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 and year ended December 31, 2019, income from operations increased by $381 thousand and $710 thousand compared to the same periods in 2018. Most of the increase was attributable to lower general and administrative expenses and a reversal of $360 thousand of the incentive fee expense. Net income was lower by $1.4 million and $1.1 million in the same periods. The lower net income was a result of a $1.8 million decrease to the fair value of one mortgage. This decrease in fair value was offset by higher income from operations. Basic and diluted income per share was $(0.16) and $(0.07) compared to $0.03 and $0.08 in the same periods in 2018.
At December 31, 2019, the Company had two mortgages remaining to be liquidated. Of the mortgages that are remaining, the more significant one is set to mature in December 2020. The Manager considers this loan to be performing however, due to continued risk and the challenged nature of the loan, the Manager has reassessed the cash flows expected from the borrower, the obligations to the loan-sharing partner and reasonability of being repaid on maturity. This analysis of the fair value of the mortgage resulted in an additional fair value decrease of $1.8 million, bringing the total fair value adjustments against the mortgage to $3.5 million.
Regular Monthly & Special Distributions
In Quarter 3 of 2017, the Board made a decision to suspend regular monthly distributions until further notice. This decision was premised on a review of the last remaining mortgages and cash requirements. One of the two remaining mortgages is shared with an external senior loan-sharing partner. Given the limited amount of principal and interest payments expected in the future, the company intends to maintain its current cash levels until the senior position is fully repaid by the borrower. The Board anticipates making further special distributions as the two remaining mortgages in the portfolio mature or are sold, subject to reasonable expected operating expenditures and repayment of the senior loan participant.
Subsequent to December 31, 2019 the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic and the ultimate duration and magnitude of the impact on the economy and our business are not known at this time. These impacts could include decreases in the fair value of our mortgage investments or potential future decreases in revenue or the profitability of our ongoing operations.
It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company as it relates to its ability to complete the Orderly Wind-Up Plan.
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
The Company holds a portfolio of mortgages in Canada. 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