Romspen Mortgage Investment Fund. Annual General Meeting May 31, 2018

Transcription

1 Romspen Mortgage Investment Fund Annual General Meeting May 31, 2018

2 Agenda Introductory Remarks Formal Business Sheldon Esbin Managing General Partner Mandate, Strategy & Direction Mark Hilson 2017 Review Managing General Partner Outlook & 2018 Q1 Issues/Opportunities Questions Wesley Roitman Managing General Partner 2

3 Safe Harbour This presentation contains forward-looking statements related to our future growth, and our financial and operational results and performance that are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to: variability of operating results among periods, which include: the pace, size and nature of mortgage investments, repayments and other realization events, the volatility of interest and exchange rates; changes in the market value of commercial real estate in Canada & the US; and other activities and events within our business. These and other risks and uncertainties and factors are discussed in the Fund s various filings available on the Fund website, 3

4 Formal Business Sheldon Esbin Managing General Partner 4

5 Strategy, 2017 Review, Outlook & 2018 Q1 Mark Hilson Managing General Partner 5

6 Mandate/Strategy/Direction Mandate/Strategy/Direction 6

7 Mandate & Strategy Mandate: capital preservation strong absolute returns consistent performance Strategy: source attractive opportunities in defined niche underwrite mortgages conservatively identify & reduce risk thorough execution/ high-touch lending 7

8 Transactions Royalton Beverly Hills, California Robson Street Vancouver, British Columbia Parkhaven Apartments Côte Saint-Luc, Quebec Sherwin William s Factory Philadelphia, Pennsylvania Howard Johnson s Toronto, Ontario L Atelier South Beach, Miami, Florida 8

9 Transactions Royalton Beverly Hills, California 9

10 Transactions Robson Street Vancouver, British Columbia 10

11 Transactions Parkhaven Apartments Côte Saint-Luc, Quebec 11

12 Transactions Sherwin William s Factory Philadelphia, Pennsylvania 12

13 Transactions Howard Johnson s Toronto, Ontario 13

14 Transactions L Atelier South Beach, Miami, Florida 14

15 Direction RMIF remains the principal focus Leverage experience, relationships, infrastructure Apply same mandate to build real estate equity platform Offer alternative yield-driven tax-advantaged, real estate opportunities Real Estate Segments Mortgage Lending Real Estate Equity M a r k e t s Canada US RMIF 15

16 2017 Results 2017 Results 16

17 2017 Highlights Another good year Distributions Performance Mortgage portfolio $0.76/unit to yield net 7.9% compounded yield, down slightly from last year solid absolute & comparative results up 19% to $2.0 billion Portfolio interest rate decrease from 11.2% in 2016 to 10.6% Investor capital up 27% to $2.1 billion Losses on disposed properties minimal, reserves increased 17

18 Key Financial Metrics Solid net earnings FX Adjustment Reported $120 FX Adjustment Reported $100 FX Adjustment Reported $114 Net income ($M) $98 $112 $135 Unrealized FX gain $22 Unrealized FX loss $12 Unrealized FX loss $ Source: Romspen Audited Financial Statements 18

19 Key Financial Metrics Strong portfolio growth $1,520 $1,710 $2,031 Net mortgage portfolio ($M) Source: Romspen Audited Financial Statements 19

20 Key Financial Metrics Low financial leverage Net mortgage portfolio (%) 10% 7% 1% Source: Romspen Audited Financial Statements 20

21 Key Financial Metrics Slight decline in unit value $9.95 $9.94 $9.87 $/unit Source: Romspen Audited Financial Statements 21

22 Key Financial Metrics Steady distributions $0.79 $0.77 $0.76 $/unit Source: Romspen Audited Financial Statements 22

23 Key Financial Metrics Strong Absolute Yield 8.2% 8.0% 7.9% Annual compounded net % yield Source: Romspen Audited Financial Statements 23

