Timbercreek Mortgage Investment Corporation’s
objective is to generate an attractive, stable income
stream for shareholders while preserving capital.
Timbercreek
Mortgage Investment Corporation
Annual Report 2014
Timbercreek Mortgage Investment Corporation (Timbercreek MIC) is a provider of shorter duration,
customised financing solutions to professional real estate investors. Our well-diversified portfolio of
mortgage investments, primarily secured by income-producing properties, provides a strong, risk-
adjusted yield for investors.
Drivers of Our Success
Our Strategy
Our People
Our focus continues to be on making high-quality
investments secured by high-quality assets. This is achieved
primarily through mortgage loans secured by income-
producing properties and disciplined portfolio diversifi cation.
These strategies, coupled with the fact that we pass through
all lender fees to investors, allow us to generate superior
risk-adjusted yield for shareholders.
Our investors benefi t from Timbercreek’s robust origination
and asset management platform. Our origination team
covers Canada east to west, leveraging strong relationships
with commercial real estate borrowers and their extensive
network of mortgage broker and investment banker
contacts. These professionals, coupled with the experienced
underwriting, funding and servicing specialists, have been
a critical component of our success.
Superior Customer Service
Customer service means more than providing expedited
funding. Timbercreek works directly with borrowers to
develop customised solutions and formulate strong
exit strategies to help their investments succeed. This
commitment, combined with ongoing communication with
borrowers throughout the lifecycle of the loan, has earned
Timbercreek a reputation for exceptional customer service.
NO principal
impairments
since inception
$3.7 billion
in mortgage originations by
Timbercreek since inception
Repeat borrowers represent
76%
of new business
2014 Company Highlights
$401.3 million
in new mortgage investments funded (68 loans)
$382.6 million
in full repayments and partial paydowns (59 loans fully repaid)
25%
portfolio growth
113%
portfolio turnover
70%
fi rst mortgage positions
71%
weighted average loan-to-value
Timbercreek Mortgage Investment Corporation
1
Our Diff erentiator:
Income-Producing Properties
Real estate investors use short-term structured fi nancing at various stages of the investment process, often
prior to stabilization. Our focus is primarily on mortgage loans that are secured by assets that are further
along in this process – where buildings have already been constructed, stabilization is more imminent and
there is typically some income in place.
Unimproved
Land
Construction
Acquisition
Renovations
Disposition
Timbercreek’s Focus
•
•
Facilitating property acquisitions
Funding redevelopment strategies designed to
improve occupancy and net operating income
• Providing open fi nancings for dispositions –
unencumbered sales
We focus on income-producing assets because they off er:
1. Stronger exit strategies. Investor demand for cash-fl owing real estate tends to be a lot less elastic
than for properties that rely on speculative sales for exit, such as the sale of condominiums, houses or
undeveloped land.
2. Lower probability of default. Rental income is available to service the debt, decreasing the probability
of impairment.
2
Timbercreek Mortgage Investment Corporation
Disciplined
Investment Strategy
Broad diversifi cation is an essential component of our risk-mitigation strategy. This strategy is designed to
minimize concentration risk across several categories including asset type, geography and borrower.
Diversity by Region and Asset Type
Our portfolio currently consists of 105 loans spread across eight regions and ten asset classes. We focus on
loans secured by real estate with strong liquidity characteristics, such as properties located in urban markets
with stable cash-fl ow.
Regional Mix
Asset Type
Ontario 44.4%
With more urban cities than
any other province, Ontario
remains an area of focus for
our business.
Multi-residential 60.7%
We strategically maintain a higher
concentration of exposure to multi-residential
real estate (primarily rental apartments) due to
its inherently stable cash-fl ow and diversifi ed
tenant base.
Ontario: 44.4%
Saskatchewan: 15.3%
Québec: 14.3%
British Columbia: 9.9%
Alberta: 6.3%
Other: 5.3%
Manitoba: 3.3%
Nova Scotia: 1.2%
Multi-residential: 60.7%
Retail: 14.3%
Offi ce: 8.0%
Unimproved land: 6.9%
Hotel: 3.1%
Retirement: 3.0%
Industrial: 1.6%
Single-family residential: 1.1%
Self-storage: 0.9%
Other-residential: 0.4%
Timbercreek Mortgage Investment Corporation
3
Sample Investments
North Vancouver, BC
Vaughan, ON
The City of North Vancouver is a waterfront
municipality on the north shore of Burrard Inlet,
directly across from Vancouver, BC. The city
offers all the benefits of a small, well-urbanized
waterfront community – perfect for those
enjoying their golden years. This 97-unit
retirement residence lies one block west of North
Vancouver’s major north-south artery. The loan
is being used to refinance an existing second
mortgage.
Located just outside Toronto, the City of Vaughan
is one of the fastest growing municipalities in
Canada, with a population that has nearly doubled
in size since 1991. The City of Vaughan ranks
as #1 neighbourhood in Ontario and as #20 in
Canada according to the Canadian Real Estate
Wealth’s 2014 ‘Top 100 Neighbourhoods across
Canada for Investment’ survey. This first mortgage
acquisition financing is on a 58,130 square
foot medical office building in Woodbridge, a
suburban community in the City of Vaughan.
Criteria
Asset type
Loan size ($1 – $25M)
Term (3 months – 3 years)
Interest
Fees
Investment
Retirement
$1,250,000
36 months
9%
0.75%
Criteria
Asset type
Loan size ($1 – $25M)
Term (3 months – 3 years)
Interest
Fees
Investment
Office
$2,425,000
36 months
9%
2.00%
4
Timbercreek Mortgage Investment Corporation
Letter to Shareholders
I am pleased to report to you on the 2014 results
for Timbercreek Mortgage Investment Corporation
(Timbercreek MIC); a year where we deployed a record level
of capital in a volatile market and were able to do so without
compromising the quality of our portfolio.
Over the course of 2014 we had repayments of $383 million,
which is equivalent to 113% turnover in the portfolio. While
this exceptional turnover did present some challenges
with maintaining full deployment through the year, it
demonstrates the quality of our mortgage investments
and borrowers. Over 90% of our loans are repaid ahead
of schedule which means our clients are successfully
executing on their business plan. This further illustrates the
thoroughness of our underwriting process.
This turnover fueled a record year of investment activity
as well, with $499 million in capital deployed resulting in
year-over-year portfolio growth of 25%. By year-end, we
had not only achieved our stated goal of having all cash
deployed, but we had exceeded that by drawing on the
credit facility for an additional $9 million. What we are most
proud to report is that we were able to achieve this in a
market that saw periods of abnormally high competition and
unprecedented low bond yields. We attribute this success to
our exceptional origination and underwriting team.
Managing risk is a top priority in our business and
something we believe diff erentiates us from other mortgage
investment corporations in the market. One of the key
strategies we use for managing risk is our focus on investing
primarily in loans secured by income-producing properties.
We strategically target these assets because we believe that
demand for properties with some form of rental income
in-place is higher and more stable than demand for land or
properties under construction. This stability provides more
certainty in the exit strategies of our loans and allows us to
sell properties faster in the event of foreclosure, minimizing
the likelihood of impairment. We also feel there is a lower
probability of default on a loan when the property has
existing cash-fl ow available to service the debt.
We further mitigate risk by maintaining a portfolio that
is well diversifi ed geographically, by asset type and
borrower. Our portfolio currently consists of 105 loans
across more than ten asset types with exposure in almost
all provinces across the country. We are continuously
monitoring all markets and rebalancing the portfolio to
ensure we are generating the best risk-adjusted returns
for shareholders. For example, we had limited investment
activity in Alberta during the days of higher oil prices as we
found competition and pricing to be very aggressive. As a
result, we currently have just 6% of our portfolio secured
by properties in that market and no exposure to oil sector
tenants. With the lower oil prices now helping to stabilize
the Alberta market and a signifi cant reduction in capital
available through conventional lenders in that market,
Alberta is once again becoming more attractive. We are
starting to see more high-quality opportunities to lend
on solid underlying real estate with reasonable long-term
valuations.
to educate the market on the quality of Timbercreek MIC’s
mortgage investments and bringing attention to this
mispricing in an eff ort to improve trading conditions.
As a lender, the outlook on bond yields is very important
to our business. We do believe, however, that key factors
relating to the structure of our loans and fundamentals in
the market will help protect current and future investments
from the impacts of lower bond yields. Our current
investments are protected by the fact that the loans are
fi xed rate loans or fl oating rate loans with fl oor rates that
are equivalent to the rate on funding. In terms of future
investment potential, we are starting to see spreads
widening as lenders set limits to the rates at which they are
willing to lend. Given the high-quality of the security in our
portfolio, we believe we are providing an exceptional fi xed-
income alternative in the market.
We are also closely monitoring economic trends that would
impact valuations across Canadian commercial real estate.
Although we do see valuations fl uctuate in diff erent markets
and asset classes over time (as was our experience in Alberta
earlier last year), we believe that, as a whole, the Canadian
commercial real estate market will remain stable for the
foreseeable future. Our thesis is supported by the fact that
there remains a high concentration of institutional and
private investors with very long-term investment horizons
and conservative debt structures. We also believe the limited
level of new supply that has come to market over the years
will help to stabilize values.
As we look ahead to 2015, we believe the momentum
generated through the last quarter of 2014 provides a strong
foundation for success this year. With a fully invested
portfolio and access to a larger facility to maintain full
deployment going forward, we expect to avoid the impacts
of cash drag that were experienced in 2014. We also continue
to see strong lending opportunities to redeploy proceeds
from repayments as our borrowers continue to successfully
execute on their investment plans.
As always, there are a number of people to thank for
our successes over the past year. Foremost, I would
like to thank you, our shareholders, for your continued
confi dence and support of our investment strategy. Our
entire investment team is dedicated to ensuring you receive
a protected capital base and stable income – I thank them
for that. Finally, I’d like to express my gratitude to our Board
of Directors and Mortgage Advisory Committee for their
guidance and oversight which continues to be invaluable.
From everyone here at Timbercreek MIC, we will continue
our steadfast investment approach and look forward to
reporting further success in the coming year.
Despite this strong focus on mitigating risk, we believe our
shares are currently trading in the market at a yield that
that does not properly refl ect the strong credit quality of
the underlying portfolio. We are committed to continuing
Andrew Jones
Chief Executive Offi cer
Timbercreek Mortgage Investment Corporation
March 2015
Timbercreek Mortgage Investment Corporation
5
Management’s Discussion and Analysis
For the year ended December 31, 2014
FORWARD-LOOKING STATEMENTS
Forward-looking statement advisory
The terms, the “Company”, “we”, “us” and “our” in the following Management Discussion & Analysis (“MD&A”)
refer to Timbercreek Mortgage Investment Corporation (the “Company”). This MD&A may contain forward-
looking statements relating to anticipated future events, results, circumstances, performance or expectations
that are not historical facts but instead represent our beliefs regarding future events. These statements are
typically identified by expressions like “believe”, “expects”, “anticipates”, “would”, “will”, “intends”, “projected”,
“in our opinion” and other similar expressions. By their nature, forward-looking statements require us to
make assumptions which include, among other things, that (i) the Company will have sufficient capital under
management to effect its investment strategies and pay its targeted dividends to shareholders, (ii) the investment
strategies will produce the results intended by the Manager, (iii) the markets will react and perform in a manner
consistent with the investment strategies and (iv) the Company is able to invest in mortgages of a quality that
will generate returns that meet and/or exceed the Company’s targeted investment returns.
Forward-looking statements are subject to inherent risks and uncertainties. There is significant risk that
predictions and other forward-looking statements will prove not to be accurate. We caution readers of this
MD&A not to place undue reliance on our forward-looking statements as a number of factors could cause
actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates
or intentions expressed or implied in the forward-looking statements. Actual results may differ materially from
management expectations as projected in such forward-looking statements for a variety of reasons, including
but not limited to, general market conditions, interest rates, regulatory and statutory developments, the effects of
competition in areas that the Company may invest in and the risks detailed from time to time in the Company’s
public disclosures. For more information on risks, please refer to the “Risks and Uncertainties” section in this
MD&A, and the “Risk Factors” section of our Annual Information Form (“AIF”), which can be found on the SEDAR
website at www.sedar.com.
We caution that the foregoing list of factors is not exhaustive and that when relying on forward-looking
statements to make decisions with respect to investing in the Company, investors and others should carefully
consider these factors, as well as other uncertainties and potential events and the inherent uncertainty of
forward-looking statements. Due to the potential impact of these factors, the Company and Timbercreek Asset
Management Inc. (the “Manager”) do not undertake, and specifically disclaim any intention or obligation to
update or revise any forward-looking statements, whether as a result of new information, future events or
otherwise, unless required by applicable law.
This MD&A is dated February 25, 2015. Disclosure contained in this MD&A is current to that date, unless
otherwise noted. Additional information on the Company, its dividend reinvestment plan and its mortgage
investments is available on the Company’s website at www.timbercreekmic.com. Additional information about
the Company, including its AIF, can be found at www.sedar.com.
6
Timbercreek Mortgage Investment Corporation
BUSINESS OVERVIEW
Timbercreek Mortgage Investment Corporation (the “Company”) is incorporated under the laws of the Province
of Ontario by Articles of Incorporation dated April 30, 2008. On September 13, 2013, in connection with the
Transition as explained below, the Company filed articles of amendment effective as of September 13, 2013 (the
“Effective Date”), to amend, among other things, certain provisions of the articles of the Company related to the
rights attached to the redeemable Class A and Class B shares and voting shares, and provided for the creation
of a new class of common shares, for which all existing classes of redeemable shares were exchanged. On
November 29, 2013 (the “Exchange Date”), all issued and outstanding Class A and Class B shares were exchanged
into common shares.
The Company invests in mortgage investments selected and determined to be high quality by the Manager. The
Company is, and intends to continue to be, qualified as a mortgage investment corporation (“MIC”) as defined
under Section 130.1(6) of the Income Tax Act (Canada) (“ITA”).
The fundamental investment objectives of the Company are to (i) preserve shareholder capital of the Company
and (ii) provide shareholders with a stable stream of monthly dividends. The Company intends to meet its
investment objectives by investing in a diversified portfolio of mortgage investments, consisting primarily of
conventional mortgage investments secured directly by multi-residential, retirement, office, retail and industrial
real property across Canada, primarily located in urban markets and surrounding areas.
TRANSITION TO PUBLIC COMPANY REGIME
On September 12, 2013, the Company received shareholder’s approval for the Company’s transition (the
“Transition”) from the Canadian securities regulatory regime for investment funds to the regulatory regime for
non-investment fund reporting issuers (the “Public Company Regime”).
Beginning on the Effective Date, the Company is subject to, and files all continuous disclosure materials
in compliance with the Public Company Regime requirements pursuant to National Instrument 51-102
Continuous Disclosure Obligations, which includes preparation and filing of its audited financial statements in
accordance with International Financial Reporting Standards (“IFRS”), along with a Management’s Discussion
and Analysis.
As part of the Transition, the Company provided a one-time special redemption right of up to 15% of the
issued and outstanding redeemable shares of each class (the “Special Redemption”). The Company redeemed
requests from holders of 1,674,568 Class A shares and 259,771 Class B shares for the Special Redemption.
The total redemptions payable of $18.0 million were paid on November 27, 2013. On the Exchange Date, the
Company exchanged all of the 32,829,013 outstanding Class A shares and 3,887,053 outstanding Class B shares
into a newly created class of common shares. The common shares commenced trading on the Toronto Stock
Exchange (“TSX”) on November 29, 2013, continuing under the symbol ‘TMC’, and the Class A shares ceased to
trade after the close of market on November 28, 2013.
Additionally, Messrs. Ugo Bizzarri and Andrew Jones were elected as additional directors of the Company.
Effective September 13, 2013, the Company entered into a new management agreement with the Manager and
terminated its management agreement with Timbercreek Asset Management Ltd., a wholly owned subsidiary of
the Manager. The Manager is responsible for the day-to-day operations and providing all general management,
mortgage servicing and administrative services for the Company’s mortgage investments.
In connection with the Transition, the Company incurred total costs of $3.8 million, which includes soliciting
dealer fees, soliciting broker fees, audit fees, legal fees and other related costs. The Manager elected to assume
responsibility for $0.3 million of costs relating to the Transition.
Timbercreek Mortgage Investment Corporation
7
BASIS OF PRESENTATION
This MD&A has been prepared to provide information about the financial results of the Company for the year
ended December 31, 2014 (the “Year”). This MD&A should be read in conjunction with the consolidated financial
statements for the years ended December 31, 2014 and 2013, which are prepared in accordance with IFRS as
issued by the International Accounting Standards Board (“IASB”).
The functional and reporting currency of the Company is Canadian dollars and unless otherwise specified, all
amounts in this MD&A are in thousands of Canadian dollars, except per share and other non-financial data.
Copies of these documents have been filed electronically with securities regulators in Canada through the
System for Electronic Document Analysis and Retrieval (“SEDAR”) and may be accessed through the SEDAR
website at www.sedar.com.
NON-IFRS MEASURES
The Company prepares and releases consolidated financial statements in accordance with IFRS. In this MD&A,
as a complement to results provided in accordance with IFRS, the Company discloses certain financial measures
not recognized under IFRS and that do not have standard meanings prescribed by IFRS (collectively the “non-
IFRS measures”). These non-IFRS measures are further described below. The Company has presented such
non-IFRS measures because the Manager believes they are relevant measures of the ability of the Company to
earn and distribute cash dividends to shareholders and to evaluate the Company’s performance. These non-IFRS
measures should not be construed as alternatives to net income and comprehensive income or cash flows from
operating activities as determined in accordance with IFRS as indicators of the Company’s performance.
• Expense ratio – represents total expenses (excluding financing costs, net operating (gain) loss on foreclosed
properties held for sale (“FPHFS”), fair value adjustment on FPHFS, transition related costs and provision for
mortgage investments loss) for the stated period, expressed as an annualized percentage of total assets less
mortgage syndication liabilities;
•
Fixed expense ratio – represents expenses as calculated under expense ratio, less performance fees, for the
stated period, expressed as an annualized percentage of total assets less mortgage syndication liabilities;
• Net mortgage investments – represents total mortgage investments, net of mortgage syndication liabilities
and before adjustments for interest receivable, unamortized lender fees and allowance for mortgage
investments loss as at the reporting date;
• Average net mortgage investment – represents the total net mortgage investments divided by the total
number of mortgage investments at the reporting date;
• Average net mortgage investment portfolio – represents the monthly average of the net mortgage
investments portfolio over the stated period;
• Weighted average interest rate – represents the weighted average interest rate (not including lender fees) on
the net mortgage investments at the reporting date;
• Weighted average lender fees – represents the cash lender fees received on individual mortgage investments
during the stated period, expressed as a percentage of the Company’s advances on those mortgage
investments. If the entire lender fees is received but the mortgage investment is not fully funded, the
denominator is adjusted to include the Company’s unadvanced commitment;
• Weighted average loan-to-value – a measure of advanced and unadvanced mortgage commitments on a
mortgage investment, including priority or pari-passu debt on the underlying real estate, as a percentage of
the fair value of the underlying real estate collateral at the time of approval of the mortgage investment. For
construction/redevelopment mortgage investments, fair value is based on an ‘as completed’ basis;
• Leverage – represents the total of gross convertible debentures and the total credit facility balance divided by
total assets less any amounts that are reflected as mortgage syndication liabilities;
• Targeted dividend yield – represents the average 2-Year Government of Canada Bond Yield plus 550 basis
points;
• Actual dividend yield – represents the total per share dividend for the stated period for Class A shares and
common shares divided by the trading close price for the stated period;
8
Timbercreek Mortgage Investment Corporation
• Adjusted net income (loss) and comprehensive income (loss) – represents net income (loss) and
comprehensive income (loss) for the stated period excluding Transition related costs, issuance costs of
redeemable shares and dividends to holders of redeemable shares;
• Adjusted earnings per share – represents the total adjusted net income (loss) and comprehensive income
(loss) divided by the weighted average outstanding shares for the stated period;
• Turnover ratio – represents total mortgage repayments during the stated period, expressed as a percentage
of the average net mortgage investment portfolio for the stated period; and
• Payout ratio – represents total dividends paid and declared for payment to the holders of redeemable shares
and common shares during the stated period, divided by distributable income for the stated period.
RECENT DEVELOPMENTS AND OUTLOOK
The Company had a very active year in 2014. The mortgage investments portfolio performed well throughout
the year with $383 million in loans repaid equating to a portfolio turnover of 112.6% the largest volume of
repayments the Company has ever experienced. To offset this, the Manager successfully funded $499 million
in new mortgage investments and additional fundings which resulted in portfolio growth of 25% year-over-
year. Investment activity continued to be disciplined with a strong focus towards mortgage investments
primarily secured by income producing properties and also on maintaining a well-diversified portfolio, both
geographically and by product type.
Although the market saw a lot of competitive pressure through the first and second quarters of 2014, the
Manager did continue to source quality mortgage investments opportunities. This momentum increased
through the fourth quarter, as competition appeared to become less aggressive. As a result, new mortgage
investments and additional advances totalling $186 million were funded in the quarter [the Companies most
active quarter to-date] and the weighted average interest rate rose from 9.2% at the end of the third quarter of
9.4% at December 31, 2014.
Following the extraordinary repayments that the Company experienced in the first half of 2014, the Manager has
been focused on more consistently utilizing the credit facility to ensure the portfolio is fully funded at all times.
These efforts resulted in having all excess cash deployed and the credit facility drawn by $9.1 million at year end.
Despite having yet another record quarter for repayments, the focus on having the portfolio more than 100%
deployed has helped to mitigate the impacts of cash drag and has allowed the Company to generate income
available for distribution which exceeded the amount of the actual distribution during the quarter. Since year-
end, the Company has increased its credit facility from $35 million to $50 million, which should further assist in
managing cash flows going forward.
The Company has maintained minimal exposure to the Alberta real estate market in the most recent quarters
due to concerns around aggressive valuations and competition. As a result, the Company does not feel it is
directly exposed in any material way to downward pressure on oil prices. However, under the current conditions
and the abrupt exit from conventional lenders the Alberta market has become more attractive. The Company will
be actively seeking opportunities to capitalize on the lack of capital available in that market in order to generate
strong risk-adjusted returns by providing alternative sources of capital for high-quality real estate investors.
Heading into 2015, the Company is well positioned to succeed. With a fully deployed, well-diversified portfolio
of mortgage investments primarily secured by income-producing properties, a more normalized competitive
environment and access to a larger facility to cushion the impacts of turn-over, the Company is on track to
generate income sufficient to meet its targeted dividends.
Timbercreek Mortgage Investment Corporation
9
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
For the year ended December 31, 2014
FINANCIAL HIGHLIGHTS
STATEMENT OF FINANCIAL POSITION HIGHLIGHTS
As at
KEY FINANCIAL POSITION INFORMATION
Mortgage investments, including mortgage syndications
December 31,
2014
December 31,
2013
December 31,
2012
$
616,174
$
442,166
$
407,140
Total assets
Credit facility
Convertible debentures
Total liabilities
CAPITAL STRUCTURE
Net assets attributable to holders of redeemable shares
Shareholders’ equity
Convertible debentures, gross
Credit facility limit1
Unutilized credit facility
Leverage2
COMMON SHARE INFORMATION
Number of common shares outstanding
Number of Class A redeemable shares outstanding
Number of Class B redeemable shares outstanding
Closing trading price
Market capitalization
1 Subsequent to year end, the credit facility was increased to $50.0 million.
Subsequent to year end, the credit facility was increased to $50.0 million.
