Romspen Mortgage Investment Fund Announces 2016 Results

Romspen delivers solid absolute returns despite a challenging economic cycle and continuing low rates.

TORONTO, June 13, 2017 /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, 2016.  For 2016, the Fund had an 8.0% net return, reflecting both a strong absolute return and continued significant comparative outperformance against the major fixed income benchmarks.  While slightly below last year, it was achieved in a year with significant geopolitical events, a continuously competitive lending environment and persistent record-low interest rates.

2016 Highlights

"Completing its 50th year in business in 2016, the firm has a strong history of growth, broad diversification across North America and a solid and consistent investment track record, says Mark Hilson, Managing General Partner of Romspen. "We are proud of our long established track record of delivering steady and predictable returns. We have generated positive returns each and every month over the past 20 years typically outperforming the major benchmarks during all matter of economic conditions".

  • The net investment portfolio increased by 13% in 2016 to $1.7 billion.
  • Net earnings for 2016 decreased by 16% to $100 million.
  • Distributions to investors totalled $0.77 per unit to yield a compounded net return of 8.0%.
  • Net returns of 8.0% for Romspen significantly outperformed T-bills (0.5%) and FTSE-TMX Short-Term Bond Index ("FTSE/TMX‑STBI") (1.0%), but trailed the S&P/TSX Composite Total Return Index (21.1%).
  • Romspen's past three, ten and twenty year performance has outperformed T‑bills, S&P/TSX and FTSE/TMX‑STBI.
  • US mortgages in the portfolio increased to 41%.
  • The Fund's unitholder equity for all units outstanding grew to $1.6 billion at the end of 2016 compared to $1.4 billion for 2015.
  • Romspen has delivered positive net investor returns each and every month for the past 20 consecutive years.

2016 Results of Operations

Revenues for the year were $138 million, compared to $155 million for 2015. Current year revenues are lower because of the inclusion of unrealized foreign exchange losses from the decline of the US dollar while revenues in 2015 benefited from the inclusion of the significant unrealized foreign exchange gains. For 2016, Romspen recorded net income of $100 million, or $0.66 per unit, compared to $120 million, or $0.93 per unit, in 2015.  Investors held units totalling $1.6 billion, compared to $1.4 billion last year.  Net debt (debt less cash) was $116 million, compared to last year's level of $155 million.

Comparative Performance

During 2016, Romspen's net compounded return of 8.0% significantly outperformed T-bills (0.5%) and FTSE/TMX‑STBI (1.0%), but trailed the S&P/TSX (21.1%).  The following table presents a comparative performance history reflecting Romspen's consistent outperformance against the benchmarks.

Comparative Performance History

Investment Portfolio






Comparative Performance Returns



1 year

3 years

5 years

10 years

20 years









Romspen

8.0%

26%

46%

126%

491%


S&P/TSX

21.1%

23%

49%

59%

311%


FTSE-TMX STBI1

1.0%

7%

11%

42%

115%


T-bills

0.5%

2%

4%

13%

63%









Note: Romspen returns are net, comparative returns are gross


1FTSE-TMX STBI return is based on the 18 year cumulative return due to data restrictions

At December 31, 2016, the net investment portfolio was $1.7 billion, compared to $1.5 billion in 2015, representing an increase of 13%.  The Fund realized losses of only $4.7 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 $45.3 million as the Fund seeks to maintain a comfortable margin of safety. 

The Fund continues to focus on short-term mortgages, with 78% of mortgages maturing within one year, and 99% maturing in less than two years.  Geographic diversification continued, with 27% of mortgages invested in Ontario, 23% in Western Canada, 9% in other provinces, and 41% in the US.  The weighted average interest rate of the mortgage portfolio was 11.2% in 2016, compared to 10.6% to last year. 

2016 Distributions

Unitholder distributions for 2016 were $0.77 per unit, compared to $0.79 per unit in 2015.  This equates to a compounded net return to investors of 8.0% compared to 8.2% in 2015.

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 $1.7 billion.  Our 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% ‑ 10.6%) with positive returns each and every month.

The 2016 Romspen Mortgage Investment Fund Annual Report, including the Trustees' Report, Management's Discussion & Analysis and the audited Financial Statements, are available at: www.romspen.com.

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

For further information: Mark L. Hilson, Managing General Partner, markhilson@romspen.com, 416-966-1100

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www.romspen.com

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