24 Portfolio Remains Well Diversified By Type By Geography term 40% US 39% Other 9% By Amount pre-development 30% construction 30% By Maturity British Columbia 18% Alberta 8% Ontario 26% $5-$10 million 18% under $5 million 10% $10-$20 million 31% over 2 years 2% under 1 year 84% 1-2 years 14% over $20 million 41% Source: Romspen Audited Financial Statements 24

25 2017 Performance Romspen outperforms fixed income benchmarks 9.1% 7.9% 0.7% 0.1% S&P/TSX T-Bills FTSE/TMX-STBI Romspen Source: Bank of Canada, Romspen Audited Financial Statements Note: Romspen returns are net, comparative returns are gross. 25

26 3-Year Performance Romspen outperforms all major benchmarks 26% 21% 2% 4% S&P/TSX T-Bills FTSE/TMX-STBI Romspen Source: Bank of Canada, Romspen Audited Financial Statements Note: Romspen returns are net, comparative returns are gross. 26

27 5-Year Performance Romspen outperforms fixed income benchmarks 51% 46% 4% 9% S&P/TSX T-Bills FTSE/TMX-STBI Romspen Source: Bank of Canada, Romspen Audited Financial Statements Note: Romspen returns are net, comparative returns are gross. 27

28 10-Year Performance Romspen outperforms all major benchmarks 121% 58% 9% 36% S&P/TSX T-Bills FTSE/TMX-STBI Romspen Source: Bank of Canada, Romspen Audited Financial Statements, PriceWaterhouse Coopers Report Note: Romspen returns are net, comparative returns are gross. 28

29 20-Year Performance Romspen outperforms all major benchmarks 481% 290% 59% 115%* S&P/TSX T-Bills FTSE/TMX-STBI Romspen Source: Bank of Canada, Romspen Audited Financial Statements, PriceWaterhouse Coopers Report Note: Romspen returns are net, comparative returns are gross. * FTSE/TMX-STBI returns are based on 19 years of data due to data restrictions. 29

30 Performance - 25 Years By Month Year January February March April May June July August September October November December Annual Compound Net Yield (0.40) (0.77) Yrs 8.0% 5 Yrs 7.9% 10 Yrs 8.2% 20 Yrs 9.2% 25 Yrs 9.3% 1. Romspen results from January 1998 to January 16, 2006 reflect the pool of individually syndicated mortgages. Net returns are calculated on a cash-on-cash basis. Results from January 16, 2006 to present reflect the Romspen Mortgage Investment Fund, the successor to the individually syndicated mortgages. 2. Yield/return is calculated based on net compounded monthly cash distributions to unitholders based on a $10.00/unit subscription price without any adjustment for unit gains/losses on sale/redemption. Source: PricewaterhouseCoopers report, Romspen financial statements, Romspen analysis 30

31 2018 Outlook & Q1 Performance 2018 Outlook & Q1 Performance 31

32 2018 Economic Environment Growth prospects improving globally Stronger GDP growth low unemployment withdrawal of aggressive monetary policies Canadian/US economic divergence Interest rates increasing/normalizing Multiple data points showing increased inflation Volatility ongoing economic theme geopolitical influences Credit demand remains strong our segment remains under-served Alberta slow recovery, longer-term uncertainty Toronto/Vancouver frothy real estate markets, cautious underwriting US continues to strengthen, Canada steady diversified lending platform 32

33 The Fall and Rise of Canadian Interest Rates Interest rates have bottomed & are beginning to normalize 4 3 GOC 2 Year Bond Yield (%) Source: Statistics Canada: Government of Canada 2 Year Benchmark Bond Yields 33

34 Interest Rate Comparison Lower yield, but consistent spread 12% 10% 8% Annual return (%) 6% 4% 2% 0% BOC Overnight Rate Romspen Return Relative Spread Source: Bank of Canada, Romspen Audited Financial Statements Note: Romspen returns are net, comparative returns are gross. 34