1
2 Refer to non-IFRS measures section, where applicable.
2 Refer to non-IFRS measures section, where applicable.
634,069
8,837
32,387
269,123
–
364,946
34,500
35,000
25,924
10.5%
40,701,528
–
–
467,406
–
–
130,838
–
336,568
–
25,000
25,000
0.0%
408,895
8,706
–
53,367
355,528
–
–
25,000
16,164
2.4%
36,964,028
–
–
–
34,561,122
3,742,597
10.16
351,141
$
$
$
$
8.32
338,637
$
$
9.17
338,960
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 6
10
Timbercreek Mortgage Investment Corporation
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
For the year ended December 31, 2014
Operating Results Highlights
Operating Results Highlights
Three months ended December 31,
Year ended December 31,
2014
2013
2014
2013
2012
Net interest income
Income from operations
$
9,774
$
9,926
$
36,710
$
39,731
$
38,655
7,438
6,844
28,272
25,487
29,178
Net income (loss) and comprehensive income
(loss)
Earnings per share (basic and diluted) 1
Adjusted net income (loss) and
comprehensive income (loss)2
Adjusted earnings per share (basic and diluted)2
Dividends to shareholders
Cash flow from operating activities
Distributable income
Distributable income per share (basic and
diluted)
Targeted dividend yield2
Actual dividend yield2
Payout ratio2
Dividends per share:
Class A
Class B
Common
5,812
0.14
5,812
0.14
7,326
7,984
8,013
0.20
6.52%
8.58%
91.4%
–
–
4,050
0.17
6,624
0.17
4,953
4,025
7,536
0.20
6.61%
8.52%
97.8%
0.063
0.067
24,917
0.63
507
0.65
(402)
n/a
24,917
28,361
28,826
0.63
0.74
0.81
30,263
26,185
27,899
0.71
6.55%
9.16%
108.5%
–
–
29,274
23,812
30,204
0.79
6.61%
8.33%
96.9%
0.630
0.670
29,201
32,551
29,505
0.83
6.61%
7.68%
99.0%
0.780
0.828
$
0.180
$
0.134
$
0.762
$
0.134
$
–
NET MORTGAGE INVESTMENTS INFORMATION 2
Net mortgage investments
397,341
317,154
397,341
317,154
368,253
Total number of net investments
105
96
105
96
77
Average net mortgage investments
$
3,784
$
3,304
$
3,784
$
3,304
$
4,783
Weighted average interest rate
Weighted average lender fee3
Turnover ratio
9.4%
1.5%
9.8%
1.6%
9.4%
1.6%
9.8%
1.7%
37.3%
24.2%
112.6%
79.8%
10.1%
1.7%
80.1%
1 The Company has not disclosed earnings (loss) per share for the year ended December 31, 2012 as the Company did not have equity
1 The Company has not disclosed earnings (loss) per share for the year ended December 31, 2012 as the Company did not have equity instruments,
as defined in IAS 33, Earnings per Share as the redeemable shares were classified as a financial liability in the statements of financial position.
instruments, as defined in IAS 33, Earnings per Share as the redeemable shares were classified as a financial liability in the statements of
2 Refer to non-IFRS measures section, where applicable.
financial position.
3 The Company has revised weighted average lender fee ratios for prior periods based on an updated definition included in non-IFRS measures.
2 Refer to non-IFRS measures section, where applicable.
3 The Company has revised weighted average lender fee ratios for prior periods based on an updated definition included in non-IFRS
measures.
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 7
Timbercreek Mortgage Investment Corporation
11
For the three months ended December 31, 2014 (“Q4 2014”) and December 31, 2013 (“Q4 2013”)
• The Company funded 17 new net mortgage investments (Q4 2013 – 18) totalling $170.8 million (Q4 2013 –
$51.8 million), had additional advances on existing mortgage investments totalling $14.9 million (Q4 2013 –
$2.1 million) and received full repayments on 12 mortgage investments (Q4 2013 – 11) and partial pay downs
totalling $134.4 million (Q4 2013 – $85.8 million), resulting in net mortgage investments of $397.3 million as
at December 31, 2014 (September 30, 2014 – $346.1 million), an increase of 14.8% from September 30, 2014.
• Net interest income earned by the Company was $9.8 million (Q4 2013 – $9.9 million), a decrease of $0.1
million, or 1.5%, from Q4 2013. The decrease over Q4 2013 is mainly due to a lower average net mortgage
investment portfolio at the outset of Q4 2014 that resulted from greater than normal repayments in Q2 2014
and Q3 2014.
• The Company received lender fees of $2.5 million (Q4 2013 – $0.7 million) or a weighted average lender fee
of 1.5% (Q4 2013 – 1.6%). The increase in lender fees is directly related to the significant increase in advances
on new mortgage investments of $119.0 million made in Q4 2014 relative to Q4 2013.
• The Company generated income from operations of $7.4 million (Q4 2013 – $6.8 million), an increase of $0.6
million, or 8.7%, from Q4 2013. The increase in income from operations is mainly attributed to the decreased
provision for mortgage investments loss and general and administrative expenses relative to Q4 2013 and is
partially offset by the increase in management and performance fees relative to Q4 2013.
• The Company recorded an unrealized fair value loss on two of its FPHFS totalling $0.8 million.
• The Company declared dividends to common shareholders of $7.3 million (Q4 2013 – $7.4 million, inclusive
of Class A, Class B and common share dividends). Since inception, the dividends have exceeded the
Company’s targeted dividend yield of the 2-Year Government of Canada Bond Yield (“2-Yr GOC Yield”) plus
550 basis points.
•
•
In October 2014, the Company amended the credit facility agreement, increasing the facility to $35.0 million,
while also extending the term for an additional two years at the same pricing, and adding an option to
increase the facility limit to $60.0 million, subject to certain terms and conditions.
Subsequent to year end, the Company completed a $15.0 million increase on the credit facility, taking its total
available borrowing limit to $50.0 million.
For the years ended December 31, 2014 (the “Year” or “2014”) and December 31, 2013 (“2013”)
• The Company funded 68 new net mortgage investments (2013 – 69) totalling $401.3 million (2013 – $198.7
million), had additional advances on existing mortgage investments totalling $98.0 million (2013 – $42.6
million) and received full repayments on 59 mortgage investments (2013 – 50) and partial pay downs
totalling $382.6 million (2013 – $283.1 million), resulting in net mortgage investments of $397.3 million at
December 31, 2014 (December 31, 2013 – $317.2 million), an increase of 25.3% from December 31, 2013.
• Net interest income earned by the Company was $36.7 million (2013 – $39.7 million), a decrease of
$3.0 million, or 7.6%, from 2013. The decrease over 2013 is mainly due to a lower average net mortgage
investment portfolio resulting from greater than average repayments.
• The Company received lender fees of $5.8 million (2013 – $3.6 million) or a weighted average lender fee of
1.6% (2013 – 1.7%). The increase in lender fees is directly related to the significant increase in advances on
new mortgage investments of $202.6 million made in 2014 relative to 2013.
• The Company generated income from operations of $28.3 million (2013 – $25.5 million), an increase of $2.8
million, or 10.9%, from 2013. Although 2014 has generated lower net interest income relative to 2013, it has
been offset by the reduction in expenses resulting from no Transition costs and trailer fees and a higher
mortgage loss provision experienced in 2013.
• The Company recorded a $0.3 million collective mortgage provision along with a $0.8 million unrealized fair
value loss on two of its FPHFS.
• The Company declared dividends to common shareholders of $30.3 million (2013 – $29.3 million, inclusive
of Class A, Class B and common share dividends). Since inception, the dividends have exceeded the
Company’s targeted dividend yield.
• The Company foreclosed on the underlying security of a mortgage investment with outstanding principal
and costs of $69.6 million and accrued interest of $1.8 million. This underlying security was subsequently
12
Timbercreek Mortgage Investment Corporation
sold to a third party, with the proceeds from the sale repaying all of the outstanding principal and interest
from the mortgage investment and resulted in a gain of $0.1 million.
• The Board of Directors appointed Andrew Jones as Chief Executive Officer (“CEO”) of the Company, effective
January 20, 2014, to replace Blair Tamblyn. Blair Tamblyn remains as Chairman of the Board of Directors.
• On February 25, 2014, the Company completed a public offering of $30.0 million 6.35% convertible
debentures, including exercising the over-allotment option of $4.5 million, for net proceeds of $32.5 million
(the “debentures”), which were used to fund additional net mortgage investments.
• The Board of Directors appointed David Melo as Chief Financial Officer (“CFO”) of the Company, effective
March 25, 2014, to replace Ugo Bizzarri. Ugo Bizzarri was elected to the Board of Directors as part of the
Transition.
• On April 24, 2014, the Company closed on a public offering of 3,737,500 common shares, including
exercising the over-allotment option, at a price of $9.35 per share. The Company received net proceeds of
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
$33.2 million, which were used to fund additional net mortgage investments.
•
•
In October 2014, the Company amended and extended the credit facility agreement as described above.
Management’s Discussion and Analysis
Subsequent to year end, the Company completed a $15.0 million increase on the credit facility, taking its total
available borrowing limit to $50.0 million.
For the year ended December 31, 2014
ANALYSIS OF FINANCIAL INFORMATION FOR THE YEAR
Distributable income
ANALYSIS O F FINANCIA L INFORM ATION FOR TH E YEAR
Distributable incom e
Net income and comprehensive income
$
5,812
$
4,051
$
24,917
$
507
Three months ended
December 31,
Year ended
December 31,
2014
2013
2014
2013
Less: amortization of lender fees
Add: one-time Transition related costs
Add: lender fees received during the period
Add: amortization of financing costs, credit facility
Add: amortization of financing costs, debentures
Add: accretion expense, debentures
Add: issuance cost of redeemable shares
Add: net operating (gain) loss from FPHFS
Add: fair value adjustments on FPHFS
Add: provision for mortgage investments loss
Add: dividends to holders of redeemable shares
Distributable income
Less: Dividends to holders of redeemable shares
Less: Dividends to common shareholders
(Over) under distribution
Distributable income per share (basic and diluted)
Payout ratio
Turnover ratio
(1,297)
–
2,482
35
94
29
–
58
800
–
–
8,013
–
(7,326)
(960)
(4,437)
(4,266)
156
714
27
–
–
3
182
–
950
2,413
7,536
(2,414)
(4,953)
–
5,820
129
303
96
–
171
650
250
–
27,899
–
(30,263)
3,530
3,633
144
–
–
3
182
–
2,150
24,321
30,204
(24,321)
(4,953)
$
$
687
$
169
$
(2,364)
$
930
0.20
$
0.20
$
0.71
$
91.4%
37.3%
97.8%
24.2%
108.5%
112.6%
0.79
96.9%
79.8%
The distributable income reconciliation above provides a link between the Company’s IFRS reporting
The distributable income reconciliation above provides a link between the Company’s IFRS reporting
requirements, and its ability to generate recurring profit for distribution.
requirements, and its ability to generate recurring profit for distribution.
The Board of Directors have set a dividend policy that is predicated on what they believe to be a long-term
The Board of Directors have set a dividend policy that is predicated on what they believe to be a long-term
sustainable objective. A number of factors are assessed and evaluated each time the Board of Directors reviews
sustainable objective. A number of factors are assessed and evaluated each time the Board of Directors reviews
and approves dividends, including, but not limited to, forward-looking cash flow information such as budgets
and forecasts.
and approves dividends, including, but not limited to, forward-looking cash flow information such as budgets
and forecasts.
The Company experienced turnover of 112.6% in 2014, the highest in the Company’s history. The turnover,
coupled with the cash drag normally experienced following an equity or debenture raise, resulted in dividends
Timbercreek Mortgage Investment Corporation
13
in excess of distributable income of 108.5%. In Q4 2014, we made significant strides, including full deployment
of cash plus usage of our credit facility. We expect to be continually leveraged in 2015 to minimize cash drag,
while targeting a payout ratio of 100%.
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 10
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
The Company experienced turnover of 112.6% in 2014, the highest in the Company’s history. The turnover,
coupled with the cash drag normally experienced following an equity or debenture raise, resulted in dividends
in excess of distributable income of 108.5%. In Q4 2014, we made significant strides, including full deployment of
cash plus usage of our credit facility. We expect to be continually leveraged in 2015 to minimize cash drag, while
targeting a payout ratio of 100%.
Management’s Discussion and Analysis
For the year ended December 31, 2014
Statements of Income and Comprehensive Income
Statem ents of Incom e and Com prehensive Incom e
Net interest income
$
9,774
$
9,926
(1.5)%
$
36,710
$
39,731
(7.6%)
Three months ended
%
Year ended
%
December 31,
Change
December 31,
Change
2014
2013
2014
2013
Expenses
Income from operations
Net operating gain (loss) from FPHFS
Fair value adjustment of FPHFS
Financing costs:
Interest on credit facility
Interest on convertible debentures
Issuance costs of redeemable shares
Dividends to holders of redeemable
shares
(2,336)
7,438
(58)
(800)
(87)
(681)
–
–
(3,082)
24.2%
(8,438)
(14,244)
40.8%
6,844
8.7%
28,272
25,487
(182)
68.4%
–
(100.0%)
(195)
55.9%
–
(3)
(100.0%)
100.0%
(2,414)
100.0%
(171)
(650)
(275)
(2,259)
–
–
10.9%
6.1%
(182)
–
(100.0%)
(474)
42.2%
–
(3)
(100.0%)
100.0%
(24,321)
100.0%
Net income and comprehensive income $
5,812
$
4,050
58.3%
$
24,917
$
507
4933.6%
Earnings per share (basic and diluted) 1
1 Earnings per share for 2013 has been calculated as if the Transition occurred on January 1, 2013 and as a result, dividends to holders of
1
Earnings per share for 2013 has been calculated as if the Transition occurred on January 1, 2013 and as a result, dividends to holders of redeemable
redeemable shares and issuance costs of redeemable shares for the year ended December 31, 2013 have been added back to the net loss of the
shares and issuance costs of redeemable shares for the year ended December 31, 2013 have been added back to the net loss of the Company.
Company.
(16.4%)
(2.4%)
0.63
0.65
0.14
0.17
$
$
$
$
Net interest incom e 1
For Q4 2014 and the Year, the Company earned net interest income of $9.8 million and $36.7 million,
Net interest income1
For Q4 2014 and the Year, the Company earned net interest income of $9.8 million and $36.7 million, respectively
(Q4 2013 – $9.9 million; 2013 – $39.7 million). Net interest income is made up of the following:
respectively (Q4 2013 – $9.9 million; 2013 – $39.7 million). Net interest income is made up of the following:
(a) Interest income
(a) Interest income
For Q4 2014 and the Year, the Company earned $8.4 million and $32.0 million (Q4 2013 – $8.7 million;
2013 – $34.9 million) in interest income on the net mortgage investments. The decrease over the 2013
For Q4 2014 and the Year, the Company earned $8.4 million and $32.0 million (Q4 2013 – $8.7 million; 2013 –
$34.9 million) in interest income on the net mortgage investments. The decrease over the 2013 comparable
periods is mainly due to a lower average net mortgage investment portfolio resulting from greater than
comparable periods is mainly due to a lower average net mortgage investment portfolio resulting from
average repayments, coupled with a lower weighted average interest rate relative to 2013. The weighted
greater than average repayments, coupled with a lower weighted average interest rate relative to 2013.
average interest rate on the net mortgage investments decreased over the Year, from 9.8% at December
31, 2013 to 9.4% at December 31, 2014, mainly due to increased competition faced during the Year, placing
downward pressure on lending rates.
The weighted average interest rate on the net mortgage investments decreased over the Year, from 9.8%
at December 31, 2013 to 9.4% at December 31, 2014, mainly due to increased competition faced during
the Year, placing downward pressure on lending rates.
(b) Lender fee income
(b) Lender fee income
2013 – $0.7 million; 2013 – $3.6 million), or a weighted average lender fee of 1.5% and 1.6% respectively
During Q4 2014 and the Year, the Company received lender fees of $2.5 million and $5.8 million (Q4 2013
– $0.7 million; 2013 – $3.6 million), or a weighted average lender fee of 1.5% and 1.6% respectively (Q4 2013 –
During Q4 2014 and the Year, the Company received lender fees of $2.5 million and $5.8 million (Q4
1.6%; 2013 – 1.7%). The lender fees are amortized using the effective interest rate method over the expected
life of the mortgage investments to interest income. For Q4 2014 and the Year, lender fees of $1.3 million and
(Q4 2013 – 1.6%; 2013 – 1.7%). The lender fees are amortized using the effective interest rate method over
$4.4 million respectively, (Q4 2013 – $1.0 million; 2013 – $4.3 million) were amortized to lender fee income.
The lender fees generated by the Company continue to be a significant component of income resulting
the expected life of the mortgage investments to interest income. For Q4 2014 and the Year, lender fees
from mortgage investment turnover. The Manager does not retain any portion of the lender fees, ensuring
management interests are aligned with the Company.
of $1.3 million and $4.4 million respectively, (Q4 2013 – $1.0 million; 2013 – $4.3 million) were amortized
to lender fee income. The lender fees generated by the Company continue to be a significant
1 For analysis purposes, net interest income and its component parts are discussed net of payments made on account of mortgage
1.
syndications to provide the reader with a more representative reflection of the Company’s performance.
For analysis purposes, net interest income and its component parts are discussed net of payments made on account of mortgage syndications to provide the reader with a more
representative reflection of the Company’s performance.
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 11
14
Timbercreek Mortgage Investment Corporation
(c) Other income
For Q4 2014 and the Year, the Company earned $0.1 million and $0.2 million (Q4 2013 – $0.3 million; 2013
– $0.5 million) in other income. Other income includes fees earned on advances of mortgage investments,
prepayment penalties and exit fees earned on mortgage investment repayments and other miscellaneous
fees.
Expenses
For Q4 2014 and the Year, the Company’s expense ratio was 2.2% and 2.0% (Q4 2013 – 2.3%; 2013 – 2.5%),
including a fixed expense ratio of 1.5% and 1.5% (Q4 2013 – 1.9%; 2013 – 1.9%). The decrease in the expense and
fixed expense ratios relative to the 2013 comparable periods is primarily driven by the growth in total assets,
resulting from the equity and debenture offerings in 2014.
Management fees
(a) Management fees
As part of the Transition, the Company entered into a new management agreement with Timbercreek Asset
Management Inc. (the “Manager”) and terminated its management agreement with Timbercreek Asset
Management Ltd., a wholly owned subsidiary of the Manager. Under the new management agreement,
the Company pays the Manager an annual management fee of 1.20% per annum of the gross assets of the
Company, calculated and paid monthly in arrears, plus applicable taxes. The gross assets are calculated as the
total assets of the Company before deducting any liabilities, less any mortgage syndication liabilities.
For Q4 2014 and the Year, the Company incurred management fees of $1.4 million and $5.4 million
respectively (Q4 2013 – $1.2 million; 2013 – $5.0 million). The increase is directly related to the increase in
gross assets.
(b) Performance fees
Under the new management agreement, the Manager continues to be entitled to a performance fee. In any
calendar year where the Company has net earnings available for distribution to shareholders in excess of the
hurdle rate (the “Hurdle Rate”), which is defined as the average 2-Yr GOC Yield for the 12-month period then
ended plus 450 basis points, the Manager is entitled to receive from the Company a performance fee equal to
20% of the net earnings of the Company available to distribute over the Hurdle Rate. The net earnings of the
Company shall mean the net income before performance fees of the Company in accordance with applicable
accounting principles and adjusted for certain other non-cash adjustments as defined in the management
agreement.
For Q4 2014 and the Year, the Company accrued performance fees of $0.7 million and $2.0 million (Q4 2013 –
$0.3 million; 2013 – $1.9 million). The annualized Hurdle Rate for the Year was 5.6% (2013 – 5.6%).
Trailer fees
In conjunction with the shareholder approval for the Transition, the Company is no longer required to pay trailer
fees to the brokers effective from the quarter ended September 30, 2013. Prior to Q3 2013, the Company paid
each registered dealer a trailer fee equal to 0.50% annually of the net redemption value per Class A share held by
clients of the registered dealers, calculated and paid at the end of each calendar quarter. As such, the Company
paid no trailer fees during the Year (2013 – $0.7 million).
General and administrative
For Q4 2014 and the Year, the Company incurred general and administrative expenses of $0.2 million and $0.8
million (Q4 2013 – $0.4 million; 2013 - $0.9 million). General and administrative expenses consist mainly of
audit fees, professional fees, director fees and other operating costs associated with operating the Company and
administration of the mortgage investment portfolio. The operating expense ratio for the Year equated to 0.2%
(2013 – 0.3%), at December 31, 2014. The decrease is mainly due to an increase in assets resulting from the equity
and debenture offerings, coupled with additional costs savings.
Net operating (gain) loss from foreclosed properties held for sale
The Company consolidates the operating activities of the foreclosed properties held for sale. The net operating
(gain) loss from foreclosed properties held for sale for Q4 2014 and the Year were $0.1 million and $0.2 million
respectively (Q4 2013 – $0.2 million; 2013 – $0.2 million).
Timbercreek Mortgage Investment Corporation
15
Fair value adjustment on foreclosed properties held for sale
During Q3 2014, the Company foreclosed on a mortgage investment which had gone into default earlier in the
Year. The Company sold the property with a net gain on the sale of $0.1 million. The Company also recorded an
unrealized fair value loss of $0.8 million on the FPHFS. The adjustments pertain to two of its properties. For our
property located in Pemberton, BC, we have reduced the value by $0.4 million, in-line with the appraised value.
The property is now stabilized with full commercial occupancy and the apartments are being occupied for short
term rentals. For our apartment condominium conversion property located in Saskatoon, SK, the Company
recorded an adjustment loss of $0.4 million relating to costs it incurred to get the property ready for disposition.
Interest on credit facility
Financing costs include interest paid on amounts drawn on the credit facility, stand-by fees charged on
unutilized credit facility amounts and amortization of financing costs which were incurred on closing of the
credit facility. Financing costs for Q4 2014 and the Year relating to the credit facility were $0.1 million and $0.3
million, respectively (Q4 2013 – $0.2 million; 2013 – $0.5 million).
The Company incurred $0.3 million of financing costs in the Year on amending and extending the term of the
credit facility. These costs are amortized over the new term of the credit facility.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
Management’s Discussion and Analysis
For the year ended December 31, 2014
For the year ended December 31, 2014
Interest on convertible debentures
During Q1 2014, the Company issued $34.5 million of 6.35% convertible unsecured subordinated debentures.
Interest costs related to the debentures are recorded in financing costs using the effective interest rate method.
For Q4 2014 and the Year, interest on the debentures of $0.7 million and $2.3 million (Q4 2013 – nil; 2013 – nil), is
made up of the following:
Interest on the debentures
Interest on the debentures
Amortization of issue costs
Amortization of issue costs
Accretion of equity component of the debentures
Accretion of equity component of the debentures
$
$
$
$
558
558
93
93
29
29
680
680
$
$
$
$
1,860
1,860
303
303
96
96
2,259
2,259
Three months ended
Three months ended
December 31, 2014
December 31, 2014
Year ended
Year ended
December 31, 2014
December 31, 2014
Dividends to holders of common shares and redeemable shares
Dividends to holders of common shares and redeemable shares
The Company intends to pay dividends to shareholders on a monthly basis within 15 days following the end of
Dividends to holders of common shares and redeemable shares
The Company intends to pay dividends to shareholders on a monthly basis within 15 days following the end of
The Company intends to pay dividends to shareholders on a monthly basis within 15 days following the end
of each month. Below is a summary of the dividends to holders of common shares and holders of redeemable
each month. Below is a summary of the dividends to holders of common shares and holders of redeemable
each month. Below is a summary of the dividends to holders of common shares and holders of redeemable
shares.
shares.
shares.
