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.
During the quarter ended March 31, 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. During the following two quarters, the situation has continued to be dynamic and the duration and magnitude of the impact on the economy and our business are not fully known at this time. These impacts could include further decreases in the fair value of our mortgage investments or potential future decreases in revenue or 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.
Income from operations for the three months ended September 30, 2020 was relatively consistent compared to the same period in 2019. For the nine months ended September 30, 2020 there was an increase of $0.2 million compared to the same period in 2019. The increase was primarily the result of reduced incentive fees, the result of an additional fair value adjustment on investments in mortgages of $1.3 million during the first quarter of 2020. Remaining expenses were largely consistent with the same periods in 2019.
Basic income per share from the three and nine months ended September 30, 2020 was $0.03 and $(0.05) compared to $0.03 and $0.10 in the same periods in 2019.
At September 30, 2020, the Company had two mortgages outstanding. Of the two mortgages remaining, the more significant one is set to mature in December 2020. During the second quarter of 2020, the borrower requested a three month deferral of mortgage payments, due to the inability of tenants to pay rent as a result of the Covid-19 economic and health crisis. The deferral was granted. Regular payments resumed during the third quarter. Due to continued risk and the challenged nature of the loan, the Manager has maintained a fair value adjustments of $4.75 million against the mortgage.
Regular Monthly & Special Distributions
In the third quarter 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.
On July 13th, the Board of Directors declared a special distribution of $0.34 per Class A share of the Company. The special distribution, which constituted a return of capital pursuant to the winding up of the Company’s business as approved by Shareholders on June 16, 2016, was paid on August 20, 2020 to holders of Class A shares of record at the close of business on August 7, 2020. The total distribution paid was $2,488,143.
On September 11th, 2020 the Board of Directors declared a special distribution of $0.82 per Class A share 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, was paid on October 14, 2020 to holders of Class A shares of record at the close of business on September 30, 2020. The total distribution paid was $6,000,815.
The Board anticipates from time to time 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.
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.
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