Timbercreek
Mortgage
Investment
Corporation
2015 Annual Report
Timbercreek
Mortgage Investment Corporation
Timbercreek Mortgage Investment Corporation is a leading provider of non-bank
mortgage financing offering shorter-duration, customized financing solutions to
commercial real estate investors. By bringing together three core elements of thorough
underwriting, active management and strong governance, we are able to fulfill the
requirements of this borrower market while providing strong risk-adjusted yield for
our shareholders. Our varied portfolio of mortgage investments is primarily secured
by income-producing properties and is well-diversified by asset type, by borrower
and across key growth markets throughout the country.
Drivers of Our Success
Our Strategy
Throughout 2015, our focus continued to be on making high-quality
investments secured by high-quality assets.
This goal has been achieved primarily through mortgage loans
secured by income-producing properties and disciplined
portfolio diversification.
Together, these strategies allow us to generate superior risk-adjusted
yield for shareholders.
Our People
Our investors benefit from Timbercreek’s robust orgination and
asset management platform.
Our origination team covers Canada from east to west, leveraging
strong relationships with commercial real estate borrowers
and extensive networks of mortgage broker and investment
banker contacts.
The origination team, coupled with the underwriting, funding
and servicing team at Timbercreek, are seasoned specialists with
experience spanning varying economic cycles, and as such are
a critical component of our success.
Superior Customer Service
Timbercreek works directly with borrowers to develop customized
solutions and formulate strong exit strategies to help ensure
a successful investment from start to finish.
This commitment, combined with ongoing communication with
borrowers throughout the lifecycle of each loan, has earned Timbercreek
a well-deserved reputation for exceptional customer service.
87%
of portfolio is secured by
income-producing properties
$4.6 billion
in mortgage and loan
originations by Timbercreek
since inception
Repeat borrowers represent
76%
of new business since inception
2015 Company
Highlights
11%
portfolio growth
13%
growth in earnings
78%
first mortgage positions
70%
weighted average loan-to-value
$262.6 million
in new mortgage investments
funded (50 loans)
69%
portfolio turnover
Timbercreek Mortgage Investment Corporation
1
Why Multi-Residential
Real Estate?
61% of the loans in our portfolio are secured by multi-residential real estate
Mortgage Investment Corporations are required to invest at least 50% of their assets in mortgages
secured by housing* which can include a wide range of residential property types including
single-family homes, condominiums, residential land and development projects, retirement
and multi-residential, among others.
At Timbercreek, we have chosen to deliver on this requirement by lending primarly against
multi-residential real estate for the following reasons:
Strong Exit Strategy: compared to other commercial real estate sectors, including other
residential property types, multi-residential real estate has the lowest historical vacancy
rates and strongest historical risk-adjusted returns. These features combine to drive
demand from investors.
Lower Probability of Default: multi-residential real estate provides a strong, stable
multi-tenant income stream which is available to service debt.
Why do multi-residential investors seek capital from Timbercreek? In short, our financing
solutions allow multi-residential investors to:
- acquire assets when a conventional lender cannot accommodate tight closing timelines;
- provide financing through a renovation period when conventional financing, focused on
income already in place, does not provide sufficient capital; and
- provide second mortgages against stabilized assets where the borrower is unlocking
capital for new investments.
Diversification by Asset Type
Multi-residential 60.7%
Multi-residential: 60.7%
Hotel: 1.3%
Retail: 17.9%
Office: 8.9%
Single-family residential: 0.9%
Industrial: 0.9%
Unimproved land: 5.7%
Self-storage: 0.8%
Retirement: 2.2%
Other residential: 0.7%
88% of second mortgages secured by multi-residential real estate
* Income Tax Act
2
Timbercreek Mortgage Investment Corporation
Sample
Investments
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This newly-constructed, residential/retail
complex is located in Grandview-Woodlands –
a mature Vancouver neighbourhood characterized
by a mix of commercial, industrial, single-family
and multi-family residential stock, with rich
ethnic features.
The loan was used to bridge financing during
the lease-up period for the retail units within the
property, and is secured by the 20 fully-leased,
income-generating, high-end residential rental
units, with a Starbucks-anchored retail component.
This blanket first-mortgage loan was used for
the acquisition and improvement of a 759-suite
portfolio of 11 multi-residential buildings located in
prime downtown Saskatoon and Regina locations,
in close proximity to schools, transit and retail
amenities. Property improvements will include;
exterior upgrades, modernization of lobbies and
hallways and some in-suite enhancements.
Under new ownership, the portfolio will be
repositioned with significant upside in expected
income, making it an attractive portfolio for
securing the loan.
CrITerIA
Asset type
Loan size
Position
Term
Loan-to-value
InvesTMenT
Mixed Use - Residential & Retail
$6,000,000
First Mortgage
18 months
68.0%
CrITerIA
Asset type
Loan size
Position
Term
Loan-to-value
InvesTMenT
Multi-residential
$45,663,166
First Mortgage
24 months
55.8%
Timbercreek Mortgage Investment Corporation
3
Letter to
Shareholders
I am pleased to provide this report on the results
that Timbercreek Mortgage Investment Corporation
achieved in 2015 – a year in which we accomplished
our stated goals, achieved healthy growth at no cost
to credit quality, and maintained our deep focus on
prudent risk management for our investors.
First, the headline results: through 2015 we were
able to grow the portfolio by over 10% and earnings
by over 12%; all while reducing overall risk in the
portfolio. In 2015, our exposure to first mortgages
increased to 78% (up 9% from 2014) and by the end of
the year, 87% of our loans were secured by income-
producing properties. Our earnings growth in 2015
also allowed us to generate distributable income in
excess of dividends paid to shareholders.
During the course of the year, over $290 million
was repaid across 55 loans; which confirms that our
high-quality borrowers were able to execute on their
projects effectively. At the same time, robust deal flow
from our experienced origination team, supported by
a thorough due diligence process, allowed us to deploy
over $260 million in new deals.
The portfolio is currently comprised of 100 mortgage
loans with an average size of $4.4 million. At the end
of 2015, our exposure was well-diversified across major
geographic markets with our largest exposure focused
in Ontario (35%), Quebec (20%), and Saskatchewan
(15.3%). We continuously monitor all markets and
property types and seek to rebalance the portfolio with
an eye on managing risk. At the end of 2015, we had
just under 6% exposure in Alberta, one of the more
volatile markets; which was a slight decrease from our
exposure at the end of 2014 – and lower than all of our
market peers.
For 2015, as in previous years, our attention continued
to be on lending primarily against cash-flowing real
estate. Over 87% of our portfolio is secured by real
estate with rental income in place, compared to
84% a year earlier. Furthermore, we have maintained
a high concentration of exposure to multi-residential
real estate, which currently represents over 60% of our
portfolio. In fact, in the last quarter, over 65% of total
capital deployed was to loans secured by apartment
buildings. We continue to target these assets because
they display some of the strongest fundamentals when
compared to other commercial real estate sectors, and
because properties with rental income in place provide
better stability compared to some other property types,
such as land or properties under construction. This
stability offers more certainty in our exit strategies,
as rental income can service debt if required. After
apartment buildings, our second-highest exposure is
4
Timbercreek Mortgage Investment Corporation
to retail properties (18%). These retail loans are primarily
secured by grocery-anchored neighbourhood
shopping centres, as well as certain infill mixed-use
properties in Canada’s largest cities.
While we have always maintained a very
conservative approach to lending, over the past year
our commitment to risk management strengthened.
