Highlights compared to 2006
- The mortgage portfolio grew by 16% to $708 million;
- Originations grew by 22% to a record $127 million;
- Net income before income taxes and unrealized loss on derivative
instruments increased by 31% to $9 million;
TORONTO, March 7 /CNW/ - Home Equity Income Trust (TSX: HEQ.UN (the
Trust)), which pays cash distributions earned from a portfolio of reverse
mortgages originated by Canadian Home Income Plan (CHIP), today announced its
financial results for the year ended December 31, 2007.
During 2007 originations grew by 22% to an all time high of $127 million,
which follows 18% growth in 2006, and the Trust's total portfolio of reverse
mortgages grew by 16% to $708 million. "These rates of growth are uncommon in
the Canadian financial services sector and prove the unique position occupied
by the Trust", said CEO, Steven Ranson. "As we become better known as a viable
alternative in retirement planning, seniors are turning to our product in
greater numbers. While our clients come from a broad cross-section of society,
they share the desire to stay in their homes and experience a comfortable
Product development continues to be a major focus of the Trust, with the
intention of offering products that meet the needs of the unique personal
circumstances and requirements of as many customers as possible. During the
year further refinements were added to the product offering which now includes
features that specifically address customer preferences regarding long versus
short interest rate horizons, interest rate fluctuations and equity
The network of referral partners continues to be expanded and developed
and now encompasses all the major Canadian banks, and also includes foreign
and regional banks, wealth management companies and mortgage brokers. These
relationships have taken a long time to establish and require close monitoring
and management on an ongoing basis.
With the portfolio growth has come the benefits associated with size,
scale, efficiency and improved sophistication. The cost of both mortgage
origination and mortgage administration continue to fall on a percentage
basis, while the high quality of the assets has been maintained. As a result
of conservative underwriting policies, the portfolio has an average
loan-to-value of only 36% which would reduce the impact of a drop in
residential real estate should that occur. The real estate securing the
mortgages is well diversified by property type, location and province.
Challenging conditions in the capital markets commencing in the third
quarter resulted in a reduction in market liquidity and increased debt costs.
The spread on the portfolio is dependant on access to cost effective capital
to finance growth and refinance maturing debt. Debt transactions carried out
in the latter part of the year were at higher costs than in recent times,
however, prudent decisions were made in the past by borrowing for longer terms
when funds were available at particularly good rates. This, together with the
strategy of staggering the maturities of our assets and debt obligations has
thus far reduced some of the impact of higher debt costs.
Mr. Ranson continued, "We have every reason to remain bullish on our
business. We have built up strong brand recognition and our customer segment
continues to grow. We have a strong and well secured portfolio, we have
momentum on our side and our referral base continues to expand. We believe it
is unusual for an entity of our size to have developed business relationships
with such an impressive array of Canadian businesses. These relationships are
testament to the invaluable service we provide to both our referral partners
and our common clients."
Annual Financial Statements
The 2007 annual financial statements are available on the Trust's website
at www.homeq.ca and www.sedar.com.
HOMEQ will hold a conference call to discuss these financial results
today, March 7, 2008 at 10:00 am (Eastern).
Available on the call to answer questions will be Steven Ranson,
President and Chief Executive Officer, and Gary Krikler, Senior Vice President
and Chief Financial Officer.
To participate in the conference call, please dial 416-642-5212 or
A live audio webcast (listen-only mode) of the conference call will be
available at www.vcall.com and will be subsequently posted at www.homeq.ca.
An archived recording of the call will be available at 1-888-203-1112
(conference ID 7514116) from two hours after the completion of the call until
midnight March 9, 2008.
The Trust uses a number of financial measures to assess its performance.
Some measures are calculated in accordance with GAAP, such as operating margin
and net income. Other measures such as distributable cash and net spread are
non-GAAP measures. These measures do not have standardized meanings under GAAP
and may not be comparable to similar measures used by other trusts and
Forward Looking Statements
Home Equity Income Trust from time to time makes written and verbal
forward-looking statements about business objectives, operations, performance,
and financial condition, including, in particular, the forecast of cash
distributions and the likelihood of HOMEQ's success in developing and
expanding its business. These may be included in the Annual Reports,
regulatory filings, reports to unitholders, press releases, Trust
presentations and other communications. These forward-looking statements are
based upon a number of assumptions and estimates that are inherently subject
to significant uncertainties and contingencies, many of which are beyond the
control of HOMEQ. Actual results may differ materially from those expressed or
implied by such forward-looking statements. HOMEQ does not undertake to update
any forward-looking statement, whether written or verbal, that may be made
from time to time.
About Home Equity Income Trust
Home Equity Income Trust provides unitholders with stable monthly cash
distributions from a portfolio of reverse mortgages originated by its wholly
owned subsidiary Canadian Home Income Plan Corporation ("CHIP"). The Trust's
units are rated SR-2 by Standard and Poor's, which assigns this rating to
funds that have "a very high level of cash distribution stability relative to
other rated Canadian income funds." As of December 31, 2007, the portfolio
generating cash returns to the Trust comprised approximately 6,700 reverse
mortgages with an accrued value of $708 million, secured by residential
properties across Canada worth approximately of $2.0 billion. CHIP
(www.chip.ca), has been the main underwriter of reverse mortgages in Canada
since pioneering the concept in 1986.
The Trust's units trade on the Toronto Stock Exchange under the symbol
HEQ.UN. Additional information on HOMEQ, including annual and quarterly
reports and the Trust's distribution reinvestment plan, can be viewed at
For further information:
For further information: Steven K. Ranson, President and Chief Executive
Officer, (416) 413-4663, email@example.com or Gary Krikler, Senior Vice
President and Chief Financial Officer, (416) 413-4679, firstname.lastname@example.org