Romspen Mortgage Investment Fund Announces 2021 Results

Romspen Delivers Solid Performance in 2021

TORONTO, July 7, 2022 /CNW/ – Romspen Mortgage Investment Fund, a leading Canadian non-bank commercial mortgage lender, has released its financial statements for the year ended December 31, 2021.  In a year that saw many sectors of the economy recover from the pandemic’s dislocations, the Fund’s unitholders achieved a 7.9% net yield, which outperformed major fixed-income benchmarks.

Romspen Investment Corporation logo (CNW Group/Romspen Investment Corporation)

Romspen Investment Corporation logo (CNW Group/Romspen Investment Corporation)

2021 Highlights

  • Net earnings for 2021 increased by 54%

  • Distributions to unitholders totalled $0.74 per unit, representing a compounded net yield of 7.9%, which outperformed the FTSE Canada Short Term Overall Bond Index (“FTSE Canada STBI”) (-0.9%)

  • Romspen’s 3-, 10- and 25-year performance has outperformed the FTSE Canada STBI over the same periods

  • US mortgages in the portfolio increased to 52% from 47% in 2020

  • The Fund’s net investment portfolio decreased modestly by 7% in 2021 to $2.7 billion, reflecting an increase in loan repayments

  • Romspen delivered positive net investor yields each and every month during the year for its 26th consecutive year

Entering its 58th year, Romspen, the Fund’s mortgage manager, “has a well-earned reputation with both borrowers and investors for its innovative approach to commercial mortgage lending ,” says  Wes Roitman, Managing General Partner at Romspen. “We have a significant history of delivering investors steady and predictable returns even during challenging economic times, and we have generated positive performance each and every month over the past 26 years.   Our strategy of originating a diversified pool of carefully-underwritten first mortgage loans has generally outperformed major fixed income and equity indices over a broad spectrum of economic conditions and cycles, including the great financial crisis and the COVID-19 pandemic.”

2021 Results of Operations

Revenues for the year were $225 million, compared to $240 million in 2020. The Fund recorded net income of $204 million, or $0.66 per unit, compared to $133 million, or $0.42 per unit, in 2020. These net earnings reflect the Fund’s pivot from its defensive 2020 posture as real estate activity normalized in many sectors and sub-markets. The Fund’s investors held units totalling $2.8 billion, compared to $3.1 billion last year.  Net debt (debt less cash) was $131 million, compared to $43 million in 2020.

Comparative Performance

For 2021, the Fund’s compounded net yield of 7.9% outperformed the total return the FTSE Canada STBI (-0.9%). The following table compares Romspen’s performance history against the total return of the FTSE Canada STBI and the S&P/TSX Composite Index.

Comparative Cumulative Compounded Performance/Yields

1 year

3 years

5 years

10 years

25 years

Romspen

7.9 %

23 %

43 %

108 %

744 %

FTSE Canada-STBI

-0.9 %

8 %

10 %

22 %

136%*

S&P/TSX Composite Index

25.1 %

62 %

61 %

140 %

563 %

Romspen results prior to January 16, 2006 reflect the pool of individually syndicated mortgages

Romspen yield is calculated on a cash-on-cash basis, net of fees, and assumes a monthly reinvestment of distributions. It does not take into account income taxes, changes in unit values, third-party expenses or redemption charges.

Comparative returns are gross.

*FTSE Canada-STBI returns are based on 23 years of data due to data restrictions

Investment Portfolio

At December 31, 2021, the net investment portfolio decreased modestly by 7% to $2.7 billion compared to 2020. The Fund realized losses of $16.1 million on mortgages that were previously reserved for, meaning that there was no negative impact on net earnings. Total provisions for credit losses decreased 14% to $117.9 million, which still represents a solid margin of safety, given the economic uncertainties in 2022.

The Fund continues to focus on short-term loans, with 92% of mortgages maturing within one year and the remainder maturing in less than two years. The portfolio remains well diversified with 21% of mortgages invested in Ontario, 21% in Western Canada, 6% in other provinces, and 52% in the US across 20 states. The weighted average interest rate of the mortgage portfolio was 9.8% compared to 10.2% in 2020.

2021 Distributions

Unitholder distributions for 2021 were $0.74 per unit, compared to $0.56 per unit in 2020. This equates to a compounded net yield to investors of 7.9%, compared with 5.8% in 2020.

About the Fund

The Fund has a long track record of successful commercial mortgage investing and isone of the largest non-bank commercial mortgage lenders in Canada.  The Fund’s investors include high net worth individuals, family offices, foundations, endowments and pension plans.

The Fund’s investment mandate emphasises capital preservation, strong absolute returns and performance consistency. The Fund and its predecessor pool of syndicated mortgages has had 26 consecutive years of positive net investor yields (ranging between 5.8% – 10.6%) with positive yields each and every month.

The Fund’s 2021 Annual Report, including the Trustees’ Report, Management’s Discussion & Analysis and audited Financial Statements, are available at: www.romspen.com.

This press release is for informational purposes only. It is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. This press release is not and does not constitute, an offer to sell or the solicitation, invitation or recommendation to purchase any securities in any jurisdiction. An offering memorandum containing important information relating to the Fund has been prepared and the Fund is available only to investors who qualify under certain other exemptions from prospectus requirements under applicable securities laws. Copies of the offering memorandum, which should be reviewed carefully prior to making a decision to purchase, may be obtained from Romspen. Past performance does not guarantee future results.

The FTSE Canada Short Term Overall Bond Index™ is a market capitalized weighted index composed of a diversified range of semi-annual pay, fixed-rate investment grade Canadian government and corporate bonds, with terms to maturity of between 1 and 5 years.  While the constituent assets in this index have terms similar to the Fund’s mortgage investments, the Fund is not managed to track the FTSE Canada–STBI as a benchmark. Similarly, the Fund is not managed to track the performance the S&P/TSX Composite Index™, which is a market capitalization weighted index of approximately 250 of the largest publicly-traded companies in Canada and is the broadest gauge of the performance of publicly-listed Canadian equities. These are unmanaged, broadly based indices and measurements that do not reflect any management fees and assume reinvestment of income.  They should not be considered “benchmarks” for the Fund, as they do not track commercial mortgage investments, which is the Fund’s investment strategy.  Whenever the Fund’s net yield for a given time period is compared to the performance of these indices over the same time period, the purpose is to compare the fund’s yield against the performance of other major Canadian asset classes typically included in an investment portfolio.

This press release contains forward-looking statements or information under applicable securities laws.  Since forward-looking statements and information address future events and conditions, by their very nature they involve inherent risks and uncertainties. Actual results could differ materially from those currently anticipated due to a number of risks. The forward-looking statements and information contained in this press release are as at the date of its publication and Romspen does not undertake any obligation to update publicly or to revise any of the included forward-looking statements or information, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws. 

SOURCE Romspen Investment Corporation

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