This renewed emphasis is illustrated by an uptick in
our first-mortgage exposure – from 69.5% at the end
of 2014 to 78.0% at the end of 2015 – as well as by our
increased allocation to loans secured by cash-flowing
properties. While this did contribute to a reduction in
our weighted average interest rate, which declined
slightly over the year from an average of 9.4% in
2014 to an average of 9.1% in 2015, we believe the
improvements to credit quality have positioned the
portfolio to withstand volatility in the market.
Another change over the course of 2015 was to our
weighted average remaining term-to-maturity, which
dropped slightly from 1.4 years at the end of 2014 to
1.2 years at the end of 2015. This short duration allows
us to maintain a certain level of control as a lender, as
it allows us to re-set interest rates and actively manage
the portfolio through different market cycles.
When I look back at the results we produced in 2015
and forward to the accomplishments we expect in
2016, I am reminded that these results were generated
by the many people who have come together to
produce our success. At the forefront are you, our
investors; who place your trust and confidence in
our investment strategy – which is deployed by our
investment team as they work to protect your capital
and produce stable income. Thank you to each and
every one of you, investment team member and
investor alike. Of course, this work is also overseen
by our Board of Directors and Mortgage Advisory
Committee, to whom my appreciation goes out as well.
On behalf of everyone here at Timbercreek Mortgage
Investment Corporation, my pledge to you is that
we will carefully and thoughtfully implement our
investment strategy in 2016. I look forward to
reporting further success during the upcoming year.
Andrew Jones
Chief Executive Officer
Timbercreek Mortgage Investment Corporation
April 2016
Management’s Discussion and Analysis
For the year ended December 31, 2015
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 24, 2016. 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.
Timbercreek Mortgage Investment Corporation
5
BUsIness OvervIeW
Timbercreek Mortgage Investment Corporation (the “Company”) is a mortgage investment corporation
domiciled in Canada. The registered office of the Company is 25 Price Street, Toronto, Ontario M4W 1Z1. The
Company is incorporated under the laws of the Province of Ontario by articles of incorporation dated April 30,
2008. The common shares of the Company are publicly traded on the Toronto Stock Exchange (“TSX”) under the
symbol “TMC”.
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.
The Company has entered into a management agreement with Timbercreek Asset Management Inc. (the
“Manager”) dated September 13, 2013. The Manager is responsible for the day-to-day operations and providing
all general management, mortgage servicing and administrative services to the Company.
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, 2015 (the “Year”). This MD&A should be read in conjunction with the consolidated
financial statements for the years ended December 31, 2015 and 2014, which are prepared in accordance with
International Financial Reporting Standards (“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 Company’s ability to earn and
distribute cash dividends to shareholders and to evaluate its 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.
• 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 portfolio – represents the daily average of net mortgage investments for
the stated period;
• 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;
6
Timbercreek Mortgage Investment Corporation
• 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;
• Leverage – represents the total of gross convertible debentures and the total credit facility balance divided by
total assets less mortgage syndication liabilities;
• Weighted average interest rate for the period – represents the weighted average of daily interest rates (not
including lender fees) on the net mortgage investments for the stated period;
• 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 fee is received but the mortgage investment is not fully funded, the
denominator is adjusted to include the Company’s unadvanced commitment;
• Adjusted net income and comprehensive income – represents net income and comprehensive income 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 and comprehensive income divided
by the weighted average outstanding shares for the stated period;
• Targeted dividend yield – represents the average 2-Year Government of Canada Bond Yield for the stated
period plus 550 basis points;
• Actual dividend yield – represents the annualized total per-share dividend for common shares divided by
the trading close price as at the reporting date;
• Expense ratio – represents total expenses (excluding financing costs, net operating (income) loss on
foreclosed properties held for sale (“FPHFS”), fair value adjustment on FPHFS 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; and
• Payout ratio – represents total common share dividends paid and declared for payment, divided by
distributable income for the stated period.
reCenT DeveLOPMenTs AnD OUTLOOK
The Company’s performance through 2015 was strong. By successfully achieving our stated goal of maintaining full
deployment of cash through the year, the Company was able to grow net interest income by over 17% and generate
distributable income in excess of dividends paid to shareholders. Investment activity also remained healthy with
more than $260 million in new mortgage investments funded resulting in portfolio growth of over 10%.
This portfolio growth was also achieved without compromising credit quality. More than ever, risk management
is a top priority for our business. We achieve this through a number of strategies which include, focusing our
lending in larger urban cities, targeting mortgage investments secured by cash-flowing properties, as well as
through thorough underwriting of the asset, the stability of the cash-flow, the financial stability of the borrower
and the experience of the manager among other risk factors. At year-end, over 87% of the Company’s mortgage
investments were secured by properties with existing rental income and 60% of the portfolio was secured by
multi-residential real estate (apartment buildings) which we believe to be the most stable property type with well
diversified cash-flow streams. The portfolio’s exposure to first mortgages grew to 78% from 69% a year earlier
and, as at December 31, 2015, weighted average loan-to-value in the portfolio was 70%. We also continue to
maintain the lowest exposure to Alberta in the sector with just 5.7% allocation to that market down slightly from
6.1% at the end of Q3.
Aside from the Alberta market and certain areas of the office sector, we believe fundamentals in the commercial
real estate market across Canada continue to remain healthy, creating a good environment for mortgage
lending. This is primarily a result of continued demand for investment properties from both domestic investors
benefiting from the lower cost of mortgage debt and foreign investors capitalizing on the attractively priced
Canadian dollar.
Timbercreek Mortgage Investment Corporation
7
We were pleased with the Company’s strong performance in 2015 and continue to believe we hold one of
the highest quality mortgage portfolios in the market today, providing an exceptional risk-adjusted yield
to investors. With a fully deployed, well-diversified portfolio of mortgage investments primarily secured by
income-producing properties, we expect to continue this strong momentum through 2016.
FInAnCIAL HIGHLIGHTs
FInAnCIAL POsITIOn
As at
KEY FINANCIAL POSITION INFORMATION
Mortgage investments, including mortgage syndications
Total assets
Credit facility
Convertible debentures
Total liabilities
CAPITAL STRUCTURE
CAPITAL STRUCTURE
CAPITAL STRUCTURE
Shareholders’ equity
Convertible debentures, gross
Credit facility
Credit facility limit
Leverage1
COMMON SHARE INFORMATION
Number of common shares outstanding
Closing trading price
Market capitalization
1 Refer to non-IFRS measures section, where applicable.
1. Refer to non-IFRS measures section, where applicable.
December
December
31, 2015
31, 2015
December
December
31, 2014
31, 2014
December
December
31, 2013
31, 2013
750,703
$
616,174 $
442,166
766,734
$ 634,069 $
467,406
53,812
32,778
404,404
$
$
$
9,075 $
32,387 $
–
–
269,123 $
130,838
362,329
$
364,946 $
336,568
34,500 $
34,500 $
53,812
$
9,075 $
–
–
60,000 $
35,000 $
25,000
19.3%
10.5%
–
40,523,728
40,523,728
40,701,528
40,701,528
36,964,028
36,964,028
7.58
$
8.32 $
9.17
307,170 $
338,637 $
338,960
$
$
$
$
$
$
$
$
$
$
$
8
Timbercreek Mortgage Investment Corporation
OPerATInG resULTs
Net interest income
Income from operations
Net income and comprehensive income
Earnings per share (basic and diluted)
Adjusted net income and comprehensive income1
Adjusted earnings per share (basic and diluted)1
Dividends to shareholders
Distributable income
Distributable income per share (basic and diluted)
