Highlights in the quarter compared to Q3 2006:
- Originations grew by 12% to $34 million;
- Normalized income per unit increased 9% to $0.359;
- The mortgage portfolio grew by 14% to $678 million;
TORONTO, Nov. 6 /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 three months ended September 30, 2007.
The third quarter results continue the Trust's recent trend of
significant business expansion and improved financial performance. The
aggregate of new mortgage originations and accrued interest is significantly
outpacing repayments, resulting in acceleration in the rate of growth of the
mortgage portfolio. During the trailing 4 quarters ended September 30, 2007
the portfolio grew 14% or $85 million to $678 million, in comparison to growth
of 14% or $74 million during the comparable period in 2006.
During the quarter, mortgage originations of $34 million achieved a
record quarterly high, 12% over Q3 2006, and trailing four quarter
originations grew to $118 million, 16% higher than the period ended Q3 2006.
"Our product continues to gain acceptance and recognition, our customer
demographic is growing, our product mix is expanding and we are improving our
sales and marketing capabilities", said CEO Steven Ranson.
Despite recent difficult conditions in the capital markets, which have
resulted in a reduction in market liquidity and associated increased debt
costs, the Trust's strategy of staggering the maturities of its assets and
debt obligations has thus far mitigated the extent of the impact. The Trust's
mortgage portfolio, with its proven high credit quality supports an effective
financing program consisting primarily of 'AAA' and investment grade debt. A
combination of portfolio growth, consistent interest rate spreads and
controlled overhead costs have again had a positive impact on normalized
income per unit, which grew by 9% to $0.359 compared with $0.328 in Q3 2006.
Should the conditions in the capital markets persist for an extended
period, the Trust could ultimately suffer from a reduction in spread. In
addition, the extent to which the Trust is exposed to refinancing risk could
result in increasing debt service costs, also ultimately causing a reduction
in spread. At this time it is not possible to predict the extent to which this
situation will continue. Management has taken steps to continue the growth and
prosperity of the Trust in these circumstances.
Due mainly to the enactment of Bill C-52 Budget Implementation Act, 2007
in June 2007, the Trust recorded a non-cash charge to earnings for future
income tax liabilities. In addition, under new accounting standards, an
unrealized gain was recorded to reflect the change in fair market value of
derivatives. These charges, while significant in value, will have no impact on
the Trust's cash flows or distributable cash, nor should they in any way
adversely affect its positive momentum.
Independent studies indicate that there is a marked increase in the
number of senior homeowners who view their homes as significant assets that
will play a key role in retirement financial planning. Mr. Ranson continued,
"Our intention is to offer a product to meet the needs and requirements of as
many customers as possible. Our product mix now includes features that
specifically address customer preferences and concerns regarding short versus
long term interest rate horizons, interest rate fluctuations and equity
preservation. We believe our product is on par or better than that available
anywhere in the world".
"During the quarter the Trust again demonstrated that it is in a unique
position to capitalize on its growth in market awareness, and on the
increasing recognition of its solution as a valuable tool in retirement
planning. With the Trust's position as the leading provider in the reverse
mortgage market, and positive momentum in business performance, we expect to
continue to benefit from the demographic trend of a rising population of
seniors and their desire to remain in their homes for as long as possible",
stated Mr. Ranson.
Third Quarter Report
The Third quarter report is 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
Tuesday November 6, 2007 at 10:30 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 1-866-244-4494
(conference ID 525029) from two hours after the completion of the call to
midnight November 8, 2007.
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, normalized income
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 companies.
Forward Looking Statements
Home Equity Income Trust ("HOMEQ" or the "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. 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 September 30, 2007, the portfolio generating
cash returns to the Trust comprised approximately 6,600 reverse mortgages with
an accrued value of $678.3 million, secured by residential properties across
Canada worth approximately of $1.9 billion. CHIP (www.chip.ca), has been the
main underwriter of reverse mortgages in Canada since pioneering the concept
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: Gary Krikler, Senior Vice President and Chief
Financial Officer, (416) 413-4679, firstname.lastname@example.org; Scott Cameron, Vice
President, Finance, (416) 413-6605, email@example.com