TORONTO, May 15, 2019 – Trez Capital Mortgage Investment Corporation (TSX: TZZ) (the "Company") today released its financial results for the quarter ended March 31, 2019. The financial statements and MD&A can be found at www.sedar.com or www.trezcapitalmic.com.
Financial Highlights & Business Update
On June 16, 2016 the shareholders of the Company approved the orderly wind-up of the Company (“Orderly Wind-Up”). As such, the financial results reflect the ongoing reduction in the size of the portfolio as capital is returned to shareholders.
For the three months ended March 31, 2019, loss from operations totaled $0.3 million compared to income from operations of $0.1 million in Q1 of 2018. The decrease in income from operations was related to a $0.4 million reduction of revenue as a result of lower interest income resulting from the systematic reduction in the mortgage portfolio guided by the Orderly Wind Up. Net Income for the period was $0.7 million compared to $0.1 million in Q1 of 2018. The increase in income was a result of a $1.2 million settlement received in the favour of the Company. The amount of income recorded on the statement of income was $1.1 million, which was net of $0.1 million in legal expenses associated with the litigation. This increase in income, was offset by the previously mentioned loss from operations.
The Orderly Wind-Up of the Company commenced in June 2016. At the beginning of the Orderly-Wind Up on June 30, 2016, the Company had total investments in mortgages of approximately $165.2 million comprised of 31 mortgages. As at March 31, 2019 all mortgages have been successfully repaid or divested under the Orderly Wind-Up plan. Since inception of the Orderly-Wind Up, the Company returned capital totaling $103.6 million through regular and special distributions, plus an additional $5.5 million special distribution to be paid subsequent to quarter end. The Company bought back 7,236,095 Class A units for a total consideration of $58.3 million through Normal Course Issuer Bids (“NCIB”) and Substantial Issuer Bids (“SIB”) offers.
Below is a summary of the return of capital per book value since inception of the Orderly Wind Up plan:
|Summary of Return of Capital since Inception of the Orderly Wind Up Plan at June 30, 2016|
|Book Value per Share|
|Opening Book Value at inception of Orderly Wind Up June 30, 2016||$ 8.85|
|Total Regular and Special Distributions to Investors since inception of Plan (1)||$ (8.91)|
|Increase/decrease from Operations in net assets (including SIB) (2)||$ 0.28|
|Ending Book Value at March 31, 2019 (adjusted) (1)||$0.22|
(1) Includes upcoming Special Distribution of $0.47 per class A share which is to be paid on May 22, 2019.
(2) The NCIB has no impact on Book value per Share. The SIB had a small accretive impact on the book value per share.
The Company is involved in several legal litigations with borrowers, advisors and other parties to try and recover losses from loans where realized proceeds were less than outstanding owed principal amounts and interest. Due to the nature of the proceedings, the Company, at this time, is unable to accurately estimate an amount of any further possible future recoveries or the probability of success of recoveries.
During the first quarter of 2019, the Manager settled a lawsuit against an advisor in relation to a mortgage that was previously in default and sold at a loss in 2017. Under the terms of the settlement, the Company received $1.2 million in early April.
On April 29, 2019, the Board of Directors approved a special distribution totaling $5.5 million (or $0.47 per Class A share) to holders of Class A shares of the Company. The special distribution, which constitutes a return of capital pursuant to the winding-up of the Company’s business as approved by Shareholders on June 16, 2016, will be paid on May 22, 2019 to holders of Class A shares of record at the close of business on May 9, 2019.
After giving effect to the special distribution, the Company will have approximately $2.7 million in cash, as a reserve against ongoing expenses and contingent liabilities. Upon release and satisfaction of all liabilities, the Company intends to make a final distribution of all remaining funds to the holders of its Class A shares (the “Final Distribution”). If and to the extent there are proceeds from the ongoing litigation, one or more interim distributions may be made to the holders of Class A shares prior to the Final Distribution. However, there can be no assurance that any such interim distributions will occur. The formal dissolution of the Company will follow the Final Distribution.
Following the payment of the special distribution, the next steps to wind down the Company involve delisting of the Class A shares from the TSX and making of an application to cease to be a reporting issuer.
Forward Looking Statements
Certain statements in this news release about Trez Capital Senior 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.
About the Company
Trez Capital Fund Management Limited Partnership is the manager of and portfolio advisor to the Company. 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.
For further information:
Chief Executive Officer
Tel: (604) 630-0775