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 and six months ended June 30, 2019, net income totaled $0.1 million and $0.8 million compared to net income of $1.8 and $1.9 million for 2018. The decrease in net income in 2019 was related to an overall reduction of revenue for the three and six months ended June 30th, as a result of lower interest income resulting from the systematic reduction in the mortgage portfolio guided by the Orderly Wind Up. A one-time reversal of a fair value adjustment loss in Q2 of 2018 due to a higher than expected recovery of a previously challenged mortgage also contributed to higher net income in 2018.
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 June 30, 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 $109.1 million through regular and special distributions. 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||$ (8.91)|
|Increase/decrease from Operations in net assets (including SIB) (1)||$ 0.29|
|Ending Book Value at June 30, 2019||$0.23|
(1) 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.
The Company has approximately $2.8 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.
As previously announced in a press release on April 29, 2019 and further communicated on July 17th, 2019, because the Company had voluntarily disposed of all of its mortgage assets and is currently in the final wind-down period, it was not expected to meet the listing requirements of the TSX and consequently effective at the close of the markets on July 31, 2019, the Company’s shares stopped trading on the TSX. Anyone wishing to trade Class A shares following delisting should contact their broker.
The Company is in the process of filling an application for an order that it cease to be a reporting issuer. The order, if granted, is expected to permit the Company to make minimal disclosure to shareholders by press release each quarter going forward. Such disclosure is not expected to include interim financial statements or management discussion and analysis.
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