Targeted dividend yield1
Actual dividend yield1
Payout ratio1
Dividends per share
Class A
Class B
Common
1. Refer to non-IFRS measures section, where applicable.
1 Refer to non-IFRS measures section, where applicable.
TThhrreeee mmoonntthhss eennddeedd
DDeecceemmbbeerr 3311,,
YYeeaarr eennddeedd DDeecceemmbbeerr 3311,,
22001155
22001144
22001155
22001144
22001133
$ 10,814 $
9,774 $ 43,004 $ 36,710 $ 39,731
$
$
$
$
$
$
$
$
8,427 $
7,438 $ 32,750 $ 28,272 $ 25,487
6,905 $
5,812 $ 28,021 $ 24,917 $
507
0.17 $
0.14 $
0.69 $
0.63 $
0.65
6,905 $
5,812 $ 28,021 $ 24,917 $ 28,361
0.17 $
0.14 $
0.69 $
0.63 $
0.74
7,296 $
7,326 $ 29,253 $ 30,263 $ 29,274
7,256 $
8,013 $ 29,484 $ 27,899 $ 30,204
0.18 $
0.20 $
0.73 $
0.71 $
0.79
6.07%
9.42%
100.6%
6.52%
6.05%
6.55%
6.61%
8.58%
9.50%
9.16%
8.33%
91.4%
99.2%
108.5%
96.9%
$
$
$
– $
– $
– $
– $
– $
– $
– $ 0.630
– $ 0.670
0.180 $
0.180 $
0.720 $
0.762 $
0.134
For the three months ended December 31, 2015 (“Q4 2015”) and December 31, 2014 (“Q4 2014”)
• The Company funded 10 new net mortgage investments (Q4 2014 – 17) totalling $62.6 million
(Q4 2014 – $170.8 million), had additional advances on existing mortgage investments totalling $23.8 million
(Q4 2014 – $14.9 million) and received full repayments on 20 mortgage investments (Q4 2014 – 12) and
partial paydowns totalling $91.2 million (Q4 2014 – $134.4 million), resulting in net mortgage investments of
$439.5 million as at December 31, 2015 (September 30, 2015 – $444.3 million).
• Net interest income earned by the Company was $10.8 million (Q4 2014 – $9.8 million), an increase of $1.0
million, or 10.6%, from Q4 2014. The increase over Q4 2014 is mainly due to an increase of over $84.1 million
in the average net mortgage investments portfolio during Q4 2015 relative to Q4 2014. This was facilitated by
increased use of the credit facility during Q4 2015. Weighted average interest rate for the period decresed to
8.9% compared to 9.5% during Q4 2014.
• Non-refundable cash lender fees received by the Company was $0.9 million (Q4 2014 – $2.5 million) or a
weighted average lender fee of 1.4% (Q4 2014 – 1.5%). Fees generated in 2015 are within our target percentage
range with Q4 2014 an exception on a nomial basis mainly due to a significant increase in advances on new
mortgage investments of $108.2 million in Q4 2014 relative to Q4 2015.
•
Income from operations generated by the Company was $8.4 million (Q4 2014 – $7.4 million), an increase of
$1.0 million, or 13.3%, from Q4 2014. The increase in income from operations is mainly attributed to a larger
average net mortgage investments portfolio during Q4 2015 relative to Q4 2014.
• The Company recorded a net unrealized fair value loss of $374 (Q4 2014 - $800) on its FPHFS.
• The Company generated net income and comprehensive income of $6.9 million (Q4 2014 – $5.8 million),
an increase of $1.1 million, or 18.8%, from Q4 2014, resulting in earnings per share of $0.17 for Q4 2015
(Q4 2014 – $0.14).
Timbercreek Mortgage Investment Corporation
9
• The Board of Directors declared dividends to common shareholders of $7.3 million (Q4 2014 – $7.3 million),
or $0.18 (Q4 2014 – $0.18) per share, consistent with the previous quarter. 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.
• The Company acquired 22,700 common shares (Q4 2014 – nil) for cancellation under its normal course
issuer bid (the “2014 bid”) at a cost of $172 (Q4 2014 – nil) at an average purchase price of $7.59 per common
share. Subsequent to year end, the Company reinstituted the normal course issuer bid (the “2015 bid”)
following TSX approval.
For the years ended December 31, 2015 (the “Year” or “2015”) and December 31, 2014 (“2014”)
• The Company funded 50 new net mortgage investments (2014 – 68) totalling $262.6 million
(2014 – $401.3 million), had additional advances on existing mortgage investments totalling $70.9 million
(2014 – $98.0 million) and received full repayments on 55 mortgage investments (2014 – 59) and partial
paydowns totalling $291.3 million (2014 – $382.6 million), resulting in net mortgage investments of
$439.5 million as at December 31, 2015 (December 31, 2014 – $397.3 million), an increase of 10.6% from
December 31, 2014.
• Net interest income earned by the Company was $43.0 million (2014 – $36.7 million), an increase of
$6.3 million, or 17.1%, from 2014. The increase over 2014 is mainly due an increase of $75.8 million in the
average net mortgage investments portfolio during 2015, from increased use of the credit facility. Weighted
average interest rate for the period decresed to 9.1% compared to 9.4% during 2014.
• Non-refundable cash lender fees received by the Company was $4.3 million (2014 – $5.8 million) or a weighted
average lender fee of 1.2% (2014 – 1.6%). The decrease in lender fees is directly related to the significant increase
in advances on new mortgage investments of $138.7 million made in 2014 relative to 2015.
• The Company generated income from operations of $32.8 million (2014 – $28.3 million), an increase of $4.5
million, or 15.8%, from 2014. The increase in income from operations is attributed to a larger average net
mortgage investments portfolio during 2015, although reduced in part by a specific provision for mortgage
investment loss, and higher management and performance fees.
• The Company recorded a $900 specific mortgage provision (2014 – nil), no collective mortgage provision (2014
- $250) along with a $524 (2014 - $650) fair value loss on its FPHFS.
• The Board of Directors declared dividends to common shareholders of $29.3 million (2014 – $30.3 million),
or $0.720 (2014 – $0.762) per share. 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.
• The Company generated net income and comprehensive income of $28.0 million (2014 – $24.9 million), an
increase of $3.1 million, or 12.5%, from 2014, resulting in earnings per share of $0.69 for 2015 (2014 – $0.63).
• The Company acquired 177,800 common shares (2014 – nil) for cancellation under its 2014 bid at a cost of $1.4
million (2014 – nil) at an average purchase price of $7.79 per common share.
• 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 in the form of deferred share units
(“DSUs”). For 2015, the directors, on average, have elected to receive 94% of their compensation in DSUs. For
2015, 17,022 DSUs were issued and outstanding totalling $0.1 million.