35 2018 Q1 Performance Solid first quarter Stable unit value Stable distributions Stable yield $9.95 $9.90 $0.19 $ % 1.8% Q Q Q Q Q Q Source: Romspen 2018 Q1 Financial Statements 35

36 Q Performance Solid performance continues in Q1 0.3% 0.2% 1.8% S&P/TSX T-Bills FTSE/TMX-STBI Romspen -4.5% Source: Bank of Canada, Romspen 2018 Q1 Financial Statements Note: Romspen returns are net, comparative returns are gross. 36

37 YTD 2018 Comparative Performance Solid performance continues YTD as at April 30, % 0.4% 0.2% S&P/TSX T-Bills FTSE/TMX-STBI Romspen -2.8% Source: Bank of Canada, Romspen Analysis Note: Romspen returns are net, comparative returns are gross. 37

38 Issues/Opportunities Wesley Roitman Managing General Partner 38

39 Issues/Opportunities Issues/Opportunities 39

40 Non-performing Loans Ongoing part of business Loan pricing takes this into account Non-performing loans losses Non-performing Loans 21% 23% 23% $M / % portfolio $335 $407 $ Source: Romspen Audited Financial Statements 40

41 Loss Reserves & Realized Losses Loss Reserves & Realized Losses ($ millions) Loss Reserve Realized Losses Realized losses as a % of capital invested is less than 0.5% Source: Romspen Audited Financial Statements 41

42 Workout Case Studies Camarillo, Ventura County, CA Type: Land and construction loan Location: Camarillo, Ventura County, California Advance Date: December 2014 Sale/Realization Date: September 2018 Corrective Action: Foreclosure & sale process Takeover Date: February 2018 Loan Amount at Take-over: US$13.5M Sale Proceeds: US$18M Total Return to Fund: 7.5% 42

43 Workout Case Studies Cumberland Harbour, St. Mary s, GA Type: Land and construction loan Location: St. Mary s, Georgia Advance Date: July 2013 Sale/Realization Date: August Corrective Action: Foreclosure & sale process Takeover Date: February 2018 Loan Amount at Take-over: US$4.9M Sale Proceeds: US$6.2M Total Return to Fund: 4% 43

44 Workout Case Studies Kettle Creek, Langford, BC Type: Land and construction loan Location: Langford, British Columbia Advance Date: January 2008 Sale/Realization Date: 2 year sell-out Corrective Action: Foreclosure & development Takeover Date: January 2016 Loan Amount: $19.8M Estimated Sale Proceeds: Return of capital & interest Total Return to Fund: Reasonable rate of return 44

45 Non-performing Loans Ponderosa Peachland, BC Falconridge Abbotsford, BC Carolina Golf Trail Southern US $33 million $40 million $53 million ($43 million US) $126 million 45

46 US Mortgages/Fund Update Current New Canadian Investors Canadian Investors Romspen Mortgage Investment Fund Romspen Mortgage Investment Fund Romspen Mortgage Limited Partnership Canadian Mortgages Romspen Mortgage Limited Partnership Canadian Mortgages US Mortgages US Mortgages Romspen US Mortgage LP US Investors 46

47 May 2018

48 Real Estate Investment Rationale Stable and predictable income stream Long-term property appreciation and inflation protection Reduces portfolio volatility low correlation to stocks and bonds Enhanced returns through prudent use of low-cost leverage Significant tax benefits Multiple sources of value creation 48

49 RREI Strategy and Execution Property type Office, industrial, multi-family, retail Market dynamics Canada vs. U.S. Deal size Mid-sized deals ($10 - $100 million) Real estate is a local business Leverage local partners Regional & asset class expertise Target returns (net to investor) Cash-on-cash: 6% IRR: 10% 49