Three months ended December 31, 2014
Three months ended December 31, 2014
Year ended December 31, 2014
Year ended December 31, 2014
Dividends
Dividends
per share
per share
Total
Total
Dividends
Dividends
per share
per share
Total
Total
Common shares
Common shares
$
$
0.180
0.180
$
$
7,326
7,326
$
$
0.762
0.762
$
$
30,263
30,263
Three months ended December 31, 2013
Three months ended December 31, 2013
Year ended December 31, 2013
Year ended December 31, 2013
Dividends
Dividends
per share
per share
Total
Total
Dividends
Dividends
per share
per share
Class A
Class A
Class B
Class B
Common shares
Common shares
$
$
0.063
0.063
0.067
0.067
0.134
0.134
$
$
$
$
2,170
2,170
$
$
244
244
4,953
4,953
0.630
0.630
0.670
0.670
0.134
0.134
7,367
7,367
$
$
Total
Total
$
$
21,876
21,876
2,445
2,445
4,953
4,953
29,274
29,274
The actual dividend yield for the Year of 9.16% on common shares (2013 – 8.33% on combined Class A and
The actual dividend yield for the Year of 9.16% on common shares (2013 – 8.33% on combined Class A and
The actual dividend yield for the Year of 9.16% on common shares (2013 – 8.33% on combined Class A and
common shares) is in excess of the Company’s targeted dividend yield of 6.55% (2013 – 6.61%).
common shares) is in excess of the Company’s targeted dividend yield of 6.55% (2013 – 6.61%).
common shares) is in excess of the Company’s targeted dividend yield of 6.55% (2013 – 6.61%).
Earnings per share
Earnings per share
Earnings per share for the Year was $0.63 per share (2013 – $0.65 per share). Income for 2014 was lower due to
Earnings per share for the Year was $0.63 per share (2013 – $0.65 per share). Income for 2014 was lower due to
lower net income for the Year (2013 net income is adjusted for dividends to holders of redeemable shares and
lower net income for the Year (2013 net income is adjusted for dividends to holders of redeemable shares and
issuance costs of redeemable shares) which was partially offset by the reduction in expenses resulting from no
issuance costs of redeemable shares) which was partially offset by the reduction in expenses resulting from no
Transition costs and trailer fees and a higher mortgage loss provision experienced in 2013.
Transition costs and trailer fees and a higher mortgage loss provision experienced in 2013.
Timbercreek Mortgage Investment Corporation
16
Earnings per share for 2013 has been calculated as if the Transition occurred on January 1, 2013 and as a result,
Earnings per share for 2013 has been calculated as if the Transition occurred on January 1, 2013 and as a result,
dividends to holders of redeemable shares and issuance costs of redeemable shares for the year ended
dividends to holders of redeemable shares and issuance costs of redeemable shares for the year ended
December 31, 2013 have been added back to the net loss of the Company.
December 31, 2013 have been added back to the net loss of the Company.
STATEM EN T OF FIN AN CIAL PO SITIO N
STATEM EN T OF FIN AN CIAL PO SITIO N
Net m ortgage investm ents
Net m ortgage investm ents
The balance of net mortgage investments is as follows:
The balance of net mortgage investments is as follows:
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 14
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 14
Earnings per share
Earnings per share for the Year was $0.63 per share (2013 – $0.65 per share). Income for 2014 was lower due to
lower net income for the Year (2013 net income is adjusted for dividends to holders of redeemable shares and
issuance costs of redeemable shares) which was partially offset by the reduction in expenses resulting from no
Transition costs and trailer fees and a higher mortgage loss provision experienced in 2013.
Earnings per share for 2013 has been calculated as if the Transition occurred on January 1, 2013 and as a
result, dividends to holders of redeemable shares and issuance costs of redeemable shares for the year ended
December 31, 2013 have been added back to the net loss of the Company.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
Management’s Discussion and Analysis
For the year ended December 31, 2014
For the year ended December 31, 2014
STATEMENT OF FINANCIAL POSITION
Net mortgage investments
The balance of net mortgage investments is as follows:
Gross mortgage investments, including mortgage
Gross mortgage investments, including mortgage
syndications
syndications
Mortgage syndications liabilities
Mortgage syndications liabilities
December 31, 2014 December 31, 2013
December 31, 2014 December 31, 2013
Change
Change
$
$
$
$
$
$
616,174
616,174
(219,581)
(219,581)
396,593
396,593
(4,392)
(4,392)
4,890
4,890
250
250
397,341
397,341
442,166
442,166
(124,379)
(124,379)
317,787
317,787
(4,691)
(4,691)
3,508
3,508
550
550
317,154
317,154
174,008
174,008
(95,202)
(95,202)
78,806
78,806
299
299
1,382
1,382
(300)
(300)
Interest receivable
Interest receivable
Unamortized lender fees
Unamortized lender fees
Allowance for mortgage investments loss
Allowance for mortgage investments loss
Net mortgage investments
Net mortgage investments
As at December 31, 2014, the Company’s mortgage investments portfolio is comprised of 105 mortgage
As at December 31, 2014, the Company’s mortgage investments portfolio is comprised of 105 mortgage
As at December 31, 2014, the Company’s mortgage investments portfolio is comprised of 105 mortgage
investments (December 31, 2013 – 96), with a weighted average interest rate of 9.4% (December 31, 2013 – 9.8%)
investments (December 31, 2013 – 96), with a weighted average interest rate of 9.4% (December 31, 2013 – 9.8%)
investments (December 31, 2013 – 96), with a weighted average interest rate of 9.4% (December 31, 2013 – 9.8%)
and an average mortgage investment of $3.8 million (December 31, 2013 – $3.3 million).
and an average mortgage investment of $3.8 million (December 31, 2013 – $3.3 million).
and an average mortgage investment of $3.8 million (December 31, 2013 – $3.3 million).
80,187
80,187
$
$
$
$
$
$
Portfolio allocation
Portfolio allocation
Portfolio allocation
As at December 31, the Company’s net mortgage investments were allocated across the following categories:
As at December 31, the Company’s net mortgage investments were allocated across the following categories:
As at December 31, the Company’s net mortgage investments were allocated across the following categories:
(a) Security Position
(a) Security position
(a) Security position
First mortgages
First mortgages
Non-first mortgages
Non-first mortgages
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
84
84
21
21
105
105
December 31, 2014
December 31, 2014
% of Net
% of Net
Mortgage
Mortgage
Investments
Investments
69.5%
69.5%
30.5%
30.5%
100.0%
100.0%
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
72
72
24
24
96
96
December 31, 2013
December 31, 2013
% of Net
% of Net
Mortgage
Mortgage
Investments
Investments
61.1%
61.1%
38.9%
38.9%
100.0%
100.0%
The Company’s allocation to first mortgages has increased moderately by 8.4% over the Year. During the
The Company’s allocation to first mortgages has increased moderately by 8.4% over the Year. During the
Year, the Company co-invested in several first mortgage investments with Timbercreek Senior Mortgage
The Company’s allocation to first mortgages has increased moderately by 8.4% over the Year. During the
Year, the Company co-invested in several first mortgage investments with Timbercreek Senior Mortgage
Investment Corporation (“TSMIC”) and holds subordinate first mortgage positions in these co-investments
Year, the Company co-invested in several first mortgage investments with Timbercreek Senior Mortgage
Investment Corporation (“TSMIC”) and holds subordinate first mortgage positions in these co-investments
in relation to TSMIC.
Investment Corporation (“TSMIC”) and holds subordinate first mortgage positions in these co-investments in
in relation to TSMIC.
relation to TSMIC.
(b) Region
(b) Region
ON
ON
AB
AB
QC
QC
BC
BC
SK
SK
MB
MB
OT
OT
NS
NS
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
50
50
11
11
16
16
10
10
7
7
6
6
3
3
2
2
December 31, 2013
December 31, 2014
December 31, 2013
December 31, 2014
% of Net
% of Net
% of Net
% of Net
Mortgage
Mortgage
Mortgage
Mortgage
Investments
Investments
Investments
Investments
51.4%
44.4%
51.4%
44.4%
12.6%
6.3%
12.6%
6.3%
13.7%
14.3%
13.7%
14.3%
14.5%
9.9%
14.5%
9.9%
3.3%
15.3%
15.3%
3.3%
Timbercreek Mortgage Investment Corporation
2.5%
3.3%
2.5%
3.3%
1.1%
5.3%
1.1%
5.3%
0.9%
1.2%
0.9%
1.2%
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
47
47
15
15
14
14
9
9
5
5
3
3
2
2
1
1
105
105
100.0%
100.0%
96
96
100.0%
100.0%
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 15
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 15
17
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
For the year ended December 31, 2014
Gross mortgage investments, including mortgage
syndications
Mortgage syndications liabilities
Interest receivable
Unamortized lender fees
Allowance for mortgage investments loss
December 31, 2014 December 31, 2013
Change
$
616,174
$
442,166
$
174,008
(219,581)
396,593
(4,392)
4,890
250
(124,379)
317,787
(4,691)
3,508
550
(95,202)
78,806
299
1,382
(300)
Net mortgage investments
$
397,341
$
317,154
$
80,187
As at December 31, 2014, the Company’s mortgage investments portfolio is comprised of 105 mortgage
investments (December 31, 2013 – 96), with a weighted average interest rate of 9.4% (December 31, 2013 – 9.8%)
and an average mortgage investment of $3.8 million (December 31, 2013 – $3.3 million).
As at December 31, the Company’s net mortgage investments were allocated across the following categories:
Portfolio allocation
(a) Security position
First mortgages
Non-first mortgages
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
84
21
105
69.5%
30.5%
100.0%
72
24
96
61.1%
38.9%
100.0%
The Company’s allocation to first mortgages has increased moderately by 8.4% over the Year. During the
Year, the Company co-invested in several first mortgage investments with Timbercreek Senior Mortgage
Investment Corporation (“TSMIC”) and holds subordinate first mortgage positions in these co-investments
(b) Region
in relation to TSMIC.
(b) Region
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
ON
AB
QC
50
11
16
44.4%
6.3%
14.3%
47
15
14
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
10
7
9.9%
15.3%
BC
SK
9
5
MB
6
3.3%
3
OT
Management’s Discussion and Analysis
2
For the year ended December 31, 2014
105
100.0%
5.3%
1.2%
NS
96
2
3
1
51.4%
12.6%
13.7%
14.5%
3.3%
2.5%
1.1%
0.9%
100.0%
The Company continues to maintain a diversified portfolio of net mortgage investments primarily across
The Company continues to maintain a diversified portfolio of net mortgage investments primarily across
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 15
Canada, with its greatest concentration in Canada’s largest provinces. As at December 31, 2014, 74.9% of
Canada, with its greatest concentration in Canada’s largest provinces. As at December 31, 2014, 74.9% of the
the net mortgage investments (December 31, 2013 – 92.2%) were allocated across Ontario, Quebec, British
net mortgage investments (December 31, 2013 – 92.2%) were allocated across Ontario, Quebec, British
Columbia and Alberta. The Company has continued to maintain significant exposure to Ontario as it is
Columbia and Alberta. The Company has continued to maintain significant exposure to Ontario as it is
Canada’s most populated province with the greatest number of metropolitan cities. Of note, the Company
has a low exposure to the Alberta market, which has experienced volatility stemming from the recent drop in
Canada’s most populated province with the greatest number of metropolitan cities. Of note, the Company
oil prices.
has a low exposure to the Alberta market, which has experienced volatility stemming from the recent drop
in oil prices.
(c) Maturity
(c) Maturity
Maturing 2014
Maturing 2015
Maturing 2016
Maturing 2017
Maturing 2018
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
–
42
32
30
1
105
0.0%
38.5%
34.2%
24.9%
2.4%
100.0%
38
41
16
1
–
96
32.0%
51.3%
15.1%
1.6%
0.0%
100.0%
The Company’s portfolio turnover rate for the Year was 112.6% (2013 – 79.8%). The Company’s strong
portfolio turnover helps generate fee income, all of which goes to the Company, and helps ensure the
The Company’s portfolio turnover rate for the Year was 112.6% (2013 – 79.8%). The Company’s strong portfolio
turnover helps generate fee income, all of which goes to the Company, and helps ensure the Company
Company is able to respond quickly to a changing interest rate environment. The weighted average term of
is able to respond quickly to a changing interest rate environment. The weighted average term of the
the portfolio as at December 31, 2014 is 2.1 years (December 31, 2013 – 2.2 years), in-line with the portfolio’s
portfolio as at December 31, 2014 is 2.1 years (December 31, 2013 – 2.2 years), in-line with the portfolio’s
target maturity of 1.5 – 3.0 years. The weighted average remaining term to maturity as at December 31, 2014
target maturity of 1.5 – 3.0 years. The weighted average remaining term to maturity as at December 31, 2014
is 1.4 years (December 31, 2013 – 1.2 years). A majority of the mortgage investments contain a prepayment
is 1.4 years (December 31, 2013 – 1.2 years). A majority of the mortgage investments contain a prepayment
option, whereby the borrower may repay the principal at any time prior to maturity without penalty or yield
option, whereby the borrower may repay the principal at any time prior to maturity without penalty or yield
maintenance, which would in effect reduce the weighted average remaining term to maturity.
maintenance, which would in effect reduce the weighted average remaining term to maturity.
(d) Asset type
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
Multi-residential
Office
18
Retail
Timbercreek Mortgage Investment Corporation
Retirement
Industrial
Unimproved land
Other-residential
Hotels
Self-storage
Single-family residential
50
15
14
5
4
8
2
3
2
2
60.7%
8.0%
14.3%
3.0%
1.6%
6.9%
0.4%
3.1%
0.9%
1.1%
36
15
14
8
7
6
4
2
2
2
96
51.7%
13.6%
13.2%
12.5%
1.8%
4.1%
0.9%
1.2%
0.7%
0.3%
100.0%
105
100.0%
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 16
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
For the year ended December 31, 2014
The Company continues to maintain a diversified portfolio of net mortgage investments primarily across
Canada, with its greatest concentration in Canada’s largest provinces. As at December 31, 2014, 74.9% of the
net mortgage investments (December 31, 2013 – 92.2%) were allocated across Ontario, Quebec, British
Columbia and Alberta. The Company has continued to maintain significant exposure to Ontario as it is
Canada’s most populated province with the greatest number of metropolitan cities. Of note, the Company
has a low exposure to the Alberta market, which has experienced volatility stemming from the recent drop
in oil prices.
(c) Maturity
Maturing 2014
Maturing 2015
Maturing 2016
Maturing 2017
Maturing 2018
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
–
42
32
30
1
105
0.0%
38.5%
34.2%
24.9%
2.4%
100.0%
38
41
16
1
–
96
32.0%
51.3%
15.1%
1.6%
0.0%
100.0%
The Company’s portfolio turnover rate for the Year was 112.6% (2013 – 79.8%). The Company’s strong
portfolio turnover helps generate fee income, all of which goes to the Company, and helps ensure the
Company is able to respond quickly to a changing interest rate environment. The weighted average term of
the portfolio as at December 31, 2014 is 2.1 years (December 31, 2013 – 2.2 years), in-line with the portfolio’s
target maturity of 1.5 – 3.0 years. The weighted average remaining term to maturity as at December 31, 2014
is 1.4 years (December 31, 2013 – 1.2 years). A majority of the mortgage investments contain a prepayment
option, whereby the borrower may repay the principal at any time prior to maturity without penalty or yield
maintenance, which would in effect reduce the weighted average remaining term to maturity.
(d) Asset Type
(d) Asset type
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
Multi-residential
Office
Retail
Retirement
Industrial
Unimproved land
50
15
14
5
4
8
60.7%
8.0%
14.3%
3.0%
1.6%
6.9%
36
15
14
8
7
6
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Other-residential
0.4%
4
2
Hotels
3
3.1%
2
Self-storage
Management’s Discussion and Analysis
For the year ended December 31, 2014
Single-family residential
100.0%
1.1%
105
96
2
2
0.9%
2
2
51.7%
13.6%
13.2%
12.5%
1.8%
4.1%
0.9%
1.2%
0.7%
0.3%
100.0%
The Company has developed a lending niche predominantly targeting short-term mortgages, secured by
The Company has developed a lending niche predominantly targeting short-term mortgages, secured by
cash-flowing properties, while specializing in multi-residential real estate assets. Historically, the Company
cash-flowing properties, while specializing in multi-residential real estate assets. Historically, the Company
has had very little exposure to land development, single-family residential and construction loans, where
demand is largely impacted by the strength or weakness of the Canadian housing market.
has had very little exposure to land development, single-family residential and construction loans, where
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 16
demand is largely impacted by the strength or weakness of the Canadian housing market.
(e) Interest Rate
(e) Interest rate
9.99% or lower
10.00%–10.99%
11.00% or greater
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
67
21
17
105
76.4%
9.1%
14.5%
100.0%
47
23
26
96
59.3%
22.7%
18.0%
100.0%
The weighted average interest rate, excluding lender fee income, on the net mortgage investments at
The weighted average interest rate, excluding lender fee income, on the net mortgage investments at
December 31, 2014 was 9.4% (December 31, 2013 – 9.8%). Although the weighted average interest rate has
December 31, 2014 was 9.4% (December 31, 2013 – 9.8%). Although the weighted average interest rate has
decreased over the Year, it is still significantly greater than the Company’s target dividend for the Year of
decreased over the Year, it is still significantly greater than the Company’s target dividend for the Year
6.55% (December 31, 2013 – 6.61%), equal to the 2-Yr GOC Yield plus 550 basis points, while providing
of 6.55% (December 31, 2013 – 6.61%), equal to the 2-Yr GOC Yield plus 550 basis points, while providing
sufficient margin for operating expenses of the Company.
sufficient margin for operating expenses of the Company.
(f) Loan-to-value
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
55% or less
56%–60%
61%–65%
66%–70%
71%–75%
76%–80%
81%–85%
20
10
13
11
17
19
15
105
9.3%
7.2%
8.8%
14.5%
18.6%
11.5%
30.1%
26
6
9
11
10
13
21
15.1%
3.0%
5.1%
9.8%
13.1%
19.1%
34.8%
100.0%
100.0%
Timbercreek Mortgage Investment Corporation
96
19
As at December 31, 2014, the weighted average loan-to-value on the mortgage investment portfolio was
70.8% (December 31, 2013 – 70.8%), well below the maximum threshold of 85%.
M ortgage syndication liabilities
The Company enters into certain mortgage participation agreements with third party lenders, using senior and
subordinated participation, whereby the third party lenders take the senior position and the Company retains
the subordinated position. These agreements generally provide an option to the Company to repurchase the
senior position, but not the obligation, at a purchase price equal to the outstanding principal amount of the
lenders’ proportionate share together with all accrued interest. During the Year, the mortgage syndication
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 17
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
For the year ended December 31, 2014
The Company has developed a lending niche predominantly targeting short-term mortgages, secured by
cash-flowing properties, while specializing in multi-residential real estate assets. Historically, the Company
has had very little exposure to land development, single-family residential and construction loans, where
demand is largely impacted by the strength or weakness of the Canadian housing market.
(e) Interest rate
9.99% or lower
10.00%–10.99%
11.00% or greater
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
67
21
17
105
76.4%
9.1%
14.5%
100.0%
47
23
26
96
59.3%
22.7%
18.0%
100.0%
The weighted average interest rate, excluding lender fee income, on the net mortgage investments at
December 31, 2014 was 9.4% (December 31, 2013 – 9.8%). Although the weighted average interest rate has
decreased over the Year, it is still significantly greater than the Company’s target dividend for the Year of
6.55% (December 31, 2013 – 6.61%), equal to the 2-Yr GOC Yield plus 550 basis points, while providing
sufficient margin for operating expenses of the Company.
(f) Loan-to-value
(f) Loan-to-value
55% or less
56%–60%
61%–65%
66%–70%
71%–75%
76%–80%
81%–85%
December 31, 2014
December 31, 2013
# of Net
Mortgage
% of Net
Mortgage
# of Net
Mortgage
% of Net
Mortgage
Investments
Investments
Investments
Investments
20
10
13
11
17
19
15
105
9.3%
7.2%
8.8%
14.5%
18.6%
11.5%
30.1%
100.0%
26
6
9
11
10
13
21
96
15.1%
3.0%
5.1%
9.8%
13.1%
19.1%
34.8%
100.0%
As at December 31, 2014, the weighted average loan-to-value on the mortgage investment portfolio was
As at December 31, 2014, the weighted average loan-to-value on the mortgage investment portfolio was
70.8% (December 31, 2013 – 70.8%), well below the maximum threshold of 85%.
70.8% (December 31, 2013 – 70.8%), well below the maximum threshold of 85%.
M ortgage syndication liabilities
Mortgage syndication liabilities
The Company enters into certain mortgage participation agreements with third party lenders, using senior and
The Company enters into certain mortgage participation agreements with third party lenders, using senior and
subordinated participation, whereby the third party lenders take the senior position and the Company retains
subordinated participation, whereby the third party lenders take the senior position and the Company retains
the subordinated position. These agreements generally provide an option to the Company to repurchase the
the subordinated position. These agreements generally provide an option to the Company to repurchase the
senior position, but not the obligation, at a purchase price equal to the outstanding principal amount of the
senior position, but not the obligation, at a purchase price equal to the outstanding principal amount of the
lenders’ proportionate share together with all accrued interest. During the Year, the mortgage syndication
lenders’ proportionate share together with all accrued interest. During the Year, the mortgage syndication
liabilities have increased to $219.6 million (December 31, 2013 – $124.4 million), as the Company syndicated on
several newly funded mortgages investments during the Year. Mortgage syndication liabilities will vary from
quarter to quarter and is dependent on the type of investments seen at any particular time, and not necessarily
indicative of a future trend.
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 17
Foreclosed properties held for sale
During the Year, the Company foreclosed on two properties (2013 – two) and reclassified the carrying amount
of the outstanding principal, interest receivable, costs incurred and related allowance for mortgage investments
loss to foreclosed properties held for sale. The fair value of the remaining foreclosed properties held for sale as
at December 31, 2014 is $13.9 million (December 31, 2013 – $11.4 million). The Company has engaged third party
managers to operate the properties while they are held for sale.
The Company felt it was prudent to foreclose on a mortgage investment which had gone into default earlier
in the year. As part of the foreclosure process, the Manager sought to control the process and acquired the
syndicated first mortgage while attracting multiple interested purchasers. The Company subsequently sold
the property, recouping all of its principal and costs of $69.6 million and accrued interest of $1.8 million, and
also recognized a gain on the sale of $0.1 million. The purchaser also obtained mortgage financing from the
Company in respect of the property.
During the Year, the Company closed on the sale of eight residential units from one of the foreclosed properties
for net proceeds of $1.4 million (2013 – nil). During Q4 2014, the Company recorded an unrealized fair value loss
on the FPHFS of $0.8 million.
Allowance for mortgage investments loss
As at December 31, 2014, the Company has concluded that there is no objective evidence of impairment on any
individual mortgage investment. At a collective level, the Company assesses for impairment to identify losses
that have been incurred, but not yet identified, on an individual basis. As part of the Company’s analysis, it has
grouped mortgage investments with similar risk characteristics, including geographical exposure, collateral
type, loan-to-value, counterparty and other relevant groupings, and assesses them for impairment using
statistical data. Based on the amounts determined by the analysis, the Company uses judgement to determine
whether or not the actual future losses are expected to be greater or less than the amounts calculated.
20
Timbercreek Mortgage Investment Corporation
During the Year, the Company recognized a collective impairment allowance of $0.3 million (December 31, 2013
– nil) and specific impairment allowance of nil (December 31, 2013 – $2.2 million).
During the Year, the Company foreclosed on the underlying security relating to an impaired mortgage
investment and reclassified $0.6 million from allowance for mortgage investments loss to FPHFS.
Net working capital
Net working capital decreased by $11.9 million to $0.1 million at December 31, 2014 from $12.0 million at
December 31, 2013, mainly due to the reduction of cash on hand through the funding of net mortgage
investments.
Credit facility
The Company has a credit facility with an available limit of $35.0 million (December 31, 2013 – $25.0 million).