10
Timbercreek Mortgage Investment Corporation
AnALYsIs OF FInAnCIAL InFOrMATIOn FOr THe PerIOD
Distributable income
TThhrreeee mmoonntthhss eennddeedd DDeecceemmbbeerr 3311,, YYeeaarr eennddeedd DDeecceemmbbeerr 3311,,
22001155
22001144
22001155
22001144
Net income and comprehensive income
$
6,905
$
5,812 $
28,021
$
24,917
Less: amortization of lender fees
Add: lender fees received
Add: amortization of financing costs, credit facility
Add: amortization of financing costs, debentures
Add: accretion expense, debentures
Add: net operating (income) loss from FPHFS
Add: unrealized fair value adjustments on FPHFS
Add: provision for mortgage investments loss
DDiissttrriibbuuttaabbllee iinnccoommee
Less: dividends on common shares
((OOvveerr))//uunnddeerr ddiissttrriibbuuttiioonn
Distributable income per share (basic and diluted)
Payout ratio
Turnover ratio
(1,076)
950
56
(10)
29
28
374
–
(1,297)
2,482
(4,966)
4,280
(4,437)
5,820
35
94
29
58
800
–
221
277
113
114
524
900
129
303
96
171
650
250
$
$
7,256
(7,296)
8,013
29,484
(7,326)
(29,253)
27,899
(30,263)
(40)
$
687 $
231
$
(2,364)
0.18
$
0.20 $
0.73
$
0.71
100.6%
21.1%
91.4%
37.3%
99.2%
69.2%
108.5%
112.6%
The distributable income reconciliation above provides a link between the Company’s IFRS reporting
requirements and its ability to generate recurring profit for distribution. The Company expects minor
fluctuations in payout ratios throughout the year as dividends are straight-lined while we experience
fluctuations in distributable income.
During 2015, the Company increased utilization of the credit facility which resulted in an increase in net interest
income over the comparable 2014 periods. As a result, the Company was able to achieve a strong year with
distributable income in excess of our current distribution and a payout ratio of just under 100%.
Timbercreek Mortgage Investment Corporation
11
statements of income and comprehensive income
TThhrreeee mmoonntthhss eennddeedd
DDeecceemmbbeerr 3311,,
YYeeaarr eennddeedd
DDeecceemmbbeerr 3311,,
22001155
22001144
%%
CChhaannggee
22001155
22001144
%%
CChhaannggee
Net interest income
$
10,814 $
9,774
10.6% $
43,004 $
36,710
17.1%
Expenses
(2,387)
(2,336)
(2.2%)
(10,253)
(8,438)
(21.5%)
Income from operations
8,427
7,438
13.3%
32,750
28,272
15.8%
Net operating (loss) from foreclosed
properties held for sale
(28)
(58)
51.6%
(114)
(171)
33.0%
Fair value adjustment of foreclosed
properties held for sale
(374)
(800)
53.3%
(524)
(650)
19.4%
Financing costs:
Interest on credit facility
Interest on convertible debentures
NNeett iinnccoommee aanndd
ccoommpprreehheennssiivvee iinnccoommee
EEaarrnniinnggss ppeerr sshhaarree
((bbaassiicc aanndd ddiilluutteedd))
(554)
(566)
(87)
(544.0%)
(681)
16.8%
(1,520)
(2,571)
(275)
(453.5%)
(2,259)
(13.8)%
$$ 66,,990055 $$ 55,,881122
1188..88%% $$ 2288,,002211 $$ 2244,,991177
1122..55%%
$$
00..1177 $$
00..1144
$$
00..6699 $$
00..6633
net interest income1
For Q4 2015 and the Year, the Company earned net interest income of $10.8 million and $43.0 million
(Q4 2014 – $9.8 million; 2014 – $36.7 million). Net interest income includes the following:
(a) Interest income
For Q4 2015 and the Year, the Company earned $9.7 million and $37.9 million (Q4 2014 – $8.4 million;
2014 – $32.0 million) in interest income on the net mortgage investments or an increase of 16.5% and 19.5%,
respectively. The increase over the 2014 comparable periods is mainly due to a larger average net mortgage
investments portfolio driven by increased utilization of the Company’s credit facility borrowing. The weighted
average interest rate for Q4 2015 and 2015 was 8.9% and 9.1% (Q4 2014 – 9.5%; 2014 – 9.4%) on the net mortgage
investments. The weighted average interest rate has declined as a result of higher allocation towards first
mortgages which tend to carry lower risk along with downward pressure on interest rates in the market.
(b) Lender fee income
During Q4 2015 and the Year, the Company received lender fees of $0.9 million and $4.3 million
(Q4 2014 – $2.5 million; 2014 – $5.8 million), or a weighted average lender fee of 1.4% and 1.2%
(Q4 2014 – 1.5%; 2014 – 1.6%). The decreasein lender fees is directly related to the significant increase in
advances on new mortgage investments of $138.7 million made in 2014 relative to 2015. The lender fees are
amortized using the effective interest rate method over the expected life of the mortgage investments to
lender fee income but are paid out in the year they are received (see Distributable Income section). For Q4
2015 and 2015, lender fees of $1.1 million and $5.0 million (Q4 2014 – $1.3 million; 2014 – $4.4 million) were
amortized to lender fee income. The lender fees generated by the Company continue to be a significant
component of income resulting from mortgage investment turnover. The Manager does not retain any
portion of the lender fees in order to ensure management’s interests are aligned with shareholders.
expenses
For Q4 2015 and the Year, the Company’s expense ratio was 2.1% and 2.0% (Q4 2014 – 2.2%; 2014 – 2.0%),
including a fixed expense ratio of 1.6% and 1.5% (Q4 2014 – 1.5%; 2014 – 1.5%). The increase in expenses is mainly
related to higher professional fees and directors fees as compared to 2014.
1
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.
12
Timbercreek Mortgage Investment Corporation
Management fees
(a) Management fees
The Company has entered into a management agreement with Timbercreek Asset Management Inc. (the
“Manager”) and under the 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 2015 and the Year, the Company incurred management fees of $1.6 million and $6.0 million
(Q4 2014 – $1.4 million; 2014 – $5.4 million). The increase is directly related to the increase in gross assets
averaging $444.2 million in 2015, in comparison to $399.8 million in 2014.
(b) Performance fees
Under the management agreement, the Manager is 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 2015 and 2015, the Company accrued performance fees of $0.6 million and $2.4 million
(Q4 2014 – $0.7 million; 2014 – $2.0 million), which represents a decrease of $0.1 million and an increase of
$0.4 million, or (20.6%) and 24.1%, respectively. The increase in performance fee is attributed to a decrease in
the average 2-Yr GOC Yield from 1.02% and 1.05% for Q4 2014 and 2014 to 0.57% and 0.55% for Q4 2015 and
2015, coupled with an increase in the Company’s net earnings available to distribute over the Hurdle Rate.
Provision for mortgage investments loss
For Q4 2015 and 2015, the Company has recognized a specific impairment allowance of nil and $0.9 million
(Q4 2014 – nil; 2014 – nil) relating to a mortgage investment which represents the total outstanding balance as
at December 31, 2015. For Q4 2015 and 2015, the Company did not recognize a collective impairment allowance
(Q4 2014 – nil; 2014 – $0.3 million).
General and administrative
For Q4 2015 and 2015, the Company incurred general and administrative expenses of $228 and $967
(Q4 2014 – $197; 2014 – $811). 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 investments portfolio. The increase in general and administrative expenses relative to the comparable
2014 periods is attributed to increased professional fees and director fees related to the new DSU plan. The
operating expense ratio for Q4 2015 and 2015 equated to 0.2% (0.2% for both Q4 2014 and 2014).
net operating loss from foreclosed properties held for sale
The Company consolidates the operating activities of the foreclosed properties held for sale. The net operating loss
from foreclosed properties held for sale for Q4 2015 and 2015 were $28 and $114 (Q4 2014 – $58; 2014 – $171). The
loss is primarily attributable to fixed operating expenses at our property located in Montreal, QC which are being
incurred while the property is held for sale.
