TORONTO, March 30, 2017 /CNW/ - Trez Capital Mortgage Investment Corporation (TSX: TZZ) (the "Company") financial results for the three months and year ended December 31, 2016 are as follows:
On June 16, 2016 the Shareholders of the Company approved the orderly wind-up of the Company. Under the orderly wind-up plan the Company will distribute the net proceeds through special distributions, the repurchase of shares pursuant to the normal course issuer bid, or otherwise.
Financial results reflect the ongoing reduction in the size of the portfolio as capital is returned to shareholders.
For the three months ended December 31, 2016
- Revenue decreased to $1.9 million, versus $4.0 million at Q4 2015
- Expenses increased to $4.7 million, versus $1.2 million at Q4 2015
- Net loss totaled $2.8 million, versus net income of $2.6 million at Q4 2015
- Basic and diluted loss per share were $0.17, versus earnings per share of $0.14 at Q4 2015
For the year ended December 31, 2016
- Revenue decreased to $11.8 million, versus $15.5 million at December 31, 2015
- Expenses increased to $15.2 million, versus $3.8 million at December 31, 2015
- Net loss totaled $3.4 million, versus net income of $10.8 million at December 31, 2015
- Basic and diluted loss per share were $0.19, versus earnings per share of $0.56 at December 31, 2015
- Dividends declared totaled $0.70 per share, unchanged from December 31, 2015
Revenue consists of interest income and commitment fees net of mortgage syndication interest expense. For the three months and year ended December 31, 2016, revenue decreased by $2.1 and $3.7 million compared to the same periods in 2015. The decreases were the result of reduced interest income of $2.0 million and reduced commitment fees $0.1 million for the three months ended December 31, 2016. For the year ended December 31, 2016, the decrease was due to reduced interest income of $3.3 million and reduced commitment fees of $0.4 million. The decrease in interest income and commitment fees resulted from a decrease in the mortgage portfolio driven by a decrease in mortgage funding activity in 2016 as the Company proceeded with the orderly liquidation of its mortgage portfolio.
For the three months and year ended December 31, 2016, income from operations declined by $5.5 and $15.0 million compared to the same periods in 2015. The decreases were the result of a combination of previously mentioned reductions in revenue, as well as increases in expenditures. For the three months ended December 31, 2016, the increase in expenses of $3.4 million resulted from an increase of $4.2 million to the fair value adjustment on investments in mortgages and an increase of $0.2 million in general and administrative costs, which was offset by a decrease of $1.0 million in management and incentive fees payable to the Manager. As part of the assessment of fair value, the Manager routinely reviews each mortgage for changes in estimated cash flows and credit risk to determine whether or not fair value of a mortgage should be adjusted for changes in credit risk. The fair value adjustment is a non-cash charge to reflect changes in credit risk and may be reversed in the future. For the year ended December 31, 2016, the increase in expenses of $11.3 million ($0.62 per share) resulted from an increase of $9.5 million ($0.52 per share) to fair value adjustment on investments in mortgages, $1.0 million ($0.05 per share) increase in incentive fee payable to the Manager, and significant increases in expenses of $1.8 ($0.10 per share) million primarily resulting from the shareholder action. These amounts were offset by a $0.4 million ($0.02 per share) reduction in management fees.
Investment Portfolio Highlights as of December 31, 2016
- 68% of the portfolio was invested in first mortgages
- Weighted average loan-to-value of the mortgage portfolio was 80%
- Weighted average interest rate and remaining term to maturity on mortgage investments was 5.8% and 16.6 months, respectively
- Geographical exposure: Ontario 55%, Alberta 20%, New Brunswick 7% and Nova Scotia 18%
- Aggregate fair value adjustments of $11.4 million are included in the net investments in mortgages of $94.9 million, and realized investment losses for the past two years sum to $0.1 million
On Dec. 5, 2016, the Company announced that its Board of Directors had authorized a SIB (the "Offer"), pursuant to which the Company offered to purchase for cancellation up to 4,375,000 class A shares (the "Shares") for an aggregate purchase price not to exceed $35,000,000. On Feb. 15, 2017, the Company further announced that it had taken up and paid for 4,216,867 Class A Shares at a price of $8.30 per Share under the Company's previously announced SIB. The Shares purchased under the Offer represented approximately 25.56% of the Shares outstanding as at January 10, 2017. After giving effect to the repurchase, the number of issued and outstanding Shares was 12,283,371 at January 10, 2017. As a result of the cash outlay and liquidation of residential mortgages, less than 50% of the cost amount to the Company of its property consists of residential mortgages and cash. This resulted in the Company losing its status as a "mortgage investment corporation" for purposes of the Income Tax Act (Canada) (the "ITA") for the 2017 taxation year. As a result, the Company will no longer able to deduct dividends paid to shareholders from its taxable income in 2017 and in subsequent years. The Manager believes that Company's non-capital losses carried forward will be sufficient to offset any taxable income such that the Manager does not expect the Company to be subject to Part I tax under the ITA on its income in 2017 and in subsequent years.
Certain statements in this news release about Trez Capital Mortgage Investment Corporation (the "Company"), and its business, operations, investments and strategies, and financial performance and condition may constitute forward-looking information, future oriented financial information, or financial outlooks (collectively, "forward looking statements"). The forward-looking statements are stated as of the date of this news release and are based on estimates and assumptions made by Trez Capital Fund Management LP ("Trez") in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that Trez believes are appropriate and reasonable in the circumstances. There can be no assurance that such forward-looking statements will prove to be accurate, as actual results, performance and future events could differ materially from those anticipated in such statements. Past performance is not an indication of future returns, and there can be no guarantee that targeted returns or yields can be achieved. Trez refers you to the Company's public disclosure for information regarding these forward-looking statements, including the assumptions made in preparing forward-looking statements and management's expectations, and the risk factors that could cause the Company's actual results, yield, levels of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements. Such public disclosure is available on SEDAR and at the request of Trez. This news release does not represent an offer or solicitation to sell securities of the Company.
SOURCE Trez Capital
For further information: Karyn Phuong, Vice President, Investor Relations, Trez Capital, Tel: (647) 788-1788, E-mail: [email protected]