The Company amended and restated the credit facility on October 31, 2014, extending the term for an additional
two years and increasing the available limit to $35.0 million, with an option to increase the limit to $60.0 million,
subject to certain terms and conditions. Subsequent to year end, the Company completed an additional $15.0
million increase on the credit facility, taking its total available borrowing limit to $50.0 million. The credit
facility is subject to an interest rate equal to the bank’s prime rate of interest plus 1.50% (December 31, 2013
– bank’s prime rate of interest plus 1.50%). The credit facility is secured by a general security agreement over
the Company’s assets. As at December 31, 2014, $9.1 million was outstanding on the credit facility (December
31, 2013 – nil). The excess capacity will allow the Company to keep the portfolio more than 100% invested and
minimize the impact of unanticipated portfolio turnover.
Interest costs related to the credit facility are recorded in financing costs using the effective interest rate method.
For the Year, interest on the credit facility of $0.3 million (2013 – $0.5 million) is included in financing costs.
As at December 31, 2014, there were $0.2 million (December 31, 2013 – $0.1 million) in unamortized financing
costs related to the placement of the credit facility netted against the outstanding facility balance. For the Year,
the Company has amortized financing costs of $0.1 million (2013 – $0.1 million) to interest expense using the
effective interest rate method.
Convertible debentures
In Q1 2014, the Company completed a public offering of $34.5 million, 6.35% convertible unsecured subordinated
debentures for net proceeds of $32.5 million (the “debentures”). The debentures are listed on the TSX under the
symbol ‘TMC.DB’, mature on March 31, 2019, with interest payable semi-annually on March 31 and September
30 of each year. The Company believes that a modest amount of structural leverage coupled with increased
borrowing under the credit facility is accretive to net earnings, while still maintaining a low risk profile. Overall,
total leverage including the maximum credit facility amount plus the convertible debentures at December 31,
2014, equates to approximately 16% of total assets, less mortgage syndication liabilities, an amount we believe is
conservative. The debentures are convertible into common shares at the option of the holder at any time prior
to their maturity at a conversion price of $11.25 per common share, subject to adjustment in certain events in
accordance with the trust indenture governing the terms of the debentures.
Upon issuance of the debentures, the liability component of the debentures was recognized initially at the fair
value of a similar liability that does not have an equity conversion option. The difference between these two
amounts of $0.6 million has been recorded as equity, with the remaining $31.9 million allocated to long-term
debt.
The discount on the debentures is being accreted such that the liability at maturity will equal the face value
of $34.5 million. The issue costs of $2.0 million were proportionately allocated to the liability and equity
components. The issue costs allocated to the liability component are amortized over the term of the debentures
using the effective interest rate method.
Common shares
The Company is authorized to issue an unlimited number of common shares. The holders of common shares
are entitled to receive notice of and to attend and vote at all meetings of the shareholders of the Company.
The holders of the common shares shall be entitled to receive dividends as and when declared by the Board of
Directors.
Timbercreek Mortgage Investment Corporation
21
On April 24, 2014, the Company closed on a public offering of 3,737,500 common shares, including exercising
the overallotment option, at a price of $9.35 per common share. The Company received gross proceeds of $34.9
million. In connection with the above-noted share offering, the Company incurred $1.8 million in issuance
costs. There were no equity offerings during the year ended December 31, 2013.
Dividend reinvestment plan
As part of the Transition, the Company has amended and restated its dividend reinvestment plan (“DRIP”)
effective as of November 20, 2013. The amended and restated DRIP (the “Amended DRIP”) replaces in its entirety
the original DRIP (the “Original DRIP”) established by the Company on May 19, 2010. During the Year, 332,009
common shares were purchased on the open market under the Amended DRIP (2013 – 198,574 Class A shares
issued and 194,948 Class A shares purchased on the open market under the Original DRIP; 35,250 common
shares purchased on the open market under the Amended DRIP).
Normal course issuer bid
On November 13, 2014, the Company received the approval of the TSX to commence a second normal course
issuer bid (the “Second Bid”) to purchase for cancellation up to a maximum of 4,052,822 common shares;
representing approximately 10% of the public float of common shares as of November 11, 2014. Furthermore,
subject to certain exemptions for block purchases, the purchases are limited to 13,170 common shares on
any one trading day. The Second Bid commenced on November 17, 2014 and provides the Company with the
flexibility to repurchase common shares for cancellation until its expiration on November 16, 2015, or such
earlier date as the Second Bid is complete. From November 17, 2014 to December 31, 2014, the Company did not
acquire any common shares for cancellation.
The Company may use the 2014 NCIB to repurchase shares in years where the Company has income in excess
of its dividends that would be accretive to shareholders.
Non-executive director deferred share unit plan
Commencing January 1, 2015, the Company instituted a non-executive director deferred share unit plan
(the “Plan”) whereby, up to 100% of the compensation for a director may be paid to the director in the form of
deferred share units (“DSUs”), payable quarterly in arrears. Directors may elect once every year, in accordance
with the Plan, as to how much (if any) of his/her compensation will be paid in DSUs, having regard at all times to
the ownership guidelines of the Plan. The portion of a director’s compensation which is not payable in the form
of DSUs shall be paid by the Company in cash, quarterly in arrears. The purpose of the Plan is to (a) enhance the
Company’s ability to provide long-term incentive compensation to directors which is linked to the performance
of the Company and not dilutive to shareholders, (b) assist the Company in attracting, retaining and motivating
its directors and (c) promote a closer alignment of interests between directors and the shareholders of the
Company.
As part of the Plan, each director must seek to acquire and maintain a direct or indirect ownership of common
shares or deferred share units of the Company that has a value equal to at least three times the Director’s
annual board retainer and meeting fees. Each director is to achieve this level of ownership within five years of
becoming a director, subject to the requirement, being January 1, 2015 for the current directors.
STATEMENT OF CASH FLOWS
Cash from operating activities
Cash from operating activities for the Year was $26.2 million (2013 – $23.8 million), an increase of $2.4 million, or
10.0%, from 2013. The increase is primarily a result of the increase in lender fees received during the Year of $2.2
million relative to 2013, a result of the significant turnover experienced in 2014.
Cash from investing activities
Cash utilized in investing activities for the Year was $80.9 million (2013 - $40.6 million, net cash received)
and consisted of net proceeds from disposal and capital improvements on FPHFS of $35.4 million and the
repayments of net mortgage investments of $382.6 million, less the funding of net mortgage investments of
$498.9 million.
22
Timbercreek Mortgage Investment Corporation
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Cash from financing activities
Sources of cash from financing activities consisted of net proceeds from the Company’s issuance of convertible
debentures of $32.5 million, issuance of common shares of $33.2 million and the Company’s advances on the
credit facility of $9.1 million. After interest payments on the debentures and credit facility of $1.7 million and
payment of dividends of $30.3 million, the net cash provided by financing activities was $42.8 million for the
Year.
Management’s Discussion and Analysis
For the year ended December 31, 2014
QUARTERLY FINANCIAL INFO RM ATION
QUARTERLY FINANCIAL INFORMATION
The following is a quarterly summary of the Company’s results for the eight most recently completed quarters:
The following is a quarterly summary of the Company’s results for the eight most recently completed quarters:
Net interest income
Expenses 1
Income from operations
Net operating gain (loss) from
FPHFS
Fair value adjustment of FPHFS
Financing costs:
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Q4
2013
Q3
2013
Q2
2013
Q1
2013
$
9,774
$ 8,660
$
9,465 $
8,811
$ 9,926
$
9,888
$ 9,397
$ 10,520
(2,336)
(2,042)
7,438
6,618
(2,049)
7,416
(2,011)
6,800
(3,082)
6,844
(5,622)
(2,690)
(2,851)
4,266
6,707
7,669
(58)
(800)
81
149
(97)
−
(97)
−
(182)
−
−
−
−
−
−
−
Interest on credit facility
(87)
(67)
(57)
(64)
(195)
(98)
(91)
(90)
Interest on convertible
debentures
Issuance costs of redeemable
shares
Dividends to holders of
redeemable shares
Total financing costs
Net income (loss) and
comprehensive income
(loss)
Earnings per share
(basic and diluted) 2
(681)
(671)
(664)
(243)
−
−
−
−
−
−
−
−
(768)
(738)
(721)
(307)
−
(3)
−
−
−
−
−
−
(2,414)
(2,612)
(7,299)
(7,311)
(7,297)
(7,397)
(7,402)
(7,387)
$
5,812 $ 6,110 $
6,598 $
6,396
$ 4,050
$
(3,131)
$ (695)
$ 282
$
0.14 $
0.15 $
0.17 $
0.17
$
−
$
−
$ −
$ −
1 Q3 2013 includes one-time costs of $3.4 million relating to the Transition.
1 Q3 2013 includes one-time costs of $3.4 million relating to the Transition.
2 Earnings per share for quarters in 2013 has not been presented as the Company did not have equity instruments, as defined in IAS 33,
2 Earnings per share for quarters in 2013 has not been presented as the Company did not have equity instruments, as defined in IAS 33,
Earnings per Share, as the redeemable shares were classified as financial liability in the statements of financial position.
Earnings per Share, as the redeemable shares were classified as financial liability in the statements of financial position.
The variations in net income (loss) and comprehensive income (loss) by quarter are mainly attributed to the
The variations in net income (loss) and comprehensive income (loss) by quarter are mainly attributed to the
following:
following:
In any given quarter, the Company is subject to volatility from portfolio turnover from both scheduled and
(i)
(i) In any given quarter, the Company is subject to volatility from portfolio turnover from both scheduled and
early repayments. As a result, net interest income is susceptible to quarterly fluctuations. The Company
early repayments. As a result, net interest income is susceptible to quarterly fluctuations. The Company
models the portfolio throughout the year factoring in both scheduled and probable repayments, and the
models the portfolio throughout the year factoring in both scheduled and probable repayments, and the
corresponding new mortgage advances to determine its distributable income on a calendar year basis.
corresponding new mortgage advances to determine its distributable income on a calendar year basis.
(ii) Within expenses the Company accrues the performance fee payable to the Manager. Given that the
(ii) Within expenses the Company accrues the performance fee payable to the Manager. Given that the
performance fee is adjusted for cash items, the volatility of cash receipts in the year (mainly relating to
lender fees) will typically have an impact on the amount expensed. Further, through Q2 2013, the Company
was required to pay a trailer fee to registered dealers on a quarterly basis.
was required to pay a trailer fee to registered dealers on a quarterly basis.
lender fees) will typically have an impact on the amount expensed. Further, through Q2 2013, the Company
performance fee is adjusted for cash items, the volatility of cash receipts in the year (mainly relating to
(iii) The dividends to holders of redeemable shares and issuance costs relating to redeemable shares were
presented in the statement of income (loss) and comprehensive income (loss) until October 2013. Following
(iii) The dividends to holders of redeemable shares and issuance costs relating to redeemable shares were
the Exchange Date, the dividends to common shareholders are presented in the statement of changes in
presented in the statement of income (loss) and comprehensive income (loss) until October 2013. Following
equity.
the Exchange Date, the dividends to common shareholders are presented in the statement of changes in
equity.
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 22
Timbercreek Mortgage Investment Corporation
23
RELATED PARTY TRANSACTIONS
As at December 31, 2014, due to Manager includes management and performance fees payable of $2.0 million
(December 31, 2013 – $2.3 million) and $6 (December 31, 2013 – $3) related to costs incurred by the Manager on
behalf of the Company.
The Manager is responsible for the general management and day to day operations of the Company and,
through Timbercreek Mortgage Servicing Inc. (“TMSI”), a related party by virtue of common management, acts
as the Company’s mortgage servicer and administrator. As at December 31, 2014, included in other assets is $3.0
million (December 31, 2013 – $1.0 million) of cash held in trust for the Company by TMSI, the balance of which
relates to mortgage funding holdbacks and prepaid mortgage interest received from various borrowers.
In the pursuit of meeting its investment objectives, the Company, from time to time and at the discretion of the
Manager, syndicates its mortgage investments. As at December 31, 2014, the Company, TSMIC, Timbercreek
Four Quadrant Global Real Estate Partners (“T4Q”) and Timbercreek Canadian Direct LP, related parties by virtue
of common management, have co-invested in several mortgage investments totalling $701.9 million (December
31, 2013 – $703.4 million). The Company’s share in these gross mortgage investments is $268.9 million
(December 31, 2013 – $151.1 million). Of these co-invested mortgages, a mortgage investment of $1.1 million
(December 31, 2013 – $1.0 million) was provided to a limited partnership which is partially owned by T4Q. As at
December 31, 2014, no amount (December 31, 2013 – $0.3 million) is receivable by the Company from TSMIC
relating to amounts paid by the Company on behalf of TSMIC.
The above related party transactions are in the normal course of business and are recorded at the exchange
amount, which is the amount of consideration established and agreed to by the related parties.
COMMITMENTS AND CONTINGENCIES
In the ordinary course of business activities, the Company may be contingently liable for litigation and claims
arising from investing in mortgages and loans. Where required, management records adequate provisions in the
accounts.
Although it is not possible to accurately estimate the extent of potential costs and losses, if any, management
believes that the ultimate resolution of such contingencies would not have a material adverse effect on the
Company’s financial position.
CRITICAL ACCOUNTING ESTIMATES
In the preparation of the consolidated financial statements, the Manager has made judgments, estimates and
assumptions that affect the application of the Company’s accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates.
In making estimates, the Manager relies on external information and observable conditions where possible,
supplemented by internal analysis as required. Those estimates and judgments have been applied in a manner
consistent with the prior period and there are no known trends, commitments, events or uncertainties that we
believe will materially affect the methodology or assumptions utilized in making those estimates and judgments
in the consolidated financial statements. The significant estimates and judgments used in determining the
recorded amount for assets and liabilities in the consolidated financial statements are as follows:
Mortgage investments
The Company is required to make an assessment of the impairment of mortgage investments. Mortgage
investments are considered to be impaired only if objective evidence indicates that one or more events (“loss
events”) have occurred after its initial recognition, that have a negative effect on the estimated future cash
flows of that asset. Specifically, the Company will consider loss events including, but not limited to: 1) payment
default by a borrower; 2) whether security of the mortgage negatively impacted by some event; and 3) financial
difficulty experienced by a borrower. The estimation of future cash flows includes assumptions about local
real estate market conditions, market interest rates, availability and terms of financing, underlying value of
the security and various other factors. These assumptions are limited by the availability of reliable comparable
market data, economic uncertainty and the uncertainty of future events. Accordingly, by their nature, estimates
of impairment are subjective and may not necessarily be comparable to the actual outcome. Should the
underlying assumptions change, the estimated future cash flows could vary.
24
Timbercreek Mortgage Investment Corporation
The Company applies judgment in assessing the relationship between parties with which it enters into
participation agreements in order to assess the derecognition of transfers relating to mortgage investments.
Measurement of fair values
The Company’s accounting policies and disclosures require the measurement of fair values for both financial
and non-financial assets and liabilities.
When measuring the fair value of an asset or liability, the Company uses market observable data where possible.
Fair values are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation
techniques as follows:
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that is, derived from prices).
• Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable
inputs).
The Manager reviews significant unobservable inputs and valuation adjustments. If third party information,
such as broker quotes or appraisals are used to measure fair values, the Manager will assess the evidence
obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS,
including the level in the fair value hierarchy in which such valuations should be classified.
Information about the assumptions made in measuring fair value is included in notes 5 and 18 to the
consolidated financial statements for the year ended December 31, 2014.
CHANGES IN ACCOUNTING POLICIES
Except for the changes below, the Company has consistently applied the accounting policies set out to all
periods presented in its consolidated financial statements for the years ended December 31, 2014 and 2013.
(a) Convertible debentures:
The convertible debentures are a compound financial instrument as it contains both a liability and an equity
component.
At the date of issuance, the liability component of convertible debentures is recognized at its estimated
fair value of a similar liability that does not have an equity conversion option and the residual is allocated
to the equity component. Any directly attributable transaction costs are allocated to the liability and equity
components in proportion to their initial carrying amounts. Subsequent to initial recognition, the liability
component of a convertible debenture is measured at amortized cost using the effective interest rate
method. The equity component is not re-measured subsequent to initial recognition and will be transferred
to share capital when the conversion option is exercised or, if unexercised, at maturity.
Interest, losses and gains relating to the financial liability are recognized in profit or loss.
(b) Changes in accounting policies
The Company has adopted the following new and revised standards, along with any consequential
amendments, effective January 1, 2014. These changes were made in accordance with the applicable
transitional provisions.
(i) IAS 32, Financial Instruments: Presentation (“IAS 32”)
In December 2011, the IASB published Disclosures – Offsetting Financial Assets and Financial Liabilities
(Amendments to IAS 32) and issued new disclosure requirements in IFRS 7, Financial Instruments:
Disclosures, with the amendments applied retrospectively. The implementation of this standard had no
impact on the consolidated financial statements.
Timbercreek Mortgage Investment Corporation
25
(ii) IFRIC 21, Levies (“IFRIC 21”)
In 2013, the IASB issued IFRIC 21. This standard addresses accounting for a liability to pay a levy within
the scope of IAS 37, Provisions, contingent liabilities and contingent assets (“IAS 37”). A levy is an outflow
of resources embodying economic benefits that is imposed by governments on entities in accordance
with legislation, other than income taxes. The standard is applied retrospectively. The implementation of
this standard had no impact on the consolidated financial statements.
(c) Future changes in accounting policies
A number of new standards, amendments to standards and interpretations are effective in future periods
and have not been applied in preparing the consolidated financial statements. Those which may be relevant
to the Company are set out below. The Company does not plan to adopt these standards early.
(i) IFRS 9, Financial Instruments (“IFRS 9”)
On July 24, 2014, the IASB issued IFRS 9. IFRS 9 (2014) introduces new requirements for the classification
and measurement of financial assets. Under IFRS 9 (2014), financial assets are classified and measured
based on the business model in which they are held and the characteristics of their contractual cash
flows. The standard introduces additional changes relating to financial liabilities. It also amends the
impairment model by introducing a new ‘expected credit loss’ model for calculating impairment. The
standard will be effective for annual periods beginning on or after January 1, 2018 and will be applied
retrospectively with some exemptions. The Company is currently assessing the impact of the new
standard on its consolidated financial statements.
(ii) IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
In May 2014, the IASB issued IFRS 15. The new standard provides a comprehensive framework for
recognition, measurement and disclosure of revenue from contracts with customers, excluding
contracts within the scope of the standard on leases, insurance contracts and financial instruments.
IFRS 15 becomes effective for annual periods beginning on or after January 1, 2017 and is to be applied
retrospectively. Early adoption is permitted. The Company is currently assessing the impact of the new
standard on its consolidated financial statements.
OUTSTANDING SHARE DATA
As at February 25, 2015, the Company’s authorized capital consists of an unlimited number of common shares,
of which 40,701,528 are issued and outstanding. In addition, as at the date of this MD&A, 3,066,667 common
shares are issuable upon conversion or redemption of the debentures (based on the conversion price of $11.25
per common share).
CAPITAL STRUCTURE AND LIQUIDITY
Capital structure
The Company manages its capital structure in order to support ongoing operations while focusing on its
primary objectives of preserving shareholder capital and generating a stable monthly cash dividend to
shareholders. During the Year, the Company added the debentures to its capital structure to complement
the common shares and the increase to the limit on its credit facility. The Company believes that the modest
amount of structural leverage gained from the debentures is accretive to net earnings, while having a low
impact on the risk profile of the business. The Company anticipates meeting all of its contractual liabilities
(described below) using its mix of capital structure and cash flow from operating activities.
The Company reviews its capital structure on an ongoing basis and adjusts its capital structure in response to
mortgage investment opportunities, the availability of capital and anticipated changes in general economic
conditions.
Liquidity
Access to liquidity is an important element of the Company as it allows the Company to implement its
investment strategy. The Company is, and intends to continue to be, qualified as a MIC as defined under
Section 130.1(6) of the ITA and, as a result, is required to distribute not less than 100% of the taxable income
of the Company to its shareholders. The Company manages its liquidity position through various sources of
cash flows including cash generated from operations, equity and debenture offerings and the credit facility.
26
Timbercreek Mortgage Investment Corporation
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
For the year ended December 31, 2014
flows including cash generated from operations, equity and debenture offerings and the credit facility. The
Company has a borrowing ability of $35.0 million through its credit facility and intends to utilize the credit
facility to manage the fluctuations in cash flows as a result of the timing of mortgage investment fundings and
increase on the credit facility, taking its total available borrowing limit to $50.0 million. As at December 31, 2014,
The Company has a borrowing ability of $35.0 million through its credit facility and intends to utilize the credit
repayments and other working capital needs. Subsequent to year end, the Company completed a $15.0 million
facility to manage the fluctuations in cash flows as a result of the timing of mortgage investment fundings and
repayments and other working capital needs. Subsequent to year end, the Company completed a $15.0 million
increase on the credit facility, taking its total available borrowing limit to $50.0 million. As at December 31, 2014,
the Company is in compliance with its credit facility covenants and expects to remain in compliance going
the Company is in compliance with its credit facility covenants and expects to remain in compliance going
forward.
forward.
The Company routinely forecasts cash flow sources and requirements, including unadvanced commitments, to
The Company routinely forecasts cash flow sources and requirements, including unadvanced commitments, to
ensure cash is efficiently utilized.
ensure cash is efficiently utilized.
The following are the contractual maturities of financial liabilities as at December 31, 2014, including expected
The following are the contractual maturities of financial liabilities as at December 31, 2014, including expected
interest payments:
interest payments:
Carrying
Contractual
Within
Following
values
cash flows
a year
year
3–5
years
Accounts payable and accrued expenses
$
856
$
856
$
856
$
Dividends payable
Due to Manager
Mortgage funding holdbacks
Prepaid mortgage interest
Credit facility 1
Convertible debentures
Total liabilities
Unadvanced gross mortgage commitments
2,442
1,976
484
2,560
9,076
32,387
49,781
–
2,442
1,976
484
2,560
9,825
43,803
61,946
2,442
1,976
484
2,560
409
2,191
10,918
107,367
107,367
$
–
–
–
–
–
9,416
2,197
11,613
–
–
–
–
–
–
–
39,415
39,415
–
Total contractual liabilities
$
49,781
$
169,313
$
118,285
$
11,613
$
39,415
1
1
Includes interest on the credit facility assuming the outstanding balance is not repaid until its maturity in October 2016.
Includes interest on the credit facility assuming the outstanding balance is not repaid until its maturity in October 2016.
As at December 31, 2014, the Company had a cash position of $0.5 million (December 31, 2013 – $12.3 million)
As at December 31, 2014, the Company had a cash position of $0.5 million (December 31, 2013 – $12.3 million)
and an unutilized credit facility of $25.9 million (December 31, 2013 – $25.0 million). The Company is confident
and an unutilized credit facility of $25.9 million (December 31, 2013 – $25.0 million). The Company is confident
that it will be able to finance its operations using the cash flow generated from operations and the credit facility.
that it will be able to finance its operations using the cash flow generated from operations and the credit facility.
Included within the unadvanced mortgage commitments is $42.8 million relating to the Company’s syndication
partners. The Company expects the syndication partners to fund this amount.
partners. The Company expects the syndication partners to fund this amount.
Included within the unadvanced mortgage commitments is $42.8 million relating to the Company’s syndication
Cash generated from operating activities consisted primarily of net income and comprehensive income of
Cash generated from operating activities consisted primarily of net income and comprehensive income of $25.5
$25.5 million. Cash from operating activities is also impacted by changes in operating items such as, interest
receivable, other assets and accounts payable and accrued expenses.
million. Cash from operating activities is also impacted by changes in operating items such as, interest
receivable, other assets and accounts payable and accrued expenses.