Fair value adjustment on foreclosed properties held for sale
During Q4 2015 and 2015, the Company recorded an unrealized fair value loss of $374 and $524 (Q4 2014 – $800;
2014 – $650), respectively on the FPHFS.
Interest on credit facility
The Company actively monitors its advances and repayments while efficiently using bankers’ acceptances (“BA”)
for the majority of its borrowings to minimize interest costs. Financing costs include interest paid on amounts
drawn on the credit facility, standby 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 2015 and 2015
relating to the credit facility were $554 and $1,520 (Q4 2014 – $86; 2014 – $274). The increase over the
Timbercreek Mortgage Investment Corporation
13
comparable 2014 periods are directly related to the significant increase in credit facility utilization during Q4
2015 and 2015. The weighted average credit utilization for Q4 2015 and 2015 was $51.4 million and $30.9 million.
The Company incurred $0.2 million of financing costs during 2015 on the increase of the credit facility. These
costs are amortized over the term of the credit facility.
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 2015 and 2015, interest on the debentures of $0.6 million and $2.6 million (Q4 2014 – $0.7 million;
2014 – $2.3 million), is made up of the following:
Interest on the convertible debentures
Interest on the convertible debentures
Amortization of issue costs
Amortization of issue costs
Accretion of equity component of the
Accretion of equity component of the
convertible debentures
convertible debentures
$
$
$
$
TThhrreeee mmoonntthhss eennddeedd
TThhrreeee mmoonntthhss eennddeedd
DDeecceemmbbeerr 3311,,
DDeecceemmbbeerr 3311,,
22001144
22001144
558
558
93
93
22001155
22001155
548
548
(10)
(10)
$
$
29
29
567
567
$
$
29
29
680
680
$
$
$
$
YYeeaarr eennddeedd
YYeeaarr eennddeedd
DDeecceemmbbeerr 3311,,
DDeecceemmbbeerr 3311,,
22001144
22001144
1,860
1,860
303
303
$
$
22001155
22001155
2,180
2,180
277
277
113
113
2,570
2,570
$
$
96
96
2,259
2,259
earnings per share
For Q4 2015 and 2015, earnings per share increased to $0.17 and $0.69 (Q4 2014 - $0.14; 2014, - $0.63). Overall,
net income and comprehensive income for Q4 2015 and 2015 was higher from the comparable 2014 periods,
primarily due to higher net interest income generated from a larger net mortgage investments portfolio, but was
reduced in part by higher management and performance fees and a specific provision for mortgage investments
loss.
$
$
DDeecceemmbbeerr 3311,, 22001155
DDeecceemmbbeerr 3311,, 22001155
750,703
750,703
(310,049)
(310,049)
440,654
440,654
(6,534)
(6,534)
4,204
4,204
1,150
1,150
443399,,447744
443399,,447744
$$
$$
DDeecceemmbbeerr 3311,,
DDeecceemmbbeerr 3311,,
22001144
22001144
616,174
616,174
(219,581)
(219,581)
396,593
396,593
(4,392)
(4,392)
4,890
4,890
250
250
339977,,334411
339977,,334411
$
$
$$
$$
sTATeMenT OF FInAnCIAL POsITIOn
net mortgage investments
The balance of net mortgage investments is as follows:
Mortgage investments, including mortgage syndications
Mortgage investments, including mortgage syndications
Mortgage syndication liabilities
Mortgage syndication liabilities
Interest receivable
Interest receivable
Unamortized lender fees
Unamortized lender fees
Allowance for mortgage investment loss
Allowance for mortgage investment loss
NNeett mmoorrttggaaggee iinnvveessttmmeennttss
NNeett mmoorrttggaaggee iinnvveessttmmeennttss
14
Timbercreek Mortgage Investment Corporation
Net mortgage investments statistics and ratios1
Net mortgage investments statistics and ratios1
stnemtsevni egagtrom ten fo rebmun latoT
stnemtsevni egagtrom ten fo rebmun latoT
tnemtsevni egagtrom ten egarevA
tnemtsevni egagtrom ten egarevA
Average net mortgage investment portfolio
Average net mortgage investment portfolio
Weighted average interest rate
Weighted average interest rate
seef rednel egareva dethgieW
seef rednel egareva dethgieW
oitar revonruT
oitar revonruT
)sraey( mret egareva dethgieW
)sraey( mret egareva dethgieW
)sraey( ytirutam ot mret gniniameR
)sraey( ytirutam ot mret gniniameR
Net mortgage investments secured by cash-
Net mortgage investments secured by cash-
eulav-ot-naol egareva dethgieW
eulav-ot-naol egareva dethgieW
flowing properties
flowing properties
doirep eht rof
doirep eht rof
,13 rebmeceD dedne raeY ,13 rebmeceDdedne shtnom eerhT
,13 rebmeceD dedne raeY ,13 rebmeceDdedne shtnom eerhT
4102
4102
4102
4102
5102
5102
5102
5102
$
$
$
$
001
001
$593,4
$593,4
501
501
487,3
487,3
435,374 $ 351,251
435,374 $ 351,251
%5.9
%5.9
%5.1
%5.1
%3.73
%3.73
1.2
1.2
4.1
4.1
83.8%
83.8%
%8.07
%8.07
%9.8
%9.8
%4.1
%4.1
%1.12
%1.12
1.2
1.2
2.1
2.1
87.2%
87.2%
%4.07
%4.07
$
$
$
$
001
001
593,4
593,4
415,840
415,840
%1.9
%1.9
%2.1
%2.1
%2.96
%2.96
1.2
1.2
2.1
2.1
87.2%
87.2%
%4.07
%4.07
501
501
$
487,3
$
487,3
$ 340,009
$ 340,009
%4.9
%4.9
%6.1
%6.1
%6.211
%6.211
1.2
1.2
4.1
4.1
83.8%
83.8%
%8.07
%8.07
1.
1.
Refer to non-IFRS measures section, where applicable.
1 Refer to non-IFRS measures section, where applicable.
Refer to non-IFRS measures section, where applicable.
The Company has developed a lending niche predominantly targeting short-term mortgage investments,
secured by cash-flowing properties, while specializing in multi-residential real estate assets. The Company
focuses its efforts on diversifying the mortgage investment portfolio, with its greatest concentration in Canada’s
largest provinces. As at December 31, 2015, 70.1% (December 31, 2014 – 74.9%) of the net mortgage investments
were allocated across Ontario, Quebec, British Columbia and Alberta. 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.
