Vector Mortgage Trust
High-Yield Alternative Lending in Commercial & Land Development
Published: Jun 4, 2025
Author: FRC Analysts
*This report and research coverage is paid for and commissioned by Vector Mortgage Trust – See the bottom of this report for other important disclosures rating, and risk definitions.
Sector: AdTech | Industry: Advertising
Sector: N/A | Industry: Mortgage Investment Entities
Ticker Symbols:
Report Highlights
- Vector Mortgage Trust (VMT), established in 2022, is a Mortgage Investment Entity (MIE) and alternative lender focused on first mortgages secured by commercial and land development properties in southern Ontario. VMT offers loans for pre-development, construction, property improvement, and income-producing assets.
- The fund’s manager has been active in the mortgage industry since 1969, and has funded over $1.25B in mortgages since inception.
- At the end of Q1-2025, the fund’s mortgage portfolio totaled $238M. With a portfolio of floating-rate loans, the fund is well-positioned to adapt to shifts in market interest rates.
- Compared to other MIEs focused on land development and construction lending, we believe Vector’s portfolio has a lower loan-to-value (LTV) ratio, fewer stage 3 (impaired) mortgages, and a smaller average mortgage size. Additionally, the fund does not employ leverage to enhance yields, positioning it as a relatively lower-risk option compared to its peers.
- At the end of 2024, two out of 54 mortgages were classified as stage 3 (impaired). We believe the fund’s low LTV (45%) puts them in a comfortable position.
- Since May 2024, the BoC has cut rates seven times (225 bp), with the potential for one or two more cuts this year, due to slowing GDP growth, high unemployment, and cooling inflation. Although mortgage delinquencies remain a concern for lenders, we believe the risk is easing amid falling mortgage rates. We anticipate a gradual rebound in pre-sales, and reduced financing costs for developers, and a moderate increase in transaction activity for real estate lenders this year.
- We find high-yielding funds, like VMT, increasingly attractive in the current declining rate environment. This is because MIE lending rates are less elastic, meaning their yields tend to decline less in a falling rate environment, and rise more slowly in a rising rate environment.
- We are forecasting a yield of 9.2% in 2025 (2024: 10.5%) vs management’s guidance of prime + 5%, or approximately 9.0-10.0%.
Risks
- Highly competitive sector
- A downturn in the real estate sector may impact the fund’s deal flow
- Principal is not guaranteed; no guaranteed distributions
- Default rates can rise during recession
Fundamental Research Corp. Equity Rating Scale:
- Rating – Excellent Return to Risk Ratio
- Rating – Very Good Return to Risk Ratio
- Rating – Good Return to Risk Ratio
- Rating – Average Return to Risk Ratio
- Rating – Weak Return to Risk Ratio
- Rating – Very Weak Return to Risk Ratio
- Rating – Poor Return to Risk Ratio
Fundamental Research Corp. Risk Rating Scale:
- (Low Risk)
- (Below Average Risk)
- (Average Risk)
- (Speculative)
- (Highly Speculative)
FRC Distribution of Ratings
| Rating | Percentage | Risk | Percentage |
|---|---|---|---|
| Rating – 1 | 0% | Risk – 1 | 0% |
| Rating – 2 | 33% | Risk – 2 | 10% |
| Rating – 3 | 45% | Risk – 3 | 41% |
| Rating – 4 | 4% | Risk – 4 | 32% |
| Rating – 5 | 8% | Risk – 5 | 8% |
| Rating – 6 | 1% | Suspended | 10% |
| Rating – 7 | 0% | ||
| Suspended | 9% |
Disclaimers and Disclosure
The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary.
Fundamental Research Corp. “FRC” owns shares of the subject company: No. The analyst owns shares of the subject company: No , and does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company.
Fees ranging from $10,000 to $20,000 have been paid by Vector Mortgage Trust to FRC to issue this report. This fee creates a potential conflict of interest which readers should consider. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time.
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