Financial assets
FIN AN CIAL IN STRUM EN TS
FINANCIAL INSTRUMENTS
Financial assets
The Company’s cash and cash equivalents, other assets and mortgage investments, including mortgage
syndications, are designated as loans and receivables and are measured at amortized cost. The fair values of cash
and cash equivalents and other assets approximate their carrying amounts due to their short-term nature. The
syndications, are designated as loans and receivables and are measured at amortized cost. The fair values of
fair value of mortgage investments, including mortgage syndications, approximate their carrying value given
the mortgage investments consist of short-term loans that are repayable at the option of the borrower without
yield maintenance or penalties.
cash and cash equivalents and other assets approximate their carrying amounts due to their short-term nature.
The Company’s cash and cash equivalents, other assets and mortgage investments, including mortgage
TIMBERCREEK MORTAGE INVESTMENT CORPORATION 27
Financial liabilities
The Company’s accounts payable and accrued expenses, dividends payable, due to Manager, mortgage funding
holdbacks, prepaid mortgage interest, credit facility, convertible debentures and mortgage syndication liabilities
are designated as other financial liabilities and are measured at amortized cost. With the exception of convertible
debentures and mortgage syndication liabilities, the fair value of these financial liabilities approximate their
carrying amounts due to their short-term nature. The fair value of mortgage syndication liabilities approximate
their carrying value given the mortgage investments consist of short-term loans that are repayable at the option
of the borrower without yield maintenance or penalties. The fair value of the convertible debentures is based on
the market trading price of convertible debentures at the reporting date.
Timbercreek Mortgage Investment Corporation
27
RISKS AND UNCERTAINTIES
The Company is subject to certain risks and uncertainties that may affect the Company’s future performance
and its ability to execute on its investment objectives. We have processes and procedures in place in an attempt
to control or mitigate certain risks, while other risks cannot be or are not mitigated. Material risks that cannot be
mitigated include a significant decline in the general real estate market, interest rates changing markedly, being
unable to make mortgage investments at rates consistent with rates historically achieved, not having adequate
mortgage investment opportunities presented to us, and not having adequate sources of bank financing
available.
The Company’s business activities, including its use of financial instruments, exposes the Company to various
risks, the most significant of which are interest rate risk, credit risk, and liquidity risk.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of financial assets or financial liabilities will
fluctuate because of changes in market interest rates. As of December 31, 2014, $89.9 million of mortgage
investments bear interest at variable rates. Of these, $84.9 million of mortgage investments include a “floor
rate” to protect their negative exposure, while two mortgage investments totalling $5.0 million bear interest
at a variable rate without a “floor rate”. If there were a decrease of 0.50% in interest rates, with all other
variables constant, the impact from variable rate mortgage investments would be a decrease in net income
of $25. However, if there were a 0.50% increase in interest rates, with all other variables constant, it would
result in an increase in net income of $0.5 million. The Company manages its sensitivity to interest rate
fluctuations by generally entering into fixed rate mortgage investments or adding a “floor-rate” to protect its
negative exposure.
In addition, the Company is exposed to interest rate risk on the credit facility, which has a balance of $9.0
million as at December 31, 2014. Based on the outstanding balance of the credit facility as at December 31,
2014, a 0.50% decrease in interest rates, with all other variables constant, will increase net income by $45
annually, arising mainly as a result of lower interest expense payable on the credit facility. A 0.50% increase
in interest rates would have an equal but opposite effect on the net income of the Company.
The Company’s other assets, which includes interest receivable, accounts payable and accrued expenses,
prepaid mortgage interest, mortgage funding holdbacks, dividends payable and due to Manager have no
exposure to interest rate risk due to their short-term nature. Cash and cash equivalents carry a variable rate
of interest and are subject to minimal interest rate risk and the debentures have no exposure to interest rate
risk due to their fixed interest rate.
(b) Credit risk
Credit risk is the possibility that a borrower may be unable to honour its debt commitments as a result of a
negative change in market conditions that could result in a loss to the Company. The Company mitigates
this risk by the following:
(i) adhering to the investment restrictions and operating policies included in the asset allocation model
(subject to certain duly approved exceptions);
(ii) all mortgage investments are approved by the independent mortgage advisory committee before
funding; and
(iii) actively monitoring the mortgage investments and initiating recovery procedures, in a timely manner,
where required.
The maximum exposure to credit risk at December 31, 2014 is the carrying values of its net mortgage
investments, including interest receivable, amounting to $401.7 million (December 31, 2013 – $321.8 million).
The Company has recourse under these mortgage investments in the event of default by the borrower; in which
case, the Company would have a claim against the underlying collateral.
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as
they become due. This risk arises in normal operations from fluctuations in cash flow as a result of the
28
Timbercreek Mortgage Investment Corporation
timing of mortgage investment advances and repayments and the need for working capital. Management
routinely forecasts future cash flow sources and requirements to ensure cash is efficiently utilized. For a
discussion of the Company’s liquidity, cash flow from operations and mitigation of liquidity risk, see the
“Capital Structure and Liquidity” section in this MD&A.
For a full discussion of the risks and uncertainties affecting the Company, please also refer to the “Risk
Factors” section of our AIF for the Year.
DISCLOSURE CONTROLS AND PROCEDURES & INTERNAL CONTROL OVER FINANCIAL REPORTING
The Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company, under their direct
supervision, have designed disclosure controls and procedures (as defined in National Instrument 52-109 –
Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”) to provide reasonable assurance
that material information relating to the Company is gathered and reported to the CEO and CFO and have
designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements in accordance with IFRS during the during the
year ended December 31, 2014.
As at December 31, 2014, the Company’s disclosure controls and procedures were reviewed and the effectiveness
of their design and operation was evaluated. This evaluation confirmed the effectiveness of the design and
operation of disclosure controls and procedures as at December 31, 2014.
The CEO and the CFO assessed, or under their direct supervision caused an assessment of, the design and
operating effectiveness of the Company’s internal controls over financial reporting as at December 31, 2014.
Based on that assessment they determined that the Company’s internal controls over financial reporting
were appropriately designed and were operating effectively in accordance with the COSO Internal Control -
Independent Framework (2013), published by the Committee of Sponsoring Organizations of the Treadway
Commission.
It should be noted that a control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system are met. Given the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control
issues, including instances of fraud, if any, have been detected. These inherent limitations include, among other
items: (i)that management’s assumptions and judgments could ultimately prove to be incorrect under varying
conditions and circumstances; (ii) the impact of any undetected errors; and (iii)controls may be circumvented
by the unauthorized acts of individuals, by collusion of two or more people, or by management override.
There were no changes made in our internal controls over financial reporting during the year ended December
31, 2014, that have materially affected, or are reasonably likely to materially affect, our internal controls over
financial reporting.
ADDITIONAL INFORMATION
Phone
Calling the Company at 1-866-898-8868, Carrie Morris, Managing Director Capital Markets & Corporate
Communications.
Shareholders who wish to enroll in the DRIP or who would like further information about the plan should
contact Corporate Communications at (416) 306-9967 ext. 7266 (collect if long distance).
Internet
Visiting SEDAR at www.sedar.com; or the Company’s website at www.timbercreekmic.com
Mail
Writing to the Company at:
Timbercreek Mortgage Investment Corporation
Attention: Corporate Communications
1000 Yonge Street, Suite 500,
Toronto, Ontario M4W 2K2
Timbercreek Mortgage Investment Corporation
29
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Timbercreek Mortgage Investment Corporation
We have audited the accompanying consolidated fi nancial statements of Timbercreek Mortgage Investment
Corporation (the “Company”), which comprise the consolidated statements of fi nancial position as at December 31,
2014 and December 31, 2013, the consolidated statements of net income and comprehensive income, changes in
shareholders’ equity and net assets attributable to holders of redeemable shares and cash fl ows for the years then
ended, and notes, comprising a summary of signifi cant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated fi nancial statements
in accordance with International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of the consolidated fi nancial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the consolidated fi nancial statements based on our audits. We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about
whether the consolidated fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated fi nancial statements. The procedures selected depend on our judgment, including the assessment of
the risks of material misstatement of the consolidated fi nancial statements, whether due to fraud or error. In making
those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the
consolidated fi nancial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the eff ectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates
made by management, as well as evaluating the overall presentation of the consolidated fi nancial statements.
We believe that the audit evidence we have obtained in our audits is suffi cient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated fi nancial statements present fairly, in all material respects, the consolidated fi nancial
position of the Company as at December 31, 2014 and December 31, 2013, and its consolidated fi nancial performance
and its consolidated cash fl ows for the years then ended, in accordance with International Financial Reporting
Standards.
Chartered Professional Accountants, Licensed Public Accountants
February 25, 2015
Toronto, Canada
30
Timbercreek Mortgage Investment Corporation
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
Cash and cash equivalents
Other assets (note 14(e))
Mortgage investments, including mortgage
syndications (note 4)
Foreclosed properties held for sale (note 5)
Total assets
LIABILITIES AND EQUITY
Accounts payable and accrued expenses
Dividends payable (note 11(b))
Due to Manager (note 14(a))
Mortgage funding holdbacks
Prepaid mortgage interest
Credit facility (note 6)
Convertible debentures (note 7)
Mortgage syndication liabilities (note 4)
Total liabilities
As at December 31,
2014
2013
$
463,092
$
12,348,449
3,582,038
1,540,102
616,173,629
13,850,521
634,069,280
855,527
2,442,092
1,975,958
483,762
2,560,472
8,836,959
32,387,457
219,581,032
269,123,259
442,165,777
11,351,435
467,405,763
592,421
2,476,592
2,349,736
28,809
1,011,565
−
−
124,378,929
130,838,052
Shareholders’ equity
Total liabilities and equity
364,946,021
336,567,711
$
634,069,280
$
467,405,763
Commitments and contingencies (notes 4 and 19)
Subsequent events (notes 6, 11(b) and 22)
See accompanying notes to the consolidated financial statements.
Timbercreek Mortgage Investment Corporation
31
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 2
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE
INCOME
CONSOLIDATED STATEMENTS OF NET INCOME AND
COMPREHENSIVE INCOME
Years ended December 31,
2014
2013
Interest income:
Interest, including mortgage syndications
$
37,043,393
$
39,024,302
Fees and other income, including mortgage syndications
5,144,675
5,083,354
Gross interest income
42,188,068
44,107,656
Interest and fees expense on mortgage syndications (note 4(b))
(5,477,861)
(4,376,377)
Net interest income
36,710,207
39,731,279
Expenses:
Management fees (note 12(a))
Performance fees (note 12(a))
Trailer fees (note 12(b))
Transition related costs (note 1)
Provision for mortgage investments loss (note 4(c))
Net foreign exchange (gain) loss (note 8)
General and administrative
Total expenses
Income from operations
5,421,686
4,974,029
1,954,557
1,940,688
−
−
737,199
3,530,417
250,000
2,150,000
(7,977)
5,436
819,650
906,208
8,437,916
14,243,977
28,272,291
25,487,302
Net operating loss from foreclosed properties held for sale
Fair value adjustment on foreclosed properties held for sale (note 5)
170,748
650,421
181,845
−
Financing costs:
Interest on credit facility (note 6)
Interest on convertible debentures (note 7)
Issuance costs of redeemable shares (note 10)
Dividends to holders of redeemable shares (note 10(a))
Total financing costs
274,550
2,259,432
−
−
474,778
−
2,680
24,321,067
2,533,982
24,798,525
Net income and comprehensive income
$
24,917,140
$
506,932
Earnings per share (note 13)
Basic and diluted
$
0.63 $
0.65
See accompanying notes to the consolidated financial statements.
32
Timbercreek Mortgage Investment Corporation
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 3
CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE
INCOME
CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS’ EQUITY AND NET ASSETS
ATTRIBUTABLE TO HOLDERS OF REDEEMABLE SHARES
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Year ended December 31, 2014
Common
Shares
Retained
Earnings
Equity
Component of
Convertible
Debentures
Total
Shareholders’ equity, beginning of year
$
337,367,498
$
(799,787)
$
– $
336,567,711
Issuance of common shares, net of issue
costs
33,179,940
Equity component of convertible
debentures, net
Dividends to the holders of common
shares
Issuance of common shares under
dividend reinvestment plan
Repurchase of common shares
–
–
(30,263,327)
3,047,862
(3,047,862)
–
–
–
–
–
33,179,940
544,557
544,557
–
–
–
–
(30,263,327)
3,047,862
(3,047,862)
24,917,140
Net income and comprehensive income
–
24,917,140
Shareholders’ equity, end of year
$
370,547,438
$
(6,145,974)
$
544,557 $ 364,946,021
Year ended December 31, 2013
Net assets attributable to holders of
redeemable shares, beginning of
Class A
Shares
Class B
Shares
Common
Retained
Shares
Earnings
Total
year
$ 319,585,511
$ 35,942,459
$ –
$ –
$ 355,527,970
Gross proceeds from issuance
of redeemable shares
Issuance of redeemable shares under
dividend reinvestment plan
–
5,000,000
3,706,252
–
Redemption of redeemable shares
(15,511,769)
(2,553,549)
Repurchase of redeemable shares
under normal course issuer bid
Repurchase of redeemable shares
under dividend reinvestment plan
(3,351,744)
(1,803,199)
–
–
Exchange of redeemable shares
1,037,375
(1,037,375)
–
–
–
–
–
–
(299,929,559)
(37,437,939)
337,367,498
–
–
–
–
–
–
–
5,000,000
3,706,252
(18,065,318)
(3,351,744)
(1,803,199)
–
–
Exchange of redeemable shares to
common shares
Dividends to the holders of common
shares
Issuance of common shares under
dividend reinvestment plan
Repurchase of common shares
Net income (loss) and
comprehensive income (loss)
–
–
–
–
–
–
–
(4,953,182)
(4,953,182)
319,073
(319,073)
–
–
319,073
(319,073)
(3,732,867)
86,404
–
4,153,395
506,932
Shareholders’ equity, end of year
$ –
$ –
$ 337,367,498
$ (799,787)
$ 336,567,711
See accompanying notes to the consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOW
Timbercreek Mortgage Investment Corporation
33
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 5
CONSOLIDATED STATEMENTS OF CASH FLOW
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
OPERATING ACTIVITIES
Net income and comprehensive income
Amortization of lender fees
Lender fees received
Provision for mortgage investments loss
Financing costs
Interest income, net of syndications
Interest income received, net of syndications
Fair value adjustment on foreclosed properties held for sale
Net foreign exchange (gain) loss
Change in non-cash operating items:
Restricted cash
Interest receivable
Other assets
Accounts payable and accrued expenses
Due to Manager
Prepaid mortgage interest
Mortgage funding holdbacks
FINANCING ACTIVITIES
Proceeds from issuance of convertible debentures, net of issue costs
Proceeds from issuance of common shares, net of issue costs
Redemption of Class A and B redeemable shares
Proceeds from issuance of Class B redeemable shares
Advances from (repayment of) credit facility
Interest paid
Repurchase of redeemable shares for cancellation
Issuance costs of redeemable shares
Dividends to holders of redeemable shares
Dividends to holders of common shares
INVESTING ACTIVITIES
Capital improvements to foreclosed properties
Proceeds from disposition of foreclosed properties
Years ended December 31,
2014
2013
$
24,917,140
$
506,932
(4,437,326)
(4,266,467)
5,819,505
250,000
3,633,287
2,150,000
2,533,982
24,798,525
(32,045,133)
(34,976,627)
30,498,572
32,583,906
650,421
33,456
–
(33,456)
–
395,088
(1,048,966)
–
(2,277,526)
(1,065,865)
(339,195)
(373,778)
1,548,907
454,953
(347,575)
(119,775)
654,330
(100,453)
26,185,012
23,811,850
32,533,220
33,179,940
–
–
–
–
(18,065,318)
5,000,000
9,075,926
(8,836,425)
(1,694,372)
(452,440)
–
–
–
(5,154,943)
(2,680)
(23,042,920)
(30,297,827)
(2,476,590)
42,796,887
(53,031,316)
(331,838)
(1,251,462)
35,776,846
–
Funding of mortgage investments, net of mortgage syndications
(498,944,602)
(241,306,257)
Discharge of mortgage investments, net of mortgage syndications
382,632,338
283,132,963
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of year
(80,867,256)
40,575,244
(11,885,357)
11,355,778
12,348,449
992,671
Cash and cash equivalents, end of year
$
463,092
$
12,348,449
34
See accompanying notes to the consolidated financial statements.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 6
Notes to Financial Statements Years Ended December 31, 2014 and 2013
Timbercreek Mortgage Investment Corporation (the “Company”) is a mortgage investment corporation
domiciled in Canada. The registered office of the Company is 1000 Yonge Street, Suite 500, Toronto, Ontario
M4W 2K2.
The Company is incorporated under the laws of the Province of Ontario by Articles of Incorporation dated April
30, 2008. Effective September 13, 2013 (the “Effective Date”), the Company filed articles of amendment with the
Ministry of Government Services of Ontario in connection with the Transition, as defined in note 1 below, to
amend, among other things, certain provisions of the articles of the Company related to the rights attached
to the redeemable Class A, Class B and voting classes of shares, and provide for the creation of a new class of
common shares for which all existing classes of redeemable shares were exchanged on November 29, 2013.
The investment objective of the Company is, with a primary focus on capital preservation, to acquire and
maintain a diversified portfolio of mortgage investments that generate income which allows the Company to
pay monthly dividends to shareholders.
1. TRANSITION TO PUBLIC COMPANY REGIME
On September 12, 2013, the Company received shareholder approval for the Company’s transition (the
“Transition”) from the Canadian securities regulatory regime for investment funds to the regulatory regime
for non-investment fund reporting issuers (the “Public Company Regime”).
Beginning on the Effective Date, the Company is subject to and files all continuous disclosure materials
in compliance with the Public Company Regime requirements, which includes preparation of its
financial statements in accordance with International Financial Reporting Standards (“IFRS”), along with a
Management’s Discussion and Analysis.
As part of the Transition, the Company provided a one-time special redemption right of up to 15% of the
issued and outstanding shares of each class of redeemable shares (the “Special Redemption”). The Company
redeemed requests from holders of 1,674,568 Class A shares and 259,771 Class B shares for the Special
Redemption. The total redemption payable of $18,026,557 was paid on November 27, 2013. On November 29,
2013 (the “Exchange Date”), the Company exchanged all of the 32,829,013 outstanding Class A shares and
3,887,053 outstanding Class B Shares into a newly created class of common shares. The common shares
commenced trading on the Toronto Stock Exchange (“TSX”) on November 29, 2013, continuing under the
symbol ‘TMC’ and the Class A shares ceased to trade after the close of market on November 28, 2013.
Also effective September 13, 2013, the Company entered into a new management agreement with
Timbercreek Asset Management Inc. (the “Manager”) and terminated its management agreement with
Timbercreek Asset Management Ltd., a wholly owned subsidiary of the Manager. The Manager is responsible
for the day-to-day operations and providing all general management, mortgage servicing and administrative
services for the Company’s mortgage investments.
In connection with the Transition, the Company incurred total costs of $3,780,417, which includes
soliciting dealer fees, soliciting broker fees, audit fees, legal fees and other related costs. Timbercreek Asset
Management Inc., in its capacity as the Manager, elected to assume responsibility for $250,000 of costs
relating to the Transition.
2. BASIS OF PREPARATION
(a) Statement of compliance
These consolidated financial statements have been prepared in accordance with IFRS as issued by the
International Accounting Standards Board (“IASB”) and were approved by the Board of Directors on
February 25, 2015.
(b) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the functional
currency of the Company.
Timbercreek Mortgage Investment Corporation
35
Notes to Financial Statements Years Ended December 31, 2014 and 2013
(c) Basis of measurement
These consolidated financial statements have been prepared on the historical cost basis except for
foreclosed properties held for sale and foreign exchange forward contract which are measured at fair
value on each reporting date.
(d) Principles of consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries, including Timbercreek Mortgage Investment Fund. All intercompany transactions and
balances are eliminated upon consolidation.
(e) Use of estimates and judgments
In the preparation of these consolidated financial statements, the Manager has made judgments,
estimates and assumptions that affect the application of the Company’s accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results may differ from these
estimates.
In making estimates, the Manager relies on external information and observable conditions where
possible, supplemented by internal analysis as required. Those estimates and judgments have been
applied in a manner consistent with the prior period and there are no known trends, commitments,
events or uncertainties that the Manager believes will materially affect the methodology or assumptions
utilized in making those estimates and judgments in these consolidated financial statements. The
significant estimates and judgments used in determining the recorded amount for assets and liabilities in
the consolidated financial statements are as follows:
Mortgage investments
The Company is required to make an assessment of the impairment of mortgage investments. Mortgage
investments are considered to be impaired only if objective evidence indicates that one or more events
(“loss events”) have occurred after its initial recognition, that have a negative effect on the estimated
future cash flows of that asset. The estimation of future cash flows includes assumptions about local real
estate market conditions, market interest rates, availability and terms of financing, underlying value of the
security and various other factors. These assumptions are limited by the availability of reliable comparable
market data, economic uncertainty and the uncertainty of future events. Accordingly, by their nature,
estimates of impairment are subjective and may not necessarily be comparable to the actual outcome.
Should the underlying assumptions change, the estimated future cash flows could vary materially.
The Company applies judgment in assessing the relationship between parties with which it enters
into participation agreements in order to assess the derecognition of transfers relating to mortgage
investments.
Measurement of fair values
The Company’s accounting policies and disclosures require the measurement of fair values for both
financial and non-financial assets and liabilities.
When measuring the fair value of an asset or liability, the Company uses market observable data where
possible. Fair values are categorized into different levels in a fair value hierarchy based on the inputs used
in the valuation techniques as follows:
• Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
• Level 3: Inputs for the asset or liability that are not based on observable market data (that is,
unobservable inputs).
The Manager reviews significant unobservable inputs and valuation adjustments. If third party
information, such as broker quotes or appraisals are used to measure fair values, the Manager will assess
36
Timbercreek Mortgage Investment Corporation
Notes to Financial Statements Years Ended December 31, 2014 and 2013
the evidence obtained from the third parties to support the conclusion that such valuations meet the
requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be
classified.
The information about the assumptions made in measuring fair value is included in the following notes:
Note 5 – Foreclosed properties held for sale; and
Note 18 – Fair value measurements.
3. SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and cash equivalents
The Company considers highly liquid investments with an original maturity of three months or less
that are readily convertible to known amounts of cash and which are subject to an insignificant risk of
changes in value to be cash equivalents. Cash and cash equivalents are classified as loans and receivables
and carried at amortized cost.
(b) Mortgage investments
The mortgage investments are recognized initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, the mortgage investments are measured at amortized cost using
the effective interest method, less any impairment losses. The mortgage investments are assessed on
each reporting date to determine whether there is objective evidence of impairment. A financial asset is
considered to be impaired only if objective evidence indicates that one or more loss events have occurred
after its initial recognition, that have a negative effect on the estimated future cash flows of that asset.
The Company considers evidence of impairment for mortgage investments at both a specific asset and
collective level. All individually significant mortgage investments are assessed for specific impairment.
Those found not to be specifically impaired are then collectively assessed for any impairment that has
been incurred but not yet identifiable at an individual mortgage level. Mortgage investments that are not
individually significant are collectively assessed for impairment by grouping together mortgage investments
with similar risk characteristics.
In assessing collective impairment, the Company reviews historical trends of the probability of default, the
timing of recoveries and the amount of loss incurred, adjusted for management’s judgments as to whether
current economic and credit conditions are such that the actual losses are likely to be greater or less than
suggested by historical trends.
An impairment loss in respect of specific mortgage investments is calculated as the difference between
its carrying amount including accrued interest and the present value of the estimated future cash flows
discounted at the investment’s original effective interest rate. Losses are recognized in profit and loss and
reflected in an allowance account against the mortgage investments. When a subsequent event causes the
amount of an impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.