50 Existing Investments Fortier Industrial Complex Montreal, Quebec 2012 Vista Heights Office Complex Calgary, Alberta 2013 Total value: CAD $240 million (1) Commercial square footage: 510,000 Multi-family units: 1,500 Portfolio Cash-on-Cash (2) : 7.2% Portfolio IRR (3) : 14.4% Sturbridge Commons Montgomery, Alabama 2014 Gateway Crossing Augusta, Georgia 2015 The Overland Park Portfolio Overland Park, Kansas 2015 (1) Accounts for 50% interest in The Overland Park Portfolio (2) Annualized return of quarterly distributions for the total investment period ending March 31, 2018 (3) Based on a conservative estimate of value for the total investment period ending March 31, 2018 (Overland Park valued at cost) 50

51 Fortier Industrial Complex Asset Class: Type: Location: Fortier Industrial Complex Industrial Multi-Tenant Small Bay Montreal, QC Sq Ft: 311,062 Closing Date: August 2012 Acquisition Cost: Equity: Current Occupancy: 90% Key Tenants: Property Manager: Cash-on-Cash (1) 9.4% Holding Period IRR (2) 16.4% CAD $20.0M CAD $8.6M CAD $3.0M Média Transcontinental, Delice Antrev Property Management (1) Annualized return of quarterly distributions for the total investment period ending March 31, 2018 (2) Based on a conservative estimate of value for the total investment period ending March 31,

52 Vista Heights Office Complex Asset Class: Type: Location: Vista Heights Office Complex Office Multi-Tenant Suburban Calgary, AB Sq Ft: 196,464 Closing Date: June 2013 Acquisition Cost: Equity: Current Occupancy: 93% Key Tenants: Property Manager: Cash-on-Cash (1) 7.7% Holding Period IRR (2) 16.8% CAD $53.5M CAD $21.0M CAD $18.9M Amec Foster Wheeler, Millenium McCOR Management (1) Annualized return of quarterly distributions for the total investment period ending March 31, 2018 (2) Based on a conservative estimate of value for the total investment period ending March 31,

53 Sturbridge Commons Asset Class: Type: Location: # Suites: 360 Sturbridge Commons Multi-Family Garden Style Montgomery, AL Closing Date: November 2014 Acquisition Cost: Equity: Current Occupancy: 94% Property Manager: Cash-on-Cash (1) 8.3% Holding Period IRR (2) 24.1% USD $36.9M USD $10.8M LMS Real Estate (1) Annualized return of quarterly distributions for the total investment period ending March 31, 2018 (2) Based on a conservative estimate of value for the total investment period ending March 31,

54 Gateway Crossing Asset Class: Type: Location: # Suites: 240 Gateway Crossing Multi-Family Garden Style Augusta, GA Closing Date: July 2015 Acquisition Cost: Equity: Current Occupancy: 94% Property Manager: Cash-on-Cash (1) 8.1% Holding Period IRR (2) 8.1% USD $36.6M USD $10.1M USD $9.8M LMS Real Estate (1) Annualized return of quarterly distributions for the total investment period ending March 31, 2018 (2) Based on a conservative estimate of value for the total investment period ending March 31,

55 The Overland Park Portfolio Asset Class: Type: Location: The Overland Park Portfolio Multi-Family Garden Style Overland Park, KS # Suites: 918 across two properties Closing Date: November 2015 Acquisition Cost: Equity: Current Occupancy: 93% Property Manager: Cash-on-Cash (1) 6.1% Holding Period IRR (2) 6.1% USD $89.0M USD $24.9M USD $26.0M Mandel Property Services (1) Annualized return of quarterly distributions for the total investment period ending March 31, 2018 (2) Valued at cost 55

56 Disclaimer This presentation is for informational purposes and is not an offer to sell or a solicitation to buy or subscribe for any securities, nor does it constitute investment, financial or other advice. Prospective investors should contact their own investment advisors. Information provided herein is considered current as of the date of this presentation. Any indicated rates of return are the historical rates of return for the periods indicated, are not necessarily indicative of future performance, and do not take income taxes into account unless indicated. Actual results may vary, and will fluctuate from time to time. 56