Portfolio allocation
The Company’s net mortgage investments were allocated across the following categories:
(a) security Position
segagtrom tsriF
segagtrom tsriF
segagtrom tsrif-noN
segagtrom tsrif-noN
# of Net
Mortgage
# of Net
Investments
Mortgage
Investments
28
28
81
81
100
100
5102 ,13 rebmeceD
5102 ,13 rebmeceD
% of Net
Mortgage
% of Net
Investments
Mortgage
Investments
%0.87
%0.87
%0.22
%0.22
100.0%
100.0%
4102 ,13 rebmeceD
4102 ,13 rebmeceD
% of Net
Mortgage
% of Net
Investments
Mortgage
Investments
%5.96
%5.96
%5.03
%5.03
100.0%
100.0%
# of Net
Mortgage
# of Net
Investments
Mortgage
Investments
48
48
12
12
105
105
Timbercreek Mortgage Investment Corporation
15
(b) region
NO
NO
CQ
CQ
KS
NO
KS
TO
CQ
TO
CB
KS
CB
BA
TO
BA
BM
CB
BM
SN
BA
SN
BM
SN
(c) Maturity
5102 gnirutaM
5102 gnirutaM
6102 gnirutaM
6102 gnirutaM
7102 gnirutaM
5102 gnirutaM
7102 gnirutaM
8102 gnirutaM
6102 gnirutaM
8102 gnirutaM
7102 gnirutaM
8102 gnirutaM
(d) Asset Type
laitnediser-itluM
laitnediser-itluM
liateR
liateR
eciffO
laitnediser-itluM
eciffO
dnal devorpminU
liateR
dnal devorpminU
tnemeriteR
eciffO
tnemeriteR
sletoH
dnal devorpminU
sletoH
laitnediser ylimaf-elgniS
tnemeriteR
laitnediser ylimaf-elgniS
lairtsudnI
sletoH
lairtsudnI
egarots-fleS
laitnediser ylimaf-elgniS
egarots-fleS
laitnediser rehtO
lairtsudnI
laitnediser rehtO
egarots-fleS
laitnediser rehtO
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
# of Net
63
Mortgage
63
22
Investments
22
9
63
9
4
22
4
21
9
21
7
4
7
8
21
8
2
7
2
001
8
001
2
5102 ,13 rebmeceD
5102 ,13 rebmeceD
% of Net
% of Net
Mortgage
5102 ,13 rebmeceD
Mortgage
Investments
Investments
% of Net
%1.53
Mortgage
%1.53
%9.91
Investments
%9.91
%3.51
%1.53
%3.51
%5.9
%9.91
%5.9
%4.9
%3.51
%4.9
%7.5
%5.9
%7.5
%2.4
%4.9
%2.4
%9.0
%7.5
%9.0
%0.001
%2.4
%0.001
%9.0
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
# of Net
05
Mortgage
05
61
Investments
61
7
05
7
3
61
3
01
7
01
11
3
11
6
01
6
2
11
2
501
6
501
2
4102 ,13 rebmeceD
4102 ,13 rebmeceD
% of Net
% of Net
Mortgage
4102 ,13 rebmeceD
Mortgage
Investments
Investments
% of Net
%4.44
Mortgage
%4.44
%3.41
Investments
%3.41
%3.51
%4.44
%3.51
%3.5
%3.41
%3.5
%9.9
%3.51
%9.9
%3.6
%3.5
%3.6
%3.3
%9.9
%3.3
%2.1
%3.6
%2.1
%0.001
%3.3
%0.001
%2.1
001
%0.001
501
%0.001
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
# of Net
–
Mortgage
–
14
Investments
14
94
–
94
01
14
01
001
94
001
01
5102 ,13 rebmeceD
5102 ,13 rebmeceD
% of Net
% of Net
Mortgage
5102 ,13 rebmeceD
Mortgage
Investments
Investments
% of Net
–
Mortgage
–
%4.54
Investments
%4.54
%8.53
–
%8.53
%8.81
%4.54
%8.81
%0.001
%8.53
%0.001
%8.81
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
# of Net
24
Mortgage
24
23
Investments
23
03
24
03
1
23
1
501
03
501
1
4102 ,13 rebmeceD
4102 ,13 rebmeceD
% of Net
% of Net
Mortgage
4102 ,13 rebmeceD
Mortgage
Investments
Investments
% of Net
%5.83
Mortgage
%5.83
%2.43
Investments
%2.43
%9.42
%5.83
%9.42
%4.2
%2.43
%4.2
%0.001
%9.42
%0.001
%4.2
001
%0.001
5102 ,13 rebmeceD
5102 ,13 rebmeceD
% of Net
% of Net
Mortgage
5102 ,13 rebmeceD
Mortgage
Investments
Investments
% of Net
60.7%
Mortgage
60.7%
%9.71
Investments
%9.71
%9.8
60.7%
%9.8
%7.5
%9.71
%7.5
%2.2
%9.8
%2.2
%3.1
%7.5
%3.1
%9.0
%2.2
%9.0
%9.0
%3.1
%9.0
%8.0
%9.0
%8.0
%7.0
%9.0
%7.0
%0.001
%8.0
%0.001
%7.0
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
# of Net
95
Mortgage
95
21
Investments
21
8
95
8
6
21
6
5
8
5
2
6
2
1
5
1
3
2
3
1
1
1
3
3
3
001
1
001
3
501
%0.001
4102 ,13 rebmeceD
4102 ,13 rebmeceD
% of Net
% of Net
Mortgage
4102 ,13 rebmeceD
Mortgage
Investments
Investments
% of Net
60.7%
Mortgage
60.7%
%3.41
Investments
%3.41
%0.8
60.7%
%0.8
%9.6
%3.41
%9.6
%0.3
%0.8
%0.3
%1.3
%9.6
%1.3
%1.1
%0.3
%1.1
%6.1
%1.3
%6.1
%9.0
%1.1
%9.0
%4.0
%6.1
%4.0
%0.001
%9.0
%0.001
%4.0
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
# of Net
50
Mortgage
50
41
Investments
41
51
50
51
8
41
8
5
51
5
3
8
3
2
5
2
4
3
4
2
2
2
2
4
2
501
2
501
2
001
%0.001
501
%0.001
16
Timbercreek Mortgage Investment Corporation
(e) Interest rate
rewol ro %99.9
rewol ro %99.9
%99.01-%00.01
%99.01-%00.01
retaerg ro %00.11
retaerg ro %00.11
(f) Loan-to-value
ssel ro %55
ssel ro %55
%06-%65
%06-%65
%56-%16
%56-%16
%07-%66
%07-%66
%57-%17
%57-%17
%08-%67
%08-%67
%58-%18
%58-%18
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
57
57
11
11
41
41
001
001
5102 ,13 rebmeceD
5102 ,13 rebmeceD
% of Net
% of Net
Mortgage
Mortgage
Investments
Investments
%1.68
%1.68
%3.6
%3.6
%6.7
%6.7
%0.001
%0.001
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
76
76
12
12
71
71
501
501
4102 ,13 rebmeceD
4102 ,13 rebmeceD
% of Net
% of Net
Mortgage
Mortgage
Investments
Investments
%4.67
%4.67
%1.9
%1.9
%5.41
%5.41
%0.001
%0.001
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
91
91
8
8
8
8
61
61
61
61
51
51
81
81
001
001
5102 ,13 rebmeceD
5102 ,13 rebmeceD
% of Net
% of Net
Mortgage
Mortgage
Investments
Investments
%7.7
%7.7
%4.61
%4.61
%3.8
%3.8
%5.61
%5.61
%2.7
%2.7
%0.61
%0.61
%9.72
%9.72
%0.001
%0.001
# of Net
# of Net
Mortgage
Mortgage
Investments
Investments
02
02
01
01
31
31
11
11
71
71
91
91
51
51
501
501
4102 ,13 rebmeceD
4102 ,13 rebmeceD
% of Net
% of Net
Mortgage
Mortgage
Investments
Investments
%3.9
%3.9
%2.7
%2.7
%8.8
%8.8
%5.41
%5.41
%6.81
%6.81
%5.11
%5.11
%1.03
%1.03
%0.001
%0.001
Mortgage 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 2015, the mortgage syndication liabilities
have increased to $310.0 million (December 31, 2014 – $219.6 million) as the Company syndicated several
mortgage investments. Mortgage syndication liabilities vary from quarter to quarter and are dependent on the
type of investments seen at any particular time, and not necessarily indicative of a future trend.