(c) Foreclosed properties held for sale
When the Company obtains legal title of the underlying security of an impaired mortgage investment,
the carrying value of the mortgage investment, which comprises of principal, costs incurred, accrued
interest and the related provision for mortgage investment loss, if any, is reclassified from mortgage
investments to foreclosed properties held for sale (“FPHFS”). At each reporting date, FPHFS are measured
at fair value, with changes in fair value recorded in profit or loss in the period they arise. The Company
uses management’s best estimate to determine fair value of the properties, which may involve frequent
inspections, engaging realtors to assess market conditions based on previous property transactions or,
retaining professional appraisers to provide independent valuations.
Contractual interest on the mortgage investment is discontinued from the date of transfer from mortgage
investments to FPHFS. Net income or loss generated from FPHFS, if any, is recorded as net operating
(gain) loss from FPHFS, while fair value adjustments on FPHFS are recorded separately.
Timbercreek Mortgage Investment Corporation
37
Notes to Financial Statements Years Ended December 31, 2014 and 2013
(d) Foreign exchange forward contract
The Company held a derivative financial instrument to hedge its foreign currency risk exposure for a
mortgage investment. Derivatives are recognized initially at fair value, with transaction costs recognized
in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value at the
end of each reporting period. Any resulting gain or loss is recognized in profit or loss unless the derivative
is designated and effective as a hedging instrument under IFRS. The Company elected to not account for
its derivative instrument as a hedge.
(e) Dividends
Dividends to holders of common shares are recognized in the consolidated statement of changes in
shareholders’ equity and net assets attributable to holders of redeemable shares. Prior to the Transition,
dividends to holders of redeemable shares were recognized in the consolidated statements of net income
and comprehensive income as financing costs.
(f) Convertible debentures
The convertible debentures are a compound financial instrument as they contain both a liability and an
equity component.
At the date of issuance, the liability component of the convertible debentures is recognized at its
estimated fair value of a similar liability that does not have an equity conversion option and the residual is
allocated to the equity component. Any directly attributable transaction costs are allocated to the liability
and equity components in proportion to their initial carrying amounts. Subsequent to initial recognition,
the liability component of a convertible debenture is measured at amortized cost using the effective
interest rate method. The equity component is not re-measured subsequent to initial recognition and will
be transferred to share capital when the conversion option is exercised, or, if unexercised at maturity.
Interest, losses and gains relating to the financial liability are recognized in profit or loss.
(g) Income taxes
It is the intention of the Company to qualify as a mortgage investment corporation (“MIC”) for Canadian
income tax purposes. As such, the Company is able to deduct, in computing its income for a taxation
year, dividends paid to its shareholders during the year or within 90 days of the end of the year. The
Company intends to maintain its status as a MIC and pay dividends to its shareholders in the year and
in future years to ensure that it will not be subject to income taxes. Accordingly, for financial statement
reporting purposes, the tax deductibility of the Company’s dividends results in the Company being
effectively exempt from taxation and no provision for current or deferred taxes is required for the
Company and its subsidiaries.
(h) Financial instruments
Financial instruments are classified as one of the following: (i) fair value through profit and loss (“FVTPL”),
(ii) loans and receivables, (iii) held-to-maturity, (iv) available-for-sale, or (v) other liabilities. Financial
instruments are recognized initially at fair value, plus, in the case of financial instruments not FVTPL, any
incremental direct transaction costs. Financial assets and liabilities classified as FVTPL are subsequently
measured at fair value with gains and losses recognized in profit and loss. Financial instruments classified
as held-to-maturity, loans and receivables or other liabilities are subsequently measured at amortized
cost. Available-for-sale financial instruments are subsequently measured at fair value and any unrealized
gains and losses are recognized through other comprehensive income. The classifications of the
Company’s financial instruments are outlined in note 18.
Prior to the Transition, net assets attributable to holders of redeemable shares were carried on the
consolidated statements of financial position at net asset value. The presentation of net assets attributable
to holders of redeemable shares reflected, in total, that the interests of the holders were limited to the net
assets of the Company. After the Transition, redeemable shares were exchanged to common shares and
are classified as shareholders’ equity in the statement of financial position, as outlined in note 1.
38
Timbercreek Mortgage Investment Corporation
Notes to Financial Statements Years Ended December 31, 2014 and 2013
(i) Derecognition of financial assets and liabilities
Financial assets
The Company derecognizes a financial asset when the contractual rights to the cash flows from the
financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in
which substantially all the risks and rewards of ownership of the financial asset are transferred, or in
which the Company neither transfers nor retains substantially all the risks and rewards of ownership
and it does not retain control of the financial asset. Any interest in such transferred financial assets that
qualify for derecognition that is created or retained by the Company is recognized as a separate asset or
liability. On derecognition of a financial asset, the difference between the carrying amount of the asset (or
the carrying amount allocated to the portion of the asset transferred), and the sum of (i) the consideration
received (including any new asset obtained less any new liability assumed) and (ii) any cumulative gain or
loss that had been recognized in other comprehensive income is recognized in profit or loss.
The Company enters into transactions whereby it transfers mortgage investments recognized on its
statement of financial position, but retains either all, substantially all, or a portion of the risks and rewards
of the transferred mortgage investments. If all or substantially all risks and rewards are retained, then the
transferred mortgage or loan investments are not derecognized.
In transactions in which the Company neither retains nor transfers substantially all the risks and
rewards of ownership of a financial asset and it retains control over the asset, the Company continues to
recognize the asset to the extent of its continuing involvement, determined by the extent to which it is
exposed to changes in the value of the transferred asset.
Financial liabilities
The Company derecognizes a financial liability when the obligation under the liability is discharged,
cancelled or expires.
(j) Interest and fee income
Interest income includes interest earned on the Company’s mortgage investments and interest earned
on cash and cash equivalents. Interest income earned on the mortgage investments is accounted
for using the effective interest method. Lender fees received are an integral part of the yield on the
mortgage investments and are amortized to profit and loss over the expected life of the specific mortgage
investment using the effective interest rate method. Forfeited lender fees are taken to profit and loss at
the time a borrower has not fulfilled the terms and conditions of a lending commitment and payment has
been received.
(k) Changes in accounting policies
Except for the changes below, the Company has consistently applied the accounting policies set out to all
periods presented in these consolidated financial statements. The Company has adopted the following
new and revised standards, along with any consequential amendments, effective January 1, 2014. These
changes were made in accordance with the applicable transitional provisions.
(i) IAS 32, Financial Instruments: Presentation (“IAS 32”)
In December 2011, the IASB published Disclosures – Offsetting Financial Assets and Financial
Liabilities (Amendments to IAS 32) and issued new disclosure requirements in IFRS 7, Financial
Instruments: Disclosures, with the amendments applied retrospectively. The implementation of this
standard had no impact on these consolidated financial statements.
(ii) IFRIC 21, Levies (“IFRIC 21”)
In 2013, the IASB issued IFRIC 21. This standard addresses accounting for a liability to pay a levy
within the scope of IAS 37, Provisions, contingent liabilities and contingent assets (“IAS 37”). A levy is
an outflow of resources embodying economic benefits that is imposed by governments on entities
in accordance with legislation, other than income taxes. The standard is applied retrospectively. The
implementation of this standard had no impact on these consolidated financial statements.
Timbercreek Mortgage Investment Corporation
39
Notes to Financial Statements Years Ended December 31, 2014 and 2013
(l) Future changes in accounting policies
A number of new standards, amendments to standards and interpretations are effective in future periods
and have not been applied in preparing these consolidated financial statements. Those which may be
relevant to the Company are set out below. The Company does not plan to adopt these standards early.
(i) IFRS 9, Financial Instruments (“IFRS 9”)
On July 24, 2014, the IASB issued IFRS 9. IFRS 9 (2014) introduces new requirements for the
classification and measurement of financial assets. Under IFRS 9 (2014), financial assets are classified
and measured based on the business model in which they are held and the characteristics of their
contractual cash flows. The standard introduces additional changes relating to financial liabilities. It
also amends the impairment model by introducing a new ‘expected credit loss’ model for calculating
impairment. The standard will be effective for annual periods beginning on or after January 1, 2018
and will be applied retrospectively with some exemptions. The Company is currently assessing the
impact of the new standard on its consolidated financial statements.
(ii) IFRS 15, Revenue from Contracts with Customers (“IFRS 15”)
In May 2014, the IASB issued IFRS 15. The new standard provides a comprehensive framework for
recognition, measurement and disclosure of revenue from contracts with customers, excluding
contracts within the scope of the standard on leases, insurance contracts and financial instruments.
IFRS 15 becomes effective for annual periods beginning on or after January 1, 2017 and is to be applied
retrospectively. Early adoption is permitted. The Company is currently assessing the impact of the new
standard on its consolidated financial statements.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
Years ended December 31, 2014 and 2013
4. MORTGAGE INVESTMENTS, INCLUDING MORTGAGE SYNDICATIONS
As at December 31, 2014
Mortgage investments, including mortgage
Gross
mortgage
investments
Mortgage
syndication
liabilities
Net
syndications (a) and (b)
$
617,038,177
$
(219,697,422)
$
397,340,755
Interest receivable
5,125,457
(733,560)
4,391,897
Unamortized lender fees
Allowance for mortgage investments loss (c)
As at December 31, 2013
Mortgage investments, including mortgage
622,163,634
(220,430,982)
401,732,652
(5,740,005)
(250,000)
849,950
−
(4,890,055)
(250,000)
$
616,173,629
$
(219,581,032)
$
396,592,597
Gross
mortgage
investments
Mortgage
syndication
liabilities
Net
syndications (a) and (b)
$
441,136,647
$
(123,982,494)
$
317,154,153
Interest receivable
5,384,798
(694,227)
4,690,571
Unamortized lender fees
Allowance for mortgage investments loss (c)
446,521,445
(124,676,721)
321,844,724
(3,805,668)
(550,000)
297,792
−
(3,507,876)
(550,000)
$
442,165,777
$
(124,378,929)
$
317,786,848
As at December 31, 2014, un-advanced mortgage commitments under the existing gross mortgage investments
As at December 31, 2014, un-advanced mortgage commitments under the existing gross mortgage
amounted to $107,366,854 (December 31, 2013 – $61,563,733). Subsequent to the year ended December 31, 2014,
investments amounted to $107,366,854 (December 31, 2013 – $61,563,733). Subsequent to the year ended
December 31, 2014, $4,867,098 of the commitments have been funded.
$4,867,098 of the commitments have been funded.
40
(a) Net m ortgage investm ents
Timbercreek Mortgage Investment Corporation
Interest in first mortgages
Interest in non-first mortgages
December 31,
2014
$
276,022,401
%
61
39
%
69
31
December 31,
2013
$
193,574,221
121,318,354
123,579,932
100
$
397,340,755
100
$
317,154,153
The mortgage investments are secured by real property, bear interest at a weighted average interest rate of
9.4% (December 31, 2013 – 9.8%) and mature between 2015 and 2018 (December 31, 2013 – 2014 and 2017).
A majority of the mortgage investments contain a prepayment option, whereby the borrower may repay the
principal at any time prior to maturity without penalty or yield maintenance.
For the year ended December 31, 2014, the Company received total lender fees, net of fees relating to
mortgage syndication liabilities, of $5,819,505 (2013 – $3,633,287), which are amortized to interest income
over the term of the related mortgage investments using the effective interest rate method.
Principal repayments, net of mortgage syndications, based on contractual maturity dates are as follows:
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 14
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
Years ended December 31, 2014 and 2013
As at December 31, 2014
Mortgage investments, including mortgage
syndications (a) and (b)
$
617,038,177
$
(219,697,422)
$
397,340,755
Interest receivable
5,125,457
(733,560)
4,391,897
Gross
Mortgage
mortgage
syndication
investments
liabilities
Net
Unamortized lender fees
Allowance for mortgage investments loss (c)
622,163,634
(220,430,982)
401,732,652
(5,740,005)
(250,000)
849,950
−
(4,890,055)
(250,000)
$
616,173,629
$
(219,581,032)
$
396,592,597
Gross
Mortgage
mortgage
syndication
investments
liabilities
Net
As at December 31, 2013
Mortgage investments, including mortgage
syndications (a) and (b)
$
441,136,647
$
(123,982,494)
$
317,154,153
Interest receivable
5,384,798
(694,227)
4,690,571
Unamortized lender fees
Allowance for mortgage investments loss (c)
446,521,445
(124,676,721)
321,844,724
(3,805,668)
(550,000)
297,792
−
(3,507,876)
(550,000)
$
442,165,777
$
(124,378,929)
$
317,786,848
As at December 31, 2014, un-advanced mortgage commitments under the existing gross mortgage investments
amounted to $107,366,854 (December 31, 2013 – $61,563,733). Subsequent to the year ended December 31, 2014,
Notes to Financial Statements Years Ended December 31, 2014 and 2013
$4,867,098 of the commitments have been funded.
(a) Net mortgage investments
(a) Net m ortgage investm ents
Interest in first mortgages
Interest in non-first mortgages
December 31,
2014
$
276,022,401
121,318,354
%
61
39
December 31,
2013
$
193,574,221
123,579,932
%
69
31
100
$
397,340,755
100
$
317,154,153
The mortgage investments are secured by real property, bear interest at a weighted average interest rate of
9.4% (December 31, 2013 – 9.8%) and mature between 2015 and 2018 (December 31, 2013 – 2014 and 2017).
The mortgage investments are secured by real property, bear interest at a weighted average interest rate of
9.4% (December 31, 2013 – 9.8%) and mature between 2015 and 2018 (December 31, 2013 – 2014 and 2017).
A majority of the mortgage investments contain a prepayment option, whereby the borrower may repay the
principal at any time prior to maturity without penalty or yield maintenance.
A majority of the mortgage investments contain a prepayment option, whereby the borrower may repay
the principal at any time prior to maturity without penalty or yield maintenance.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
For the year ended December 31, 2014, the Company received total lender fees, net of fees relating to
mortgage syndication liabilities, of $5,819,505 (2013 – $3,633,287), which are amortized to interest income
For the year ended December 31, 2014, the Company received total lender fees, net of fees relating to
mortgage syndication liabilities, of $5,819,505 (2013 – $3,633,287), which are amortized to interest income
over the term of the related mortgage investments using the effective interest rate method.
Notes to the Consolidated Financial Statements
over the term of the related mortgage investments using the effective interest rate method.
Years ended December 31, 2014 and 2013
Principal repayments, net of mortgage syndications, based on contractual maturity dates are as follows:
Principal repayments, net of mortgage syndications, based on contractual maturity dates are as follows:
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 14
2015
2016
2017
2018
Total
(b) M ortgage syndication liabilities
(b) Mortgage syndication liabilities
$
152,977,148
135,955,083
98,816,265
9,592,259
$
397,340,755
senior and subordinated participation, whereby the third party lenders take the senior position and the
Company retains the subordinated position. The Company generally retains an option to repurchase the
The Company has entered into certain mortgage participation agreements with third party lenders, using
lenders’ proportionate share together with all accrued interest. Under certain participation agreements, the
The Company has entered into certain mortgage participation agreements with third party lenders, using
senior and subordinated participation, whereby the third party lenders take the senior position and the
Company retains the subordinated position. The Company generally retains an option to repurchase the
senior position, but not the obligation, at a purchase price equal to the outstanding principal amount
senior position, but not the obligation, at a purchase price equal to the outstanding principal amount of the
of the lenders’ proportionate share together with all accrued interest. Under certain participation
agreements, the Company has retained a residual portion of the credit and/or default risk as it is holding
the residual interest in the mortgage investment and therefore has not met the de-recognition criteria. As
a result, the lender’s portion of the mortgage is recorded as a mortgage investment with the transferred
position recorded as a non-recourse mortgage syndication liability. The interest and fees earned on the
transferred participation interests and the related interest expense is recognized in profit and loss. In
non-recourse mortgage syndication liability. The interest and fees earned on the transferred participation
addition, the Company may sell pari-pasu interests in certain mortgage investments which meet the
interests and the related interest expense is recognized in profit and loss. In addition, the Company may sell
criteria for de-recognition under IFRS.
Company has retained a residual portion of the credit and/or default risk as it is holding the residual interest
in the mortgage investment and therefore has not met the de-recognition criteria. As a result, the lender’s
portion of the mortgage is recorded as a mortgage investment with the transferred position recorded as a
pari-pasu interests in certain mortgage investments which meet the criteria for de-recognition under IFRS.
As at December 31, 2014, the carrying value of the transferred assets in gross mortgage investments,
As at December 31, 2014, the carrying value of the transferred assets in gross mortgage investments,
including related interest receivable and unearned lender fees, and corresponding mortgage syndication
liabilities is $219,581,032 (December 31, 2013 – $124,378,929). For the year ended December 31, 2014,
including related interest receivable and unearned lender fees, and corresponding mortgage syndication
the Company has also recognized interest income of $4,998,260 (2013 – $4,047,676) and fee income of
$479,601 (2013 – $328,701) and a corresponding interest and fee expense of $5,477,861 (2013 – $4,376,377)
in the statements of net income and comprehensive income. The fair value of the transferred assets and
mortgage syndication liabilities approximate their carrying values (see note 18).
Company has also recognized interest income of $4,998,260 (2013 – $4,047,676) and fee income of $479,601
liabilities is $219,581,032 (December 31, 2013 – $124,378,929). For the year ended December 31, 2014, the
(2013 – $328,701) and a corresponding interest and fee expense of $5,477,861 (2013 – $4,376,377) in the
statements of net income and comprehensive income. The fair value of the transferred assets and mortgage
syndication liabilities approximate their carrying values (see note 18).
(c) Allowance for m ortgage investm ents loss
As at December 31, 2014, the Company has concluded that there is no objective evidence of impairment on
any individual mortgage investment. At a collective level, the Company assesses for impairment to identify
Timbercreek Mortgage Investment Corporation
losses that have been incurred, but not yet identified, on an individual basis. As part of the Company’s
41
analysis, it has grouped mortgage investments with similar risk characteristics, including geographical
exposure, collateral type, loan-to-value, counterparty and other relevant groupings, and assesses them for
impairment using statistical data. Based on the amounts determined by the analysis, the Company uses
judgement to determine whether or not the actual future losses are expected to be greater or less than the
amounts calculated.
$2,150,000).
to FPHFS.
For the year ended December 31, 2014, the Company recognized a collective impairment allowance of
$250,000 (December 31, 2013 – nil) and specific impairment allowance of nil (December 31, 2013 –
During the year ended December 31, 2014, the Company foreclosed on the underlying security relating to
an impaired mortgage investment and reclassified $550,000 from allowance for mortgage investments loss
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 15
Notes to Financial Statements Years Ended December 31, 2014 and 2013
(c) Allowance for mortgage investments loss
As at December 31, 2014, the Company has concluded that there is no objective evidence of impairment
on any individual mortgage investment. At a collective level, the Company assesses for impairment
to identify losses that have been incurred, but not yet identified, on an individual basis. As part of the
Company’s analysis, it has grouped mortgage investments with similar risk characteristics, including
geographical exposure, collateral type, loan-to-value, counterparty and other relevant groupings, and
assesses them for impairment using statistical data. Based on the amounts determined by the analysis,
the Company uses judgement to determine whether or not the actual future losses are expected to be
greater or less than the amounts calculated.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
For the year ended December 31, 2014, the Company recognized a collective impairment allowance
of $250,000 (December 31, 2013 – nil) and specific impairment allowance of nil (December 31, 2013 –
$2,150,000).
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Years ended December 31, 2014 and 2013
Years ended December 31, 2014 and 2013
During the year ended December 31, 2014, the Company foreclosed on the underlying security relating
to an impaired mortgage investment and reclassified $550,000 from allowance for mortgage investments
loss to FPHFS.
For the year ended December 31, 2013 the Company recognized an impairment provision of $2,150,000
For the year ended December 31, 2013 the Company recognized an impairment provision of $2,150,000
For the year ended December 31, 2013 the Company recognized an impairment provision of $2,150,000
relating to impaired mortgage investments, which represented the total amount of the Manager’s estimate
relating to impaired mortgage investments, which represented the total amount of the Manager’s estimate
relating to impaired mortgage investments, which represented the total amount of the Manager’s
of the shortfall between the principal balances, costs incurred and accrued interest and the estimated
of the shortfall between the principal balances, costs incurred and accrued interest and the estimated
estimate of the shortfall between the principal balances, costs incurred and accrued interest and the
recoverable amount of the underlying security of the mortgage investment.
recoverable amount of the underlying security of the mortgage investment.
estimated recoverable amount of the underlying security of the mortgage investment.
During the year ended December 31, 2013, the Company foreclosed on the underlying securities relating to
During the year ended December 31, 2013, the Company foreclosed on the underlying securities relating to
During the year ended December 31, 2013, the Company foreclosed on the underlying securities relating
two impaired mortgage investments and reclassified $1,600,000 from allowance for mortgage investments
to two impaired mortgage investments and reclassified $1,600,000 from allowance for mortgage
two impaired mortgage investments and reclassified $1,600,000 from allowance for mortgage investments
investments loss to FPHFS.
loss to FPHFS.
loss to FPHFS.
The changes in the allowance for mortgage investments loss during the years ended December 31, 2014
and 2013 were as follows:
The changes in the allowance for mortgage investments loss during the years ended December 31, 2014 and
The changes in the allowance for mortgage investments loss during the years ended December 31, 2014 and
2013 were as follows:
2013 were as follows:
Balance, beginning of year
Balance, beginning of year
Provision for mortgage investments
Provision for mortgage investments
loss
loss
Allowance for mortgage investments loss reclassified to FPHFS
Allowance for mortgage investments loss reclassified to FPHFS
Balance, end of year
Balance, end of year
Years ended December 31,
Years ended December 31,
2014
2014
$
$
550,000 $
550,000 $
2013
2013
–
–
250,000
250,000
(550,000)
(550,000)
2,150,000
2,150,000
(1,600,000)
(1,600,000)
$
$
250,000 $
250,000 $
550,000
550,000
5. FO RECLOSED PROPERTIES HELD FO R SALE
5. FO RECLOSED PROPERTIES HELD FO R SALE
5. FORECLOSED PROPERTIES HELD FOR SALE
As at December 31, 2014, there are three FPHFS (December 31, 2013 – two) which are recorded at their fair
As at December 31, 2014, there are three FPHFS (December 31, 2013 – two) which are recorded at their fair
As at December 31, 2014, there are three FPHFS (December 31, 2013 – two) which are recorded at their fair
value of $13,850,521 (December 31, 2013 – $11,351,435). The changes in the FPHFS during the year ended
value of $13,850,521 (December 31, 2013 – $11,351,435). The changes in the FPHFS during the year ended
value of $13,850,521 (December 31, 2013 – $11,351,435). The changes in the FPHFS during the year ended
December 31, 2014 were as follows:
December 31, 2014 were as follows:
December 31, 2014 were as follows:
Balance, beginning of year
Balance, beginning of year
Foreclosed properties reclassified from mortgage investments
Foreclosed properties reclassified from mortgage investments
Capital improvements
Capital improvements
Fair market value adjustment
Fair market value adjustment
Disposition of foreclosed properties
Disposition of foreclosed properties
Balance, end of year
Balance, end of year
Years ended December 31,
Years ended December 31,
2014
2014
$
$
11,351,435
11,351,435
$
$
2013
2013
–
–
75,681,402
75,681,402
10,099,973
10,099,973
331,838
331,838
(650,421)
(650,421)
(72,863,733)
(72,863,733)
1,251,462
1,251,462
–
–
–
–
$ 13,850,521 $
$ 13,850,521 $
11,351,435
11,351,435
42
During the year ended December 31, 2014, the Company closed on the sale of eight residential units in one
During the year ended December 31, 2014, the Company closed on the sale of eight residential units in one
Timbercreek Mortgage Investment Corporation
of the foreclosed properties for net proceeds of $1,363,733.
of the foreclosed properties for net proceeds of $1,363,733.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 16
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 16
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
Notes to Financial Statements Years Ended December 31, 2014 and 2013
Years ended December 31, 2014 and 2013
During the year ended December 31, 2014, the Company closed on the sale of eight residential units in one of
the foreclosed properties for net proceeds of $1,363,733.
mortgage investment with outstanding principal and costs of $69,581,592 and accrued interest of
During the year ended December 31, 2014, the Company also foreclosed on the underlying security of a
During the year ended December 31, 2014, the Company also foreclosed on the underlying security of a
mortgage investment with outstanding principal and costs of $69,581,592 and accrued interest of $1,768,829.
$1,768,829. This underlying security was subsequently sold, with the proceeds of sale repaying all of the
This underlying security was subsequently sold, with the proceeds of sale repaying all of the outstanding
principal and costs and accrued interest from the mortgage investment and resulted in a gain of $149,579.
The purchaser also obtained mortgage financing from the Company in respect of the property.
of $149,579. The purchaser also obtained mortgage financing from the Company in respect of the property.
outstanding principal and costs and accrued interest from the mortgage investment and resulted in a gain
During the year ended December 31, 2014, the Company recorded an unrealized fair value loss of $800,000
During the year ended December 31, 2014, the Company recorded an unrealized fair value loss of $800,000
on the FPHFS.
on the FPHFS.
The fair value measurements have been categorized as a level 3 fair value based on inputs to the valuation
The fair value measurements have been categorized as a level 3 fair value based on inputs to the valuation
techniques used. The key valuation techniques used in measuring the fair values of the FPHFS are set out in
techniques used. The key valuation techniques used in measuring the fair values of the FPHFS are set out in
the following table:
the following table:
Valuation
Technique
Direct Capitalization
Method. The
valuation method is
based on stabilized
net operating income
(‘NOI’) divided by an
overall capitalization
rate.
Direct Sales
Comparison
Significant unobservable inputs
¥ Stabilized NOI is based on the location,
type and quality of the property and
supported current market rents for
similar properties, adjusted for
estimated vacancy rates and expected
operating costs.
¥ Capitalization rate is based on location,
size and quality of the property and
taking into account market data at the
valuation date.
The fair value is based on comparison to
recent sales of properties of similar types,
locations and quality.
Inter-relationship between key
unobservable inputs and fair value
measurement
The estimated fair value would increase
(decrease) if:
¥ Stabilized NOI was higher (lower)
¥ Overall capitalization rates were
lower (higher)
The significant unobservable input is
adjustments due to characteristics
specific to each property that could cause
the fair value to differ from the property
to which it is being compared.
6. CREDIT FACILITY
6. CREDIT FACILITY
31, 2013 – $25,000,000). The Company amended and restated the credit facility on October 31, 2014,
As at December 31, 2014, the Company has a credit facility with an available limit of $35,000,000 (December
As at December 31, 2014, the Company has a credit facility with an available limit of $35,000,000 (December
31, 2013 – $25,000,000). The Company amended and restated the credit facility on October 31, 2014,
extending the term for an additional two years and increasing the available limit to $35,000,000, with an
extending the term for an additional two years and increasing the available limit to $35,000,000, with an
option to increase the limit to $60,000,000, subject to certain terms and conditions. Subsequent to year end,
option to increase the limit to $60,000,000, subject to certain terms and conditions. Subsequent to year end,
the Company completed a $15,000,000 increase of the credit facility, taking its total available borrowing limit
the Company completed a $15,000,000 increase of the credit facility, taking its total available borrowing
to $50,000,000. The credit facility is subject to an interest rate equal to the bank’s prime rate of interest plus
limit to $50,000,000. The credit facility is subject to an interest rate equal to the bank’s prime rate of interest
1.50% (December 31, 2013 – bank’s prime rate of interest plus 1.50%). The credit facility is secured by a general
plus 1.50% (December 31, 2013 – bank’s prime rate of interest plus 1.50%). The credit facility is secured by a
security agreement over the Company’s assets. As at December 31, 2014, $9,075,926 was outstanding on the
credit facility (December 31, 2013 – nil).
general security agreement over the Company’s assets. As at December 31, 2014, $9,075,926 was outstanding
on the credit facility (December 31, 2013 – nil).
Interest costs related to the credit facility are recorded in financing costs using the effective interest rate
Interest costs related to the credit facility are recorded in financing costs using the effective interest rate
method. For the year ended December 31, 2014, interest on the credit facility of $274,550 (2013 – $474,778) is
included in financing costs.
method. For the year ended December 31, 2014, interest on the credit facility of $274,550 (2013 – $474,778) is
included in financing costs.
As at December 31, 2014, there were $238,967 (December 31, 2013 – $107,603) in unamortized financing costs
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 17
related to the placement of the credit facility netted against the outstanding balance. For the year ended
December 31, 2014, the Company has amortized financing costs of $129,328 (2013 – $143,859) to interest
expense using the effective interest rate method.
Timbercreek Mortgage Investment Corporation
43
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
Years ended December 31, 2014 and 2013
As at December 31, 2014, there were $238,967 (December 31, 2013 – $107,603) in unamortized financing
costs related to the placement of the credit facility netted against the outstanding balance. For the year
ended December 31, 2014, the Company has amortized financing costs of $129,328 (2013 – $143,859) to
interest expense using the effective interest rate method.
7. CON VERTIBLE D EBEN TURES
On February 25, 2014, the Company completed a public offering of $30,000,000, with an overallotment
option of $4,500,000 that was completed on March 3, 2014, of 6.35%, convertible unsecured subordinated
Notes to Financial Statements Years Ended December 31, 2014 and 2013
debentures for net proceeds of $32,533,220 (the “debentures”). The debentures mature on March 31, 2019
with interest payable semi-annually on March 31 and September 30 of each year. The first interest payment
7. CONVERTIBLE DEBENTURES
occurred on September 30, 2014 and was for $1,302,447. The debentures are convertible into common
the terms of the debentures.
shares at the option of the holder at any time prior to their maturity at a conversion price of $11.25 per
On February 25, 2014, the Company completed a public offering of $30,000,000, with an overallotment option
of $4,500,000 that was completed on March 3, 2014, of 6.35%, convertible unsecured subordinated debentures
common share, subject to adjustment in certain events in accordance with the trust indenture governing
for net proceeds of $32,533,220 (the “debentures”). The debentures mature on March 31, 2019 with interest
payable semi-annually on March 31 and September 30 of each year. The first interest payment occurred on
September 30, 2014 and was for $1,302,447. The debentures are convertible into common shares at the option
of the holder at any time prior to their maturity at a conversion price of $11.25 per common share, subject to
March 31, 2018, the debentures will be redeemable by the Company, in whole or in part, from time to time at
adjustment in certain events in accordance with the trust indenture governing the terms of the debentures.
The debentures will not be redeemable prior to March 31, 2017. On and after March 31, 2017 and prior to
given is not less than 125% of the conversion price. On and after March 31, 2018 and prior to the maturity
the Company’s sole option, at a price equal to the principal amount thereof plus accrued and unpaid
The debentures will not be redeemable prior to March 31, 2017. On and after March 31, 2017 and prior to
interest up to but excluding the date of redemption on not more than 60 days’ and not less than 30 days’
March 31, 2018, the debentures will be redeemable by the Company, in whole or in part, from time to time at
prior written notice, provided that the current market price as of the date on which notice of redemption is
the Company’s sole option, at a price equal to the principal amount thereof plus accrued and unpaid interest
up to but excluding the date of redemption on not more than 60 days’ and not less than 30 days’ prior written
notice, provided that the current market price as of the date on which notice of redemption is given is not less
than 125% of the conversion price. On and after March 31, 2018 and prior to the maturity date, the debentures
will be redeemable, in whole or in part, from time-to-time at the Company’s sole option at a price equal to the
principal amount thereof plus accrued and unpaid interest to, but excluding, the date of redemption on not
more than 60 days’ and not less than 30 days’ prior written notice.
option at a price equal to the principal amount thereof plus accrued and unpaid interest to, but excluding,
date, the debentures will be redeemable, in whole or in part, from time-to-time at the Company’s sole
the date of redemption on not more than 60 days’ and not less than 30 days’ prior written notice.
Upon issuance of the debentures, the liability component of the debentures was recognized initially at the
fair value of a similar liability that does not have an equity conversion option. The difference between these
Upon issuance of the debentures, the liability component of the debentures was recognized initially at the fair
value of a similar liability that does not have an equity conversion option. The difference between these two
amounts of $577,478 has been recorded as equity, with the remaining $31,955,742 allocated to long-term debt.
two amounts of $577,478 has been recorded as equity, with the remaining $31,955,742 allocated to long-
term debt.
The discount on the debentures is being accreted such that the liability at maturity will equal the face value
The discount on the debentures is being accreted such that the liability at maturity will equal the face
value of $34,500,000. The issue costs of $1,966,780 were proportionately allocated to the liability and
of $34,500,000. The issue costs of $1,966,780 were proportionately allocated to the liability and equity
equity components. The issue costs allocated to the liability component are amortized over the term of the
components. The issue costs allocated to the liability component are amortized over the term of the
debentures using the effective interest rate method.
debentures using the effective interest rate method.
The debentures are allocated as follows at year-end:
The debentures are allocated as follows at year-end:
Issued
December 31, 2014
$
34,500,000
Issue costs, net of amortization
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Equity component
Issue costs attributed to equity component
Notes to the Consolidated Financial Statements
Accretion for the year
(1,664,236)
(577,478)
32,921
96,250
Years ended December 31, 2014 and 2013
Debentures, end of year
$
32,387,457
Interest costs related to the debentures are recorded in financing costs using the effective interest rate
Interest costs related to the debentures are recorded in financing costs using the effective interest rate
method. For the year ended December 31, 2014, interest on the debentures is included in financing costs and
method. For the year ended December 31, 2014, interest on the debentures is included in financing costs
is made up of the following:
and is made up of the following:
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 18
Interest on the convertible debentures
Amortization of issue costs
Accretion of equity component of the convertible debentures
Year ended
December 31, 2014
$
1,860,638
302,544
96,250
$
2,259,432
8. FO REIGN EXCHAN GE FO RW ARD CON TRACT
In May 2013, the Company entered into a foreign exchange forward contract with its bank to lock in the
Company’s rate to exchange U.S. dollars into Canadian dollars for a mortgage investment. In May 2014, the
44
contract was terminated, resulting in a gain of $7,977 (2013 – $5,436 unrealized net foreign exchange loss)
Timbercreek Mortgage Investment Corporation
upon the repayment of the Company’s U.S. dollar denominated mortgage investment.
9. VOTING SH ARES
As part of the Transition outlined in note 1, on the Exchange Date, all voting shares were re-purchased for a
nominal amount and cancelled. The voting shares were held by certain shareholders of the Manager.
10. REDEEM ABLE SH ARES
As part of the Transition outlined in note 1, on the Exchange Date all classes of redeemable shares, including
Class A and Class B shares, were exchanged into common shares at the ratios specified in note 11.
Prior to the Transition, Class A shares were publicly listed on the TSX under the symbol ‘TMC’. Class B shares
were privately held and there was no market through which these shares could be sold. The Company was
authorized to issue these classes of shares, which were redeemable at the holder's option and were subject
to different fee structures. The Company classifies financial instruments issued as either financial liabilities
or equity instruments in accordance with the substance of the contractual terms of the instrument. The
redeemable shares were classified as financial liabilities and presented as ‘net assets attributable to holders
of redeemable shares’ in the statements of financial position.
The changes in the number of Class A and Class B shares were as follows:
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 19
Notes to Financial Statements Years Ended December 31, 2014 and 2013
8. FOREIGN EXCHANGE FORWARD CONTRACT
In May 2013, the Company entered into a foreign exchange forward contract with its bank to lock in the
Company’s rate to exchange U.S. dollars into Canadian dollars for a mortgage investment. In May 2014, the
contract was terminated, resulting in a gain of $7,977 (2013 – $5,436 unrealized net foreign exchange loss)
upon the repayment of the Company’s U.S. dollar denominated mortgage investment.
9. VOTING SHARES
As part of the Transition outlined in note 1, on the Exchange Date, all voting shares were re-purchased for a
nominal amount and cancelled. The voting shares were held by certain shareholders of the Manager.
10. REDEEMABLE SHARES
As part of the Transition outlined in note 1, on the Exchange Date all classes of redeemable shares, including
Class A and Class B shares, were exchanged into common shares at the ratios specified in note 11.
Prior to the Transition, Class A shares were publicly listed on the TSX under the symbol ‘TMC’. Class B shares
were privately held and there was no market through which these shares could be sold. The Company was
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
authorized to issue these classes of shares, which were redeemable at the holder’s option and were subject
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
to different fee structures. The Company classifies financial instruments issued as either financial liabilities
or equity instruments in accordance with the substance of the contractual terms of the instrument. The
Notes to the Consolidated Financial Statements
redeemable shares were classified as financial liabilities and presented as ‘net assets attributable to holders of
Notes to the Consolidated Financial Statements
redeemable shares’ in the statements of financial position.
Years ended December 31, 2014 and 2013
Years ended December 31, 2014 and 2013
The changes in the number of Class A and Class B shares were as follows:
Year ended December 31, 2013
Year ended December 31, 2013
Redeemable shares outstanding, beginning of year
Redeemable shares outstanding, beginning of year
Issued
Issued
Issuance of redeemable shares under dividend reinvestment plan
Issuance of redeemable shares under dividend reinvestment plan
Exchanged
Exchanged
Redeemed
Redeemed
Repurchased
Repurchased
Exchanged to common shares
Exchanged to common shares
Redeemable shares outstanding, end of year
Redeemable shares outstanding, end of year
Class A
Class A
34,561,122
34,561,122
–
–
393,522
393,522
110,685
110,685
(1,678,568)
(1,678,568)
(557,748)
(557,748)
(32,829,013)
(32,829,013)
–
–
Class B
Class B
3,742,597
3,742,597
508,647
508,647
–
–
(104,420)
(104,420)
(259,771)
(259,771)
–
–
(3,887,053)
(3,887,053)
–
–
During the year ended December 31, 2013, the Company completed a non-brokered private placement of
During the year ended December 31, 2013, the Company completed a non-brokered private placement of
During the year ended December 31, 2013, the Company completed a non-brokered private placement of
508,647 Class B shares for gross proceeds of $5,000,000. In connection with the above-noted share offering,
508,647 Class B shares for gross proceeds of $5,000,000. In connection with the above-noted share offering,
508,647 Class B shares for gross proceeds of $5,000,000. In connection with the above-noted share offering,
the Company incurred $2,680 in issuance costs. Under IFRS, Class A and Class B shares were considered
the Company incurred $2,680 in issuance costs. Under IFRS, Class A and Class B shares were considered debt
the Company incurred $2,680 in issuance costs. Under IFRS, Class A and Class B shares were considered
debt instruments prior to the Transition, and accordingly, the Company recorded these issuance costs
instruments prior to the Transition, and accordingly, the Company recorded these issuance costs through
debt instruments prior to the Transition, and accordingly, the Company recorded these issuance costs
through profit and loss.
profit and loss.
through profit and loss.
(a) Dividends to holders of redeemable shares
(a) Dividends to holders of redeem able shares
(a) Dividends to holders of redeem able shares
Prior to the Transition, the Company paid the following dividends to holders of redeemable shares:
Prior to the Transition, the Company paid the following dividends to holders of redeemable shares:
Prior to the Transition, the Company paid the following dividends to holders of redeemable shares:
Year ended December 31, 2013
Year ended December 31, 2013
Class A
Class A
Class B
Class B
Total
Total
Dividends
per share
Dividends
per share
$ 0.630
$ 0.630
0.670
0.670
Total
Total
21,876,011
21,876,011
2,445,056
2,445,056
24,321,067
24,321,067
$
$
$
$
(b) Norm al course issuer bid
(b) Norm al course issuer bid
On June 6, 2013, the Company received the approval of the TSX to commence a normal course issuer bid
Timbercreek Mortgage Investment Corporation
On June 6, 2013, the Company received the approval of the TSX to commence a normal course issuer bid
(the “Bid”) to purchase for cancellation up to 3,476,193 Class A shares, representing approximately 10% of the
(the “Bid”) to purchase for cancellation up to 3,476,193 Class A shares, representing approximately 10% of the
Class A shares float on June 4, 2013. The purchases were limited, during any 30-day period during the term
Class A shares float on June 4, 2013. The purchases were limited, during any 30-day period during the term
of the Bid, to 695,458 Class A shares in the aggregate. The Bid commenced on June 10, 2013, and provided
45
of the Bid, to 695,458 Class A shares in the aggregate. The Bid commenced on June 10, 2013, and provided
the Company with the flexibility to repurchase Class A shares for cancellation until its expiration on June 9,
the Company with the flexibility to repurchase Class A shares for cancellation until its expiration on June 9,
2014, or such earlier date as the Bid is complete. From June 18, 2013 to November 29, 2013, the date of the
2014, or such earlier date as the Bid is complete. From June 18, 2013 to November 29, 2013, the date of the
exchange of the Company Class A shares to common shares, the Company acquired for cancellation
exchange of the Company Class A shares to common shares, the Company acquired for cancellation
362,800 Class A shares at a cost of $3,351,744.
362,800 Class A shares at a cost of $3,351,744.
11. COM M ON SHARES
11. COM M ON SHARES
As outlined in note 1, on the Effective Date, the shareholders of the Company approved the automatic
As outlined in note 1, on the Effective Date, the shareholders of the Company approved the automatic
exchange of all outstanding Class A shares and Class B shares into a new class of common shares. The
exchange of all outstanding Class A shares and Class B shares into a new class of common shares. The
exchange ratio approved was 1 to 1 for each Class A share and an exchange ratio for each of the Class B
exchange ratio approved was 1 to 1 for each Class A share and an exchange ratio for each of the Class B
Shares equal to the quotient obtained by dividing the net redemption value per Class B share by the net
Shares equal to the quotient obtained by dividing the net redemption value per Class B share by the net
redemption value per Class A share on the last business day of the month immediately preceding such
redemption value per Class A share on the last business day of the month immediately preceding such
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 20
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 20
Notes to Financial Statements Years Ended December 31, 2014 and 2013
(b) Normal course issuer bid
On June 6, 2013, the Company received the approval of the TSX to commence a normal course issuer
bid (the “Bid”) to purchase for cancellation up to 3,476,193 Class A shares, representing approximately
10% of the Class A shares float on June 4, 2013. The purchases were limited, during any 30-day period
during the term of the Bid, to 695,458 Class A shares in the aggregate. The Bid commenced on June 10,
2013, and provided the Company with the flexibility to repurchase Class A shares for cancellation until its
expiration on June 9, 2014, or such earlier date as the Bid is complete. From June 18, 2013 to November
29, 2013, the date of the exchange of the Company Class A shares to common shares, the Company
acquired for cancellation 362,800 Class A shares at a cost of $3,351,744.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
11. COMMON SHARES
Notes to the Consolidated Financial Statements
As outlined in note 1, on the Effective Date, the shareholders of the Company approved the automatic
Years ended December 31, 2014 and 2013
exchange of all outstanding Class A shares and Class B shares into a new class of common shares. The
exchange ratio approved was 1 to 1 for each Class A share and an exchange ratio for each of the Class
B Shares equal to the quotient obtained by dividing the net redemption value per Class B share by the
net redemption value per Class A share on the last business day of the month immediately preceding
such exchange date. On the Exchange Date, 32,829,013 Class A shares and 3,887,053 Class B Shares were
exchanged into 36,964,028 common shares.
exchange date. On the Exchange Date, 32,829,013 Class A shares and 3,887,053 Class B Shares were
exchanged into 36,964,028 common shares.
On November 29, 2013, upon the completion of the exchange in accordance with the Company’s articles,
the common shares commenced trading on the TSX, continuing under the symbol ‘TMC’.
On November 29, 2013, upon the completion of the exchange in accordance with the Company’s articles, the
common shares commenced trading on the TSX, continuing under the symbol ‘TMC’.
The Company is authorized to issue an unlimited number of common shares. The holders of common
The Company is authorized to issue an unlimited number of common shares. The holders of common
shares are entitled to receive notice of and to attend and vote at all meetings of shareholders of the
shares are entitled to receive notice of and to attend and vote at all meetings of shareholders of the
Company. The holders of the common shares shall be entitled to receive dividends as and when declared by
Company. The holders of the common shares shall be entitled to receive dividends as and when declared by
the Board of Directors.
the Board of Directors.
The common shares are classified within shareholders’ equity in the statements of financial position. Any
The common shares are classified within shareholders’ equity in the statements of financial position. Any
incremental costs directly attributable to the issuance of common shares are recognized as a deduction from
shareholders’ equity.
incremental costs directly attributable to the issuance of common shares are recognized as a deduction
from shareholders’ equity.
On April 24, 2014, the Company closed on a public offering for 3,737,500 common shares, including
On April 24, 2014, the Company closed on a public offering for 3,737,500 common shares, including
exercising the overallotment option, at a price of $9.35 per common share. The Company received gross
exercising the overallotment option, at a price of $9.35 per common share. The Company received gross
proceeds of $34,945,625 and incurred $1,765,685 in issuance costs.
proceeds of $34,945,625 and incurred $1,765,685 in issuance costs.
The changes in the number of common shares were as follows:
The changes in the number of common shares were as follows:
Years ended December 31,
Balance, beginning of year
Issued
Issued as a result of exchange
Repurchased
Issued under dividend reinvestment plan
Balance, end of year
(a) Dividend reinvestm ent plan
(a) Dividend reinvestment plan
2014
2013
36,964,028
3,737,500
–
–
–
36,964,028
(332,009)
332,009
(35,250)
35,250
40,701,528
36,964,028
The Company amended and restated its dividend reinvestment plan effective as of November 20, 2013. The
The Company amended and restated its dividend reinvestment plan effective as of November 20, 2013.
The amended and restated dividend reinvestment plan (the “Amended DRIP”) replaces in its entirety the
original DRIP (the “Original DRIP”) established by the Company on May 19, 2010.
amended and restated dividend reinvestment plan (the “Amended DRIP”) replaces in its entirety the original
DRIP (the “Original DRIP”) established by the Company on May 19, 2010.
The Amended DRIP provides eligible beneficial and registered holders of common shares of the Company
with a means to reinvest dividends declared and payable on such common shares in additional common
The Amended DRIP provides eligible beneficial and registered holders of common shares of the Company
with a means to reinvest dividends declared and payable on such common shares in additional common
shares. For purposes of the Amended DRIP, “common shares” includes any Class A shares of the Company
46
Timbercreek Mortgage Investment Corporation
prior to their exchange into common shares on the Exchange Date, pursuant to the amendment to the
articles of the Company that came into effect on September 13, 2013.
Under the Amended DRIP, shareholders may enroll to have their cash dividends reinvested to purchase
additional common shares. The Manager can elect to purchase common shares on the open market or issue
common shares from treasury. For the year ended December 31, 2014, 332,009 common shares were
purchased on the open market under the Amended DRIP (2013 – 198,574 Class A shares issued and 194,948
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 21
Notes to Financial Statements Years Ended December 31, 2014 and 2013
shares. For purposes of the Amended DRIP, “common shares” includes any Class A shares of the Company
prior to their exchange into common shares on the Exchange Date, pursuant to the amendment to the
articles of the Company that came into effect on September 13, 2013.
Under the Amended DRIP, shareholders may enroll to have their cash dividends reinvested to purchase
additional common shares. The Manager can elect to purchase common shares on the open market or
issue common shares from treasury. For the year ended December 31, 2014, 332,009 common shares
were purchased on the open market under the Amended DRIP (2013 – 198,574 Class A shares issued and
194,948 Class A shares purchased on the open market under the Original DRIP; 35,250 common shares
purchased on the open market under the Amended DRIP).
(b) Dividends to holders of common shares
The Company intends to pay dividends on a monthly basis within 15 days following the end of each
month.
During the year ended December 31, 2014, the Company declared dividends of $30,263,327, or $0.762 per
share, to the holders of common shares (2013 – $4,953,183, $0.134 per share). As at December 31, 2014,
$2,442,092 (December 31, 2013 – $2,476,592) was payable to the holders of common shares. Subsequent
to December 31, 2014, the Company declared dividends of $2,442,092 ($0.060 per share) to the holders of
common shares.
(c) Normal course issuer bid
On November 13, 2014, the Company received the approval of the TSX to commence a second normal
course issuer bid (the “Second Bid”) to purchase for cancellation up to a maximum of 4,052,822 common
shares, representing approximately 10% of the public float of common shares as of November 11, 2014.
The Second Bid commenced on November 17, 2014 and provides the Company with the flexibility to
repurchase common shares for cancellation until its expiration on November 16, 2015, or such earlier
date as the Second Bid is complete. From November 17, 2014 to December 31, 2014, the Company did not
acquire any common shares for cancellation.
12. EXPENSES
(a) Management and performance fees
The Manager is responsible for the day-to-day operations of the Company, including administration
of the Company’s mortgage investments. As a part of the Transition detailed in note 1, the Company
entered into a new management agreement with the Manager effective from September 13, 2013.
Under the new management agreement, the Company shall pay to the Manager, a management fee
equal to 1.20% per annum of the gross assets of the Company, calculated and paid monthly in arrears,
plus applicable taxes. Gross Assets is defined as the total assets of the Company before deducting any
liabilities, less any amounts that are reflected as mortgage syndication liabilities related to syndicated
mortgage investments that are held by third parties. The initial term of the new management agreement
is 10 years from the Effective Date and is automatically renewed for successive five year terms at the
expiration of the initial term. For the year ended December 31, 2014, the Company incurred management
fees of $5,421,686 (2013 – $4,974,029).
Under the new management agreement, the Manager continues to be entitled to a performance fee.
In any calendar year where the Company has net earnings available for distribution to shareholders in
excess of the hurdle rate (the “Hurdle Rate”), which is defined as the average two-year Government of
Canada Bond Yield for the 12-month period then ended plus 450 basis points, the Manager is entitled to
receive from the Company a performance fee equal to 20% of the net earnings of the Company available
to distribute over the Hurdle Rate, plus applicable taxes. The net earnings of the Company shall mean
the net income before performance fees of the Company in accordance with applicable accounting
principles and adjusted for certain other non-cash adjustments as defined in the management
agreement. The performance fee is payable to the Manager within 15 days of the issuance of the
Company’s audited annual consolidated financial statements for that calendar year. The performance
fee accrued for the year ended December 31, 2014 is $1,954,557 (2013 – $1,940,688).
Timbercreek Mortgage Investment Corporation
47
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
Years ended December 31, 2014 and 2013
Notes to Financial Statements Years Ended December 31, 2014 and 2013
of the Company's audited annual consolidated financial statements for that calendar year. The
performance fee accrued for the year ended December 31, 2014 is $1,954,557 (2013 – $1,940,688).
(b) Trailer fees
Prior to September 13, 2013, the Company paid each registered dealer a trailer fee equal to 0.50%
annually of the net redemption value per Class A share for each Class A share held by clients of the
(b) Trailer fees
Prior to September 13, 2013, the Company paid each registered dealer a trailer fee equal to 0.50% annually
of the net redemption value per Class A share for each Class A share held by clients of the registered
dealer, calculated and paid at the end of each calendar quarter. In conjunction with the Transition,
effective September 13, 2013 the Company no longer pays trailer fees on Class A shares to registered
dealers. As such, the Company paid no Class A trailer fees for the year ended December 31, 2014 (2013 –
Transition, effective September 13, 2013 the Company no longer pays trailer fees on Class A shares to
$737,199).
registered dealer, calculated and paid at the end of each calendar quarter. In conjunction with the
registered dealers. As such, the Company paid no Class A trailer fees for the year ended December 31,
2014 (2013 – $737,199).
13. EARNINGS PER SHARE
13. EARN IN GS PER SH ARE
Earnings per share has been calculated as if the Transition occurred on January 1, 2013 and as a result,
dividends to holders of redeemable shares and issuance costs of redeemable shares for the year ended
December 31, 2013 have been added back to the net loss of the Company in the calculation of earnings per
share.
Earnings per share has been calculated as if the Transition occurred on January 1, 2013 and as a result,
dividends to holders of redeemable shares and issuance costs of redeemable shares for the year ended
December 31, 2013 have been added back to the net loss of the Company in the calculation of earnings per
(a) Basic and diluted earnings per share
share.
Basic and diluted earnings per share are calculated by dividing net income attributable to common
(a) Basic and diluted earnings per share
shares by the weighted average number of common shares during the year.
Years ended December 31,
Numerator for earnings per share:
2014
2013
Net income and comprehensive income
$
24,917,140
$
506,932
Issuance costs of redeemable shares
Dividends to holders of redeemable shares
–
–
Net income attributable to common shares
24,917,140
2,680
24,321,067
24,830,679
Denominator for earnings per share:
Weighted average of common shares (basic and diluted)
Earnings per share – basic and diluted
$
$
39,544,439
0.63
$
$
38,444,103
0.65
Basic and diluted earnings per share are calculated by dividing net income attributable to common
shares by the weighted average number of common shares during the year.
14. RELATED PARTY TRANSACTIONS
(a) As at December 31, 2014, due to Manager includes management and performance fees payable of
14. RELATED PARTY TRAN SACTIO N S
$1,970,131 (December 31, 2013 – $2,346,745) and $5,827 (December 31, 2013 – $2,991) related to costs
incurred by the Manager on behalf of the Company.
(a) As at December 31, 2014, due to Manager includes management and performance fees payable of
$1,970,131 (December 31, 2013 – $2,346,745) and $5,827 (December 31, 2013 – $2,991) related to costs
(b) As at December 31, 2014, no amount (December 31, 2013 – $281,126) is receivable by the Company from
incurred by the Manager on behalf of the Company.
TSMIC relating to amounts paid by the Company on behalf of TSMIC.
(b) As at December 31, 2014, no amount (December 31, 2013 – $281,126) is receivable by the Company from
TSMIC relating to amounts paid by the Company on behalf of TSMIC.
(c) As at December 31, 2014, included in other assets is $3,044,234 (December 31, 2013 – $1,040,374) of
cash held in trust by Timbercreek Mortgage Servicing Inc., the Company’s mortgage servicing and
(c) As at December 31, 2014, included in other assets is $3,044,234 (December 31, 2013 – $1,040,374) of cash
administration provider, a company controlled by the Manager. The balance relates to mortgage funding
holdbacks and prepaid mortgage interest received from various borrowers.
held in trust by Timbercreek Mortgage Servicing Inc., the Company’s mortgage servicing and
administration provider, a company controlled by the Manager. The balance relates to mortgage
funding holdbacks and prepaid mortgage interest received from various borrowers.
(d) As at December 31, 2014, the Company, Timbercreek Senior Mortgage Investment Corporation (“TSMIC”),
Timbercreek Four Quadrant Global Real Estate Partners (“T4Q”) and Timbercreek Canadian Direct LP,
related parties by virtue of common management, have co invested in several mortgage investments
totalling $701,930,591 (December 31, 2013 – $703,448,560). The Company’s share in these mortgage
investments is $268,906,244 (December 31, 2013 – $151,103,561).
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 23
(e) A mortgage investment of $1,147,226 (December 31, 2013 – $1,044,252) was provided to a limited
partnership which is partially owned by T4Q.
48
Timbercreek Mortgage Investment Corporation
Notes to Financial Statements Years Ended December 31, 2014 and 2013
(f) The Manager has borne total costs of $250,000 relating to the Transition, which are not included in the
Transition related costs in the statements of income (loss) and comprehensive income (loss).
The above related party transactions are in the normal course of business and are recorded at the exchange
amount, which is the amount of consideration established and agreed to by the related parties.
15. INCOME TAXES
As of December 31, 2014, the Company has non-capital losses carried forward for income tax purposes
of $19,938,146 (December 31, 2013 – $14,672,000), which will expire between 2029 and 2034 if not used.
The Company also has future deductible temporary differences resulting from share issuances, prepaid
mortgage interest, unearned income and financing costs for income tax purposes of $14,608,322 (December
31, 2013 – $12,040,000).
16. CAPITAL RISK MANAGEMENT
The Company manages its capital structure in order to support ongoing operations while focusing on its
primary objectives of preserving shareholder capital and generating a stable monthly cash dividend to
shareholders. The Company defines its capital structure to include common shares, debentures and the
credit facility.
The Company reviews its capital structure on an ongoing basis and adjusts its capital structure in response
to mortgage investment opportunities, the availability of capital and anticipated changes in general
economic conditions.
The Company’s investment restrictions and asset allocation model incorporate various restrictions and
investment parameters to manage the risk profile of the mortgage investments. There have been no changes
in the process over the previous year.
At December 31, 2014, the Company was in compliance with its investment restrictions.
Pursuant to the terms of the credit facility, the Company is required to meet certain financial covenants,
including a minimum interest coverage ratio, minimum adjusted shareholders’ equity and maximum
non-debenture indebtedness to adjusted shareholders’ equity. For the year ended December 31, 2014, the
Company was in compliance with all financial covenants.
17. RISK MANAGEMENT
The Company is exposed to the symptoms and effects of global economic conditions and other factors that
could adversely affect its business, financial condition and operating results. Many of these risk factors are
beyond the Company’s direct control. The Manager and Board of Directors play an active role in monitoring
the Company’s key risks and in determining the policies that are best suited to manage these risks. There
has been no change in the process since the previous year.
The Company’s business activities, including its use of financial instruments, exposes the Company to
various risks, the most significant of which are interest rate risk, credit risk, and liquidity risk.
(a) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of financial assets or financial liabilities
will fluctuate because of changes in market interest rates. As of December 31, 2014, $89,906,305 of net
mortgage investments bear interest at variable rates. Of these, $84,887,448 of net mortgage investments
include a “floor rate” to protect their negative exposure, while two mortgage investments totalling
$5,018,857 bear interest at a variable rate without a “floor rate”. If there were a decrease of 0.50% in interest
rates, with all other variables constant, the impact from variable rate mortgage investments would be a
decrease in net income of $25,094. However, if there were a 0.50% increase in interest rates, with all other
Timbercreek Mortgage Investment Corporation
49
Notes to Financial Statements Years Ended December 31, 2014 and 2013
variables constant, it would result in an increase in net income of $449,532. The Company manages its
sensitivity to interest rate fluctuations by generally entering into fixed rate mortgage investments or
adding a “floor-rate” to protect its negative exposure.
In addition, the Company is exposed to interest rate risk on the credit facility, which has a balance
of $9,075,926 as at December 31, 2014. Based on the outstanding balance of the credit facility as at
December 31, 2014, a 0.50% decrease in interest rates, with all other variables constant, will increase net
income by $45,380 annually, arising mainly as a result of lower interest expense payable on the credit
facility. A 0.50% increase in interest rates would have an equal but opposite effect on the net income of
the Company.
The Company’s other assets, which includes interest receivable, accounts payable and accrued expenses,
prepaid mortgage interest, mortgage funding holdbacks, dividends payable and due to Manager have no
exposure to interest rate risk due to their short-term nature. Cash and cash equivalents carry a variable
rate of interest and are subject to minimal interest rate risk and the debentures have no exposure to
interest rate risk due to their fixed interest rate.
(b) Credit risk
Credit risk is the possibility that a borrower may be unable to honour its debt commitments as a result
of a negative change in market conditions that could result in a loss to the Company. The Company
mitigates this risk by the following:
(i) adhering to the investment restrictions and operating policies included in the asset allocation model
(subject to certain duly approved exceptions);
(ii) all mortgage investments are approved by the independent mortgage advisory committee before
funding; and
(iii) actively monitoring the mortgage investments and initiating recovery procedures, in a timely
manner, where required.
The maximum exposure to credit risk at December 31, 2014 is the carrying values of its net mortgage
investments, including interest receivable, amounting to $401,732,652 (December 31, 2013 –
$321,844,724). The Company has recourse under these mortgage investments in the event of default by
the borrower; in which case, the Company would have a claim against the underlying collateral.
50
Timbercreek Mortgage Investment Corporation
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
Years ended December 31, 2014 and 2013
The maximum exposure to credit risk at December 31, 2014 is the carrying values of its net mortgage
investments, including interest receivable, amounting to $401,732,652 (December 31, 2013 – $321,844,724).
The Company has recourse under these mortgage investments in the event of default by the borrower; in
Notes to Financial Statements Years Ended December 31, 2014 and 2013
which case, the Company would have a claim against the underlying collateral.
(c) Liquidity risk
(c) Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations as
Liquidity risk is the risk that the Company will encounter difficulty in meeting its financial obligations
as they become due. This risk arises in the normal operations from fluctuations in cash flow as a result
they become due. This risk arises in the normal operations from fluctuations in cash flow as a result of the
of the timing of mortgage investment advances and repayments and the need for working capital.
Management routinely forecasts future cash flow sources and requirements to ensure cash is efficiently
timing of mortgage investment advances and repayments and the need for working capital. Management
utilized.
routinely forecasts future cash flow sources and requirements to ensure cash is efficiently utilized.
The following are the contractual maturities of financial liabilities as at December 31, 2014, including
The following are the contractual maturities of financial liabilities as at December 31, 2014, including
expected interest payments:
expected interest payments:
December 31, 2014
values
cash flows
a year
year
3–5 years
Carrying
Contractual
Within
Following
Accounts payable and
accrued expenses
$
855,527
$
855,527
$
855,527
$
Dividends payable
2,442,092
2,442,092
2,442,092
Due to Manager
1,975,958
1,975,958
1,975,958
Mortgage funding
holdbacks
Prepaid mortgage
interest
483,762
483,762
483,762
2,560,472
2,560,472
2,560,472
$
–
–
–
–
–
Credit facility
9,075,926
9,824,690
408,417
9,416,273
–
–
–
–
–
–
Convertible debentures
32,387,457
43,803,185
2,190,750
2,196,752
39,415,683
Total liabilities
49,781,194
61,945,686
10,916,978
11,613,025
39,415,683
Unadvanced mortgage
commitments
Total contractual
–
107,366,854
107,366,854
–
–
liabilities
$
49,781,194
$
169,312,540
$
118,283,832
$
11,613,025
$
39,415,683
and an unutilized credit facility of $25,924,074 (December 31, 2013 – $25,000,000). The Company is
As at December 31, 2014, the Company had a cash position of $463,092 (December 31, 2013 – $12,348,449)
As at December 31, 2014, the Company had a cash position of $463,092 (December 31, 2013 – $12,348,449)
and an unutilized credit facility of $25,924,074 (December 31, 2013 – $25,000,000). The Company is
confident that it will be able to finance its operations using the cash flow generated from operations and
the credit facility. Included within the unadvanced mortgage commitments is $42,774,960 relating to the
Company’s syndication partners. The Company expects the syndication partners to fund this amount.
confident that it will be able to finance its operations using the cash flow generated from operations and the
credit facility. Included within the unadvanced mortgage commitments is $42,774,960 relating to the
Company’s syndication partners. The Company expects the syndication partners to fund this amount.
18. FAIR VALUE M EASUREM EN TS
The following table shows the carrying amounts and fair values of assets and liabilities:
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 26
Timbercreek Mortgage Investment Corporation
51
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Notes to the Consolidated Financial Statements
Years ended December 31, 2014 and 2013
Notes to Financial Statements Years Ended December 31, 2014 and 2013
18. FAIR VALUE MEASUREMENTS
The following table shows the carrying amounts and fair values of assets and liabilities:
As at December 31, 2014
Assets measured at fair value
Carrying Value
Other
financial
FVTPL
liabilities
Fair
value
Loans and
receivable
Foreclosed properties held for sale
$
– $
13,850,521 $
– $
13,850,521
Assets not measured at fair value
Cash and cash equivalents
Other assets
Mortgage investments, including mortgage
syndications
Financial liabilities not measured at fair value
Accounts payable and accrued expenses
Dividends payable
Due to Manager
Mortgage funding holdbacks
463,092
3,582,038
616,173,629
–
–
–
–
–
–
–
–
–
–
–
–
–
463,092
3,582,038
–
616,173,629
855,527
855,527
2,442,092
2,442,092
1,975,958
1,975,958
483,762
483,762
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Prepaid mortgage interest
2,560,472
–
–
2,560,472
Credit facility
–
Notes to the Consolidated Financial Statements
Convertible debentures
–
–
–
8,836,959
8,836,959
32,387,457
35,017,500
Mortgage syndication liabilities
Years ended December 31, 2014 and 2013
$
– $
– $
219,581,032 $ 219,581,032
As at December 31, 2013
Assets measured at fair value
Carrying Value
Other
financial
FVTPL
liabilities
Fair
value
Loans and
receivable
Foreclosed properties held for sale
$
– $
11,351,435 $
– $
11,351,435
Assets not measured at fair value
Cash and cash equivalents
Other assets
Mortgage investments, including mortgage
syndications
Financial liabilities measured at FVTPL
12,348,449
1,540,102
442,165,777
–
–
–
–
–
12,348,449
1,540,102
–
442,165,777
Foreign exchange forward contract
71,696
71,696
Financial liabilities not measured at fair value
Accounts payable and accrued expenses
–
–
520,725
520,725
Dividends payable
Due to Manager
Mortgage funding holdbacks
Prepaid mortgage interest
–
2,476,592
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 27
2,349,736
2,476,592
2,349,736
–
–
–
–
–
–
–
28,809
28,809
1,011,565
1,011,565
Mortgage syndication liabilities
$
– $
– $
124,378,929 $
124,378,929
The valuation techniques and the inputs used for the Company’s financial instruments are as follows:
52
Timbercreek Mortgage Investment Corporation
(a) M ortgage investm ents and m ortgage syndication liabilities
There is no quoted price in an active market for the mortgage investments or mortgage syndication
liabilities. The Manager makes its determination of fair value based on its assessment of the current lending
market for mortgage investments of same or similar terms. Typically, the fair value of these mortgage
investments and mortgage syndication liabilities approximate their carrying values given the amounts
consist of short-term loans that are repayable at the option of the borrower without yield maintenance or
penalties. As a result, the fair value of mortgage investments is based on level 3 inputs.
(b) Other financial assets and liabilities
The fair values of cash and cash equivalents, other assets, accounts payable and accrued expenses,
dividends payable, due to Manager, mortgage funding holdbacks, prepaid mortgage interest and credit
facility approximate their carrying amounts due to their short-term maturities.
(c) Foreign exchange forward contracts
Foreign exchange forward contracts are measured at fair value using the market comparison technique.
The fair values are based on broker quotes from Bloomberg. Similar contracts are traded in an active market
and the quotes reflect the actual transactions in similar instruments. As a result, the fair value of foreign
exchange forward contract is based on level 2 inputs.
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 28
Notes to Financial Statements Years Ended December 31, 2014 and 2013
The valuation techniques and the inputs used for the Company’s financial instruments are as follows:
(a) Mortgage investments and mortgage syndication liabilities
There is no quoted price in an active market for the mortgage investments or mortgage syndication
liabilities. The Manager makes its determination of fair value based on its assessment of the current
lending market for mortgage investments of same or similar terms. Typically, the fair value of these
mortgage investments and mortgage syndication liabilities approximate their carrying values given
the amounts consist of short-term loans that are repayable at the option of the borrower without yield
maintenance or penalties. As a result, the fair value of mortgage investments is based on level 3 inputs.
(b) Other financial assets and liabilities
The fair values of cash and cash equivalents, other assets, accounts payable and accrued expenses,
dividends payable, due to Manager, mortgage funding holdbacks, prepaid mortgage interest and credit
facility approximate their carrying amounts due to their short-term maturities.
(c) Foreign exchange forward contracts
Foreign exchange forward contracts are measured at fair value using the market comparison technique.
The fair values are based on broker quotes from Bloomberg. Similar contracts are traded in an active
market and the quotes reflect the actual transactions in similar instruments. As a result, the fair value of
foreign exchange forward contract is based on level 2 inputs.
(d) Convertible debentures
The fair value of the convertible debentures is based on the market closing price of convertible
debentures at the reporting date.
There were no transfers between level 1, level 2 and level 3 during the year ended December 31, 2014 and
2013.
19. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business activities, the Company may be contingently liable for litigation and
claims arising from investing in mortgages. Where required, management records adequate provisions in
the accounts.
Although it is not possible to accurately estimate the extent of potential costs and losses, if any, management
believes that the ultimate resolution of such contingencies would not have a materially adverse effect on the
Company’s financial position.
20. KEY MANAGEMENT PERSONNEL COMPENSATION
The Company paid $90,231 (2013 – $105,642) to the members of the Board of Directors and nil (2013 –
$31,108) to the Independent Review Committee for their services to the Company. The compensation to the
senior management of the Manager is paid through the management fees paid to the Manager (note 12(a)).
21. COMPARATIVES
Comparative figures have been re-classified, where necessary, to conform with changes in presentation in
the current year.
Timbercreek Mortgage Investment Corporation
53
Notes to Financial Statements Years Ended December 31, 2014 and 2013
22. SUBSEQUENT EVENTS
(a) Non-executive director deferred share unit plan
Commencing January 1, 2015, the Company instituted a non-executive director deferred share unit plan
(the “Plan”) whereby, up to 100% of the compensation for a director may be paid to the director in the
form of deferred share units (“DSUs”), payable quarterly in arrears. Directors may elect once every year, in
accordance with the Plan, as to how much (if any) of his/her compensation will be paid in DSUs, having
regard at all times for the ownership guidelines of the Plan. The portion of a director’s compensation
which is not payable in the form of DSUs shall be paid by the Company in cash, quarterly in arrears.
(b) Credit facility amendment
Subsequent to year end, the Company completed a $15,000,000 increase on the credit facility, increasing
its total available borrowing limit to $50,000,000.
54
Timbercreek Mortgage Investment Corporation
Board of Directors
The directors of Timbercreek Mortgage Investment Corporation have deep experience, established reputations
and extensive contacts in the commercial real estate and mortgage lending community, as well as in the capital
markets and asset management sectors in Canada.
Zelick L. Altman
Independent Director,
Timbercreek MIC
Managing Director,
LaSalle Investment
Management (Canada)
Ugo Bizzarri
Director, Timbercreek MIC
Co-Founder and Managing
Director, Portfolio Management
& Investments, Timbercreek
Asset Management
Craig A. Geier
Independent Director and
Audit Committee Chair,
Timbercreek MIC
Chairman and CEO,
Microbonds Inc.
Andrew Jones
Director and CEO,
Timbercreek MIC
Managing Director,
Debt Investments,
Timbercreek Asset Management
W. Glenn Shyba
Independent Director and
Audit Committee Chair,
Timbercreek MIC
Principal,
Origin Merchant Partners
Blair Tamblyn
Chairman, Timbercreek MIC
Co-Founder, Managing
Director and CEO, Timbercreek
Asset Management
Derek J. Watchorn, LL.B.
Independent Director,
Timbercreek MIC
Consultant
Independent Mortgage Advisory Committee
Chris Humeniuk
President and CEO,
Community Trust
Ken Lipson
President and CIO,
TMDL Asset Management Inc.
Pamela Spackman
Committee Chair
Consultant
Head Office
1000 Yonge Street, Suite 500
Toronto, ON M4W 2K2
T 416.306.9967
F 416.848.9494
E inquiries@timbercreek.com
timbercreekmic.com
Stock Exchange Listing
TSX: TMC
Auditors
KPMG LLP
Transfer Agent & Registrar
CIBC Mellon Trust Company
320 Bay Street
Toronto, ON M5H 4A6
Legal Counsel
McCarthy Tétrault LLP