A year of solid absolute returns against a backdrop of record-low interest rates
TORONTO, May 13, 2015 /CNW/ - Romspen Mortgage Investment Fund, a leading non-bank mortgage lender specializing in commercial and industrial real estate, today released its financial statements for the year ended December 31, 2014. For 2014, the Fund returned 7.8%, reflecting both a strong absolute return and significant comparative outperformance against the major fixed income benchmarks. These results are ahead of last year's, and were achieved in an increasingly competitive lending environment and against the backdrop of continued record-low interest rates.
- The net mortgage portfolio increased by 15% in 2014 to $1.3 billion.
- Net earnings for 2014 increased by 19% to $92 million.
- Distributions to investors totalled $0.75 per unit to yield a compounded net return of 7.8%.
- Net returns of 7.8% for Romspen outperformed T-bills (0.9%) and the FTSE-TMX Short Term Bond Index ("FTSE/TMX‑STBI") (3.1%).
- Romspen's five-year performance (2010-2014), during a challenging and volatile investment period for all investors, has outperformed T‑bills, the FTSE/TMX‑STBI and the S&P/TSX.
- US mortgages in the portfolio increased to 26%.
- The Fund's unitholder equity for all units outstanding grew to $1.2 billion at the end of 2014 compared to $1.1 billion for 2013.
- Romspen has delivered positive net investor returns every year during the last 20 years with only a single monthly loss.
"Since inception, our mandate has remained unchanged: focused on capital preservation, absolute returns and performance consistency", says Mark Hilson, Managing General Partner of Romspen. "We are proud of our long established track record of consistently delivering steady and predictable returns, particularly during the past five years, which have been characterized by generationally low interest rates globally".
2014 Results of Operations
Revenues for the year were $125 million, compared to $97 million for 2013, due to the appreciation of the US dollar and the growth of the mortgage portfolio during the year to $1.3 billion. For 2014, Romspen recorded net income of $92 million, or $0.78 per unit, compared to $77 million, or $0.73 per unit, in 2013. Investors held units totalling $1.2 billion, compared to $1.1 billion last year. Net debt (debt less cash) was $153 million, compared to last year's level of $40 million.
During 2014, Romspen's net compounded return of 7.8% outperformed T-bills (0.9%), the FTSE/TMX-STBI (3.1%), but trailed a resurgent S&P/TSX (10.6%). A comparative performance history shows that over the past five years, Romspen's total net return of 47% outperformed T-bills (4%); the FTSE/TMX‑STBI (16%); and the S&P/TSX (44%). Over the past twenty years, Romspen has also outperformed these benchmarks with a total net return of 509%, compared to T-bills (81%), the FTSE/TMX-STBI (107%)*, and the S&P/TSX (444%). For a comparison of Romspen's short and long-term performance track record versus other investment classes, please see the Fund's website at: www.romspen.com.
At December 31, 2014, the net mortgage portfolio was $1.3 billion, compared to $1.1 billion in 2013, representing an increase of 15%. The Fund realized losses of only $3 million on mortgages that were previously reserved for, ensuring that there was no negative impact on net earnings from these losses. Total provisions for credit losses increased to $26 million, as the Fund seeks to maintain a comfortable margin of safety, given a larger portfolio and the shift in asset mix.
The Fund continues to focus on short-term mortgages, with 90% of mortgages maturing within one year, and 99% maturing in less than two years. Geographic diversification continued, with 43% of mortgages invested in Ontario, 24% in Western Canada, 7% in other provinces, and 26% in the US. The weighted average interest rate of the mortgage portfolio was 10.5% in 2014, equal to last year.
Unitholder distributions for 2014 were $0.75 per unit, compared to $0.72 per unit in 2013. This equates to a compounded net return to investors of 7.8%, compared to 7.4% in 2013.
About the Fund
Romspen has a long-term track record of successful mortgage investing. With its origins in the mid-60's, Romspen is one of the largest non-bank commercial/industrial mortgage lenders in Canada, with a portfolio in excess of $1.3 billion. Its investors are high-net-worth individuals, foundations, endowments and pension plans.
The Fund's investment mandate is focused on capital preservation, strong absolute returns and performance consistency. Romspen has had 20 consecutive years of positive net investor returns (ranging between 7.4% - 10.8%) and has experienced only one month of negative performance.
This press release is for informational purposes only. It is not investment or financial product advice, and is not intended to be used as the basis for making an investment decision. This press release is not, and does not constitute, an offer to sell or the solicitation, invitation or recommendation to purchase any securities in any jurisdiction. An offering memorandum containing important information relating to the Fund has been prepared, and the Fund is available only to investors who are "accredited investors" or otherwise qualify under certain other exemptions from prospectus requirements under applicable securities laws. Copies of the offering memorandum may be obtained from Romspen.
SOURCE Romspen Investment Corporation
Image with caption: "ROMSPEN INVESTMENT CORPORATION (CNW Group/Romspen Investment Corporation)". Image available at: http://photos.newswire.ca/images/download/20150513_C4217_PHOTO_EN_16614.jpg
For further information: Mark L. Hilson, Managing General Partner, [email protected], 416-966-1100