Foreclosed properties held for sale
The fair value of the remaining foreclosed properties held for sale as at December 31, 2015 is $12.8 million
(December 31, 2014 – $13.9 million). The Company has engaged third party managers to operate the properties
while they are held for sale.
During 2015, the Company closed on the sale of three residential units (2014 – eight) on one of the foreclosed
properties for net proceeds of $0.5 million (2014 – $1.0 million). During 2015, the Company recorded an
unrealized fair value adjustment on the FPHFS of $0.5 million (Q4 2014 – $0.6 million).
During 2014, the Company foreclosed on the underlying security of two mortgage investments with
outstanding principal and costs of $73.7 million and accrued interest of $2.5 million. This underlying security on
mortgage investment was subsequently sold, with the proceeds of sale repaying all of the outstanding principal,
costs and accrued interest from the mortgage investment and resulted in a gain of $0.1 million. The purchaser
also obtained mortgage financing from the Company in respect of that property.
Timbercreek Mortgage Investment Corporation
17
Allowance for mortgage investments loss
For Q4 2015 and 2015, the Company has recognized a specific impairment allowance of nil and $0.9 million
(Q4 2014 – nil; 2014 – nil) relating to a mortgage investment which represents the total outstanding balance of
the mortgage investment. The mortgage investment has been the subject of a litigation for several years and
in Q3 2015 the litigation process moved into a settlement phase, the outcome of which remains uncertain. The
Company has taken a provision for the entire amount as it felt that it was prudent to provide for a provision that
captures the entire amount of mortgage investment. Should the future outcome be positive to the Company,
upon finalization of the settlement, the provision will be reversed by the final settlement amount.
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. As at December 31, 2015, the Company has a
collective impairment allowance of $0.3 million (December 31, 2014 – $0.3 million) and a specific impairment
allowance of $0.9 million (December 31, 2014 – nil).
net working capital
Net working capital increased by $1.7 million to $1.8 million at December 31, 2015 from $0.1 million at
December 31, 2014. The change is mainly due to the increase in other assets and mortgage interest receivable for
net mortgage investments where certain mortgages allow the borrowers to accrue interest.
Credit facility
As at December 31, 2015, the Company has a credit facility with an available limit of $60.0 million
(December 31, 2014 – $35.0 million). On January 30, 2015, the Company completed a $15.0 million increase on
the credit facility, taking its total available borrowing limit to $50.0 million. On March 24, 2015, the Company
executed the accordion feature of the credit facility, increasing the available borrowing limit to $60.0 million.
The credit facility bears interest at either the prime rate of interest plus 1.5%, or bankers’ acceptances (“BA”)
with a stamping fee of 2.5% of the face amount of such BA. The credit facility is secured by a general security
agreement over the Company’s assets. The credit facility matures on October 31, 2016 and the Company expects
to renew the facility at similar terms prior to the maturity date. As at December 31, 2015, $53.8 million was
outstanding on the credit facility (December 31, 2014 – $9.1 million). The credit facility allows the Company to
better manage the impact of unanticipated portfolio turnover and avoid holding a cash balance.
During Q4 2015 and 2015, the Company significantly increased its utilization of the credit facility relative to
the comparable 2014 periods, with a significant portion of borrowing through BAs in order to reduce financing
costs.
As at December 31, 2015, there were $188 (December 31, 2014 – $239) in unamortized financing costs related to
the placement of the credit facility netted against the outstanding facility balance. For Q4 2015 and 2015, the
Company has amortized financing costs of $57 and $221 (Q4 2014 – $35; 2014 – $129) to interest expense using
the effective interest rate method.
Convertible debentures
In 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 December
31 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 available including the maximum credit facility amount plus the convertible debentures at
December 31, 2015, equates to approximately 20% of total assets, net of mortgage syndications. 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.
18
Timbercreek Mortgage Investment Corporation
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.
shareholders’ equity
(a) 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 are entitled to receive dividends as and when declared by the Board of
Directors.
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.
(b) Dividends
The Company intends to pay dividends to shareholders on a monthly basis within 15 days following the end
of each month. During Q4 2015 and 2015, the Board of Directors declared dividends of $7.3 million and
$29.3 million, or $0.18 and $0.72 per common share (Q4 2014 – $7.3 million, $0.18 per common share;
2014 – $30.3 million, $0.762 per common share).
(c) Dividend reinvestment plan
The Company’s dividend reinvestment plan (the “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.
Under the 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. During Q4 2015 and 2015, 106,425 and 397,612 common shares were purchased on the
open market (Q4 2014 – 87,204; 2014 – 332,009 common shares).
(d) normal course issuer bid
On November 13, 2014, the Company received the approval of the TSX to commence the 2014 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, at that time, on November 11, 2014 and expired on November 16, 2015. Furthermore,
subject to certain exemptions for block purchases, the purchases were limited to 13,170 common shares on
any one trading day. During Q4 2015 and 2015, the Company acquired 22,700 and 177,800 common shares
for cancellation at a cost of $172 and $1.4 million at an average price of $7.59 and $7.79 per common share
respectively.
Subsequent to year end, the Company received TSX approval to re-instate the 2015 bid to purchase for
cancellation up to a maximum of 4,105,569 common shares, representing approximately 10% of the public
float of common shares as of December 22, 2015. The 2015 bid commenced on January 6, 2016 and provides
the Company with the flexibility to repurchase common shares for cancellation until its expiration on
January 5, 2017, or such earlier date as the 2015 bid is complete. From January 6, 2016 to February 24, 2016,
the Company did not acquire any common shares for cancellation.
(e) non-executive director deferred share unit plan
Commencing January 1, 2015, the Company instituted a non-executive director deferred share unit plan
for the purpose of: (i) enhancing the Company’s ability to provide long-term incentive compensation to
directors which is linked to performance of the Company and not dilutive to shareholders, (ii) assisting
the Company in attracting, retaining and motivating its directors; and (iii) promoting a closer alignment
of interests between directors and shareholders of the Company. Under the Plan, up to 100% of the
compensation for a director may be paid to the director in the form of DSUs, credited quarterly in arrears.
Directors may elect annually, in accordance with the Plan, as to how much (if any) of the compensation will
Timbercreek Mortgage Investment Corporation
19
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. The fair market value is the volume weighted average price of a common share as reported on the
TSX for the 20 trading days immediately preceding that day (the “Fair Market Value”). DSUs granted entitle
the directors to also accumulate DSUs equal to the monthly cash dividends, assuming the reinvestment of
the dividends into units is based upon the Fair Market Value of the common shares on the dividend payment
date.
Following each calendar quarter, the director’s DSU account will be credited with the number of DSUs
calculated by multiplying the total compensation payable in DSUs divided by the Fair Market Value. Each
director is also entitled to an additional number of DSUs that is equal to the result of multiplying 25% of the
director’s DSU issuance up to a maximum value of $5 per annum.
The Plan will pay a lump sum payment in cash equal to the number of DSUs held by each director
multiplied by the Fair Market Value of one common share as of the 24th business day after publication of the
consolidated financial statements following a director’s departure from the Board of Directors.
In conjunction with the Plan, the Company has also adopted a share ownership guideline for the non-
executive directors. The ownership guidelines require that each non-executive director acquire and maintain
a level of ownership that has a value equal to at least three times their annual retainer and meeting fees,
within a five year period.
For the Year, the directors, on average, have elected to receive 94% of their compensation in DSUs. For Q4
2015 and 2015, 5,303 and 17,022 DSUs were issued and outstanding and no DSUs were exercised or cancelled
resulting in a DSU expense of $125, based on a Fair Market Value of $7.33 per common share. As at December
31, 2015, $51 in DSUs relating to Q4 2015 will be issued subsequent to year-end which are included in accrued
expenses.
sTATeMenT OF CAsH FLOWs
net cash from operating activities
Cash from operating activities for the Year was $30.9 million (2014 – $26.2 million), an increase of $4.7 million,
or 18.1%. The increase is primarily a result of greater net income and comprehensive income and the change in
non-cash operating items compared to 2014.
net cash from financing activities
Uses of cash from financing activities for 2015 consisted of the Company’s net advances on the credit facility of
$44.7 million (2014 – $9.1 million), which were made in order to advance new net mortgage investments. The
Company paid interest on the debentures and credit facility of $3.7 million (2014 – $1.7 million), common share
dividends of $29.3 million (2014 – $30.3 million) as well as purchases of common shares under the 2014 bid of
$1.4 million (2014 – nil). The net cash provided by financing activities for 2015 was $10.4 million (2014 – $42.8
million). In 2014, the Company raised proceeds of $32.5 million from the issuance of convertible debentures and
$33.2 million from the issuance of common shares.
net cash used in investing activities
Net cash used in investing activities for 2015 was $41.6 million (2014 – $80.9 million) and consisted of the
funding of net mortgage investments of $333.5 million (2014 – $498.9 million), which was offset by the
repayments of net mortgage investments of $291.3 million (2014 – $382.6 million). In addition, the Company
received proceeds from disposal of FPHFS of $0.5 million (2014 – $35.4 million).
20
Timbercreek Mortgage Investment Corporation
QUArTerLY FInAnCIAL InFOrMATIOn
The following is a quarterly summary of the Company’s results for the eight most recently completed quarters:
Q4
2015
Q3
2015
Q2
2015
Q1
2015
Q4
2014
Q3
2014
Q2
2014
Q1
2014
Net interest income
$
10,814
$
10,161
$ 11,532
$ 10,496 $ 9,774
$ 8,660 $ 9,465 $ 8,811
sesnepxE
Income from operations
Net operating income (loss) from
SFHPF
Fair value adjustment of FPHFS
:stsoc gnicnaniF
)783,2(
8,427
)82(
(374)
)641,3(
)184,2(
)932,2(
)633,2(
)240,2(
)940,2(
)110,2(
7,015
9,051
8,257
7,438
6,618
7,416
6,800
62
−
)03(
(150)
)28(
−
)85(
(800)
18
149
)79(
−
)79(
−
Interest on credit facility
(554)
(208)
(477)
(281)
(87)
(67)
(57)
(64)
Interest on convertible
serutnebed
Total financing costs
Net income and comprehensive
)665(
(1,120)
)376(
881
)276(
(1,149)
)066(
(941)
)186(
(768)
)176(
(738)
)466(
)342(
(721)
(307)
emocni
$
509,6
$
$061,6
$432,7$227,7
$ 218,5
693,6 $895,6$ 011,6
EEaarrnniinnggss ppeerr sshhaarree
((bbaassiicc aanndd ddiilluutteedd))
$$
00..1177
$$
00..1155
$$
00..1199 $$
00..1188 $$
00..1144 $$
00..1155 $$
00..1177 $$ 00..1177
The variations in net income and comprehensive income by quarter are mainly attributed to the following:
(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
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;
(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 in any quarter;
(iii) In any given quarter, the Company is subject to volatility from fair value adjustments to FPHFS
and provision for mortgage investment loan resulting in fluctuations in quarterly net income and
comprehensive income; and
(iv) The utilization of the credit facility to fund mortgage investments results in higher net interest income,
which is partially offset by higher financing costs.
reLATeD PArTY TrAnsACTIOns
As at December 31, 2015, due to Manager includes management and performance fees payable of $2.4 million
(December 31, 2014 – $2.0 million) and nil (December 31, 2014 – $6) 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 company controlled by the Manager, is the Company’s
mortgage servicer and administrator. As at December 31, 2015, included in other assets is $2.2 million (December
31, 2014 – $3.0 million) of cash held in trust for the Company by TMSI, the balance of which relates to mortgage
funding holdbacks, prepaid mortgage interest and lender fees received from various borrowers.
In addition to the above related party transactions, the Company has transacted with other entities managed by
the Manager. As at December 31, 2015, the Company, Timbercreek Senior Mortgage Investments Corporation
(“TSMIC”), Timbercreek Four Quadrant Global Real Estate Partners (“T4Q”), Timbercreek Global Real Estate Fund
and Timbercreek Canadian Direct LP, related parties by virtue of common management, have co-invested in
Timbercreek Mortgage Investment Corporation
21
several gross mortgage investments totalling $702.6 million (December 31, 2014 – $701.9 million). During 2015,
the Company, along with its related parties, funded $355.7 million in co-invested gross mortgage investments
and received repayments of $364.6 million. As at December 31, 2015, the Company’s share in these gross
mortgage investments is $286.3 million (December 31, 2014 – $268.9 million). Included in these amounts is a net
mortgage investment of $1.3 million (December 31, 2014 – $1.1 million) loaned to a limited partnership in which
T4Q is invested.
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 investments. 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: (i) payment
default by a borrower; (ii) whether security of the mortgage negatively impacted by some event; and (iii)
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.
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:
22
Timbercreek Mortgage Investment Corporation
• 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 17 to the
consolidated financial statements for the year ended December 31, 2015.
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, 2015 and 2014.
(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) non-executive director deferred share unit plan
Commencing January 1, 2015, the Company’s non-executive directors are participating in a deferred share
unit plan (the “Plan”) in respect of their compensation as directors of the Company. The benefit resulting
from the grant of DSUs under the Plan is recorded in profit and loss when awarded. DSUs granted are
included within accrued expenses based on the fair market value of the DSUs on the date of grant and
are subsequently measured at each reporting date at their fair value with changes in the carrying amount
recognized in profit and loss.
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.
(a) Annual Improvements to IFrs (2012-2014) cycle
On September 25, 2014, the IASB issued narrow-scope amendments to a total of four standards as part of its
annual improvements process. One of the amendments was made to clarify the disclosure of information
“elsewhere in the interim financial report” under IAS 34 Interim Financial Reporting. The amendment
will apply for annual periods beginning on or after January 1, 2016. Earlier application is permitted. The
Company intends to adopt these amendments in its financial statements for the annual period beginning on
January 1, 2016. The Company does not expect the amendments to have a material impact on its financial
statements.
Timbercreek Mortgage Investment Corporation
23
(b) Disclosure Initiative: Amendments to IAs 1
On December 18, 2014, the IASB issued amendments to IAS 1 Presentation of Financial Statements as part
of its major initiative to improve presentation and disclosure in financial reports (the “Disclosure Initiative”).
The amendments are effective for annual periods beginning on or after January 1, 2016 with early adoption
permitted. These amendments will not require any significant change to current practice, but should
facilitate improved financial statement disclosures. The Company intends to adopt these amendments in its
financial statements for the annual period beginning on January 1, 2016. The Company does not expect the
amