversion process.

Unitholders will be asked to approve the proposed conversion plan at a special meeting that will be scheduled for the fall of 2010. The conversion is subject to approval by not less than 66 2/3% of the votes cast at the unitholders' meeting as well as customary conditions, including the receipt of regulatory and TSX approvals and the approval by the Court. An information circular in respect of the unitholders' meeting is expected to be available by mid-October, 2010. The conversion, if approved, is expected to occur by way of a plan of arrangement.


Firm Capital, through its Mortgage Banker, Firm Capital Corporation, is a non-bank lender providing residential and commercial short-term bridge and conventional real estate financing, including construction, mezzanine and equity investments. The Trust's investment objective is the preservation of Unitholders' equity, while providing Unitholders with a stable stream of monthly distributions from investments. The Trust achieves its investment objectives by pursuing a strategy of growth through investments in selected niche markets that are under-serviced by large lending institutions. Lending activities to date continue to develop a diversified mortgage portfolio, producing a stable return to Unitholders. Full reports of the financial results of the Trust for the year are outlined in the audited financial statements and the related management discussion and analysis of Firm Capital, available on the SEDAR website at In addition, supplemental information is available on Firm Capital's website at

Forward-Looking Statements

This news release contains forward-looking statements within the meaning of applicable securities laws including, among others, statements concerning our objectives, our strategies to achieve those objectives, our performance, our mortgage portfolio and our distributions, as well as statements with respect to management's beliefs, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intent", "estimate", "anticipate", "believe", "should", "plans" or "continue" or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management.

These statements are not guarantees of future performance and are based on our estimates and assumptions that are subject to risks and uncertainties, including those described in our Annual Information Form under "Risk Factors" (a copy of which can be obtained at, which could cause our actual results and performance to differ materially from the forward-looking statements contained in this circular. Those risks and uncertainties include, among others, risks associated with mortgage lending, dependence on the Trust's trust manager and mortgage banker, competition for mortgage lending, real estate values, interest rate fluctuations, environmental matters, Unitholder liability and the introduction of new tax rules. Material factors or assumptions that were applied in drawing a conclusion or making an estimate set out in the forward-looking information include, among others, that the Trust is able to invest in mortgages at rates consistent with rates historically achieved; adequate mortgage investment opportunities are presented to the Trust; and adequate bank indebtedness and bank loans are available to the Trust. Although the forward-looking information continued in this new release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results and performance will be consistent with these forward-looking statements. 

All forward-looking statements in this news release are qualified by these cautionary statements. Except as required by applicable law, the Trust undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Contact Information

  • Firm Capital Mortgage Investment Trust
    Eli Dadouch
    President & Chief Executive Officer
    (416) 635-0221