Letter to Shareholders
A Letter From Our President
Dear Shareholder,
When I was 19 years old a family friend, also a Chartered Accountant, introduced me to the world of private lending. It immediately grabbed my attention and I became very intrigued and fascinated in the space. I had so many questions. I began my research and shortly after I purchased a book from Amazon.ca by Teri B. Clark entitled The Ultimate Guide to Private Mortgage Investing. Little did I know this book was about to completely change my life and how I saw the private lending game. I was instantly hooked and found my calling in life.
I then began my journey that would eventually lead to the birth of Wellington Hathshire. I went off to work for other major firms including Scotiabank, the Ontario Teachers’ Pension Plan and KPMG. It was from these institutions where I developed a unique set of skills however in the back of my mind, I was setting up the principles and foundation for Wellington Hathshire without even knowing it just yet.
It wasn’t until I read the book The Fountain Head by Ayn Rand that really encouraged me to follow my dream. The lesson I took from this book is that it doesn’t matter what others think; it’s how you see the world and your unique role in it. The Fountain Head was motivating for me at the highest levels and encouraged me to take risks in order to reach my goals and take responsibility for all successes and failures. It is a must read and I highly recommend it.
Today the blueprint that forms the shape and design of Wellington Hathshire is simple: it is better to have a partial interest in the Hope Diamond than to own all of the rhinestone. What this entails is that WH deals with only worthy borrowers that possess wonderful collateral assets (i.e. real estate property) that meet our specific set of requirements. It is our view that there are an infinite number of innings and swings available to the batter in this game, therefore we can afford to wait for the perfect pitch to come along and knock it out of the park.
By doing so, Wellington Hathshire has grown into an investment corporation with a large and reliable stream of earnings, liquid assets and no significant short-term cash requirements. In our view these are the three essentials for maintaining financial staying power for the years to come. Here is how we will always stand on these three essentials.
First, our earnings stream is huge and comes from a vast array of borrowers. Our shareholders now own many mortgage loans secured against wonderful real estate property specifically concentrated in Toronto and the GTA. This assures stability in our portfolio and in WH’s continued profitability.
The second essential is cash. In my experience as a Chartered Accountant, businesses often times make a fatal mistake and see cash as something to be minimized, as an unproductive asset that needs to be invested otherwise it will drag down measures such as return on equity. Cash, though, is to a business what oxygen is to an individual: never thought of when present, the only thing in mind when absent. At WH, our “breathing” has gone uninterrupted. Since inception we have supplied tens of thousands of dollars every month of fresh dividend payments to our shareholders while maintaining a cash reserve of almost 20% of AUM. We’re able to do this because of our ability to generate and maintain high-quality and performing mortgage loans. When the bills come due, cash is the only legal tender. Don’t leave home without it.
Lastly, the company will never engage in investment practices that can result in a sudden demand for large sums. As a result, this means we will not lend more than 10% of our capital to any one particular borrower, irrespective of how attractive the investment might look at that particular point in time. This is engraved as one of the founding principles of WH in that we will never trade reputation for money. In our view it is madness to risk loosing what we have for something we don’t need. This allows us to maintain diversification across our portfolio and assures continued profitability for our shareholders.
Today WH prides itself on providing shareholders with the opportunity to earn a consistent stream of strong, and potentially tax-free, dividend payments. The Company generates earnings without macroeconomic risk or volatility commonly seen in other investment vehicles. As an example, WH is not exposed to foreign exchange rate risk, fluctuations in the price of oil, or other commodities or interest rates. Our capital is protected through the security of real estate, which is pledged as collateral, specifically located in Toronto and the GTA. This form of investment protection mirrors the security Royal Bank (or any of the financial institutions) would receive when putting out a mortgage loan.
Overall, WH is committed to delivering excellence to its shareholders and although our structure is that of a corporation, our attitude is partnership. Since inception we have engraved in our culture that remuneration paid to WH is to come only from the operating profits it generates, and never as a percentage of AUM. In our opinion, this is the only way to truly align the Manager’s and Shareholder’s interests.
Today the private lending world in Canada represents a staggering $60 billion industry. The need for borrowers to seek a private financing alternative will remain central to the lives of many Canadian families and looking ahead, we see a niche made to order for WH.
We are fortunate to have founding principles and values that make WH special and I look forward to sharing them with you.
Daniel F. Astone
