Outside The Box…Investing in ‘Green’ Mortgages

Tony Edwards Everything Else, Perspective

Island Word – October 2003

Given three years of precipitous market declines, accounts of greed and corruption on a stomach-churning scale, tales of profiteering at the expense of social and environmental systems, and fraudulent accounting that victimizes both employees and shareholders, it’s little wonder that investors suffer from indigestion when they contemplate committing their savings to the stock market. Many have decided that real estate offers an alternative that they at least understand and have some degree of control over, others are looking for opportunities far outside of the traditional investment menu.

One of the alternatives that is catching the eye of environmentally-conscious investors is in the provision of what might be termed ‘green mortgages’. While the majority of organizations involved in land conservation rely on gifts and donations to further their activities, funding shortfalls are increasingly being met by attracting investors with the promise of some kind of nominal return on their capital, whether in the form of a conventional mortgage, term loan, or other type of financing vehicle. It is not uncommon for such funding to be provided with little, if any, guarantee that interest will be paid, or the original capital returned to the investor. Nevertheless, defaults are extremely rare as such an eventuality would put the future fund-raising efforts of these organizations at risk

Investors who are interested in aiding the activities of a conservation organization that operates exclusively here in British Columbia might want to start by exploring …..

THE LAND CONSERVANCY of BRITISH COLUMBIA

The Land Conservancy of British Columbia (“TLC”) is a registered, charitable, non-profit land trust, established on May 1, 1997, pursuant to the Society Act (British Columbia). TLC has been modeled after the National Trust of Britain. TLC’s mandate is to contribute to and improve the education, health and welfare of the general public through the protection and preservation of lands and waters within British Columbia. This mandate is accomplished primarily by acquiring protective control of such lands and waters through ownership in fee simple, long-term leases or conservation covenants.TLC currently protects over 86,000 acres of environmentally sensitive land throughout British Columbia. Over 9,000 acres are owned by TLC, while an additional 75,000 acres are held under long-term leases. Over 3,000 acres are protected by protective covenants.TLC recently completed an offering of a syndicated mortgage to finance the acquisition of a property known as Thwayte’s Landing in North Vancouver. This mortgage came with a five year term and an interest rate of 7 ¾ % per annum. While this offering is now closed, it is a good example of how societies involved in conservation efforts can attract investment funds.

TLC is currently seeking 5 year term loans from ‘sophisticated investors’ that will be used to improve their cash flow, fund their development activities over the next 12 months, and improve their cash reserve. They are proposing to offer interest at a rate of 6% per annum, calculated and paid annually by issuing a cheque to investors at the end of each year. Bill Turner, the Executive Director of TLC, noted that investors should be aware that this is similar to venture capital, it will not be guaranteed by any of TLC’s assets (it is not a mortgage) nor will it be guaranteed by any of the directors. “Our ability to repay the loan in 5 years will be solely dependant upon our ability to either raise the money through donations or through replacement loans.”

If you are interested in staying abreast of TLC’s activities, try visiting www.conservancy.bc.ca. Bill Turner can be reached at bturner@conservancy.bc.ca or by calling (250) 479-8053.

Of course TLC is not the only option for those seeking to integrate their investments with their values. Locally, the Comox Valley Land Trust has ongoing requirements to fund their work in the valley. While they normally meet their capital requirements through donations, bequests and charitable giving (which can all have favourable tax consequences that I will address in a future article) there may be instances where the CVLT would entertain other forms of investment. They can be reached at 338-1368 or email cvlt@uniserve.com for further details. Valley residents may also want to keep an eye on the activities of the Whyte’s Bay Forest Society, an organization that is seeking investors who wish to help preserve 500 hectares of land around Cumberland and Comox Lake that has been slated for logging. The Whyte’s Bay contact is Gwynne Sproule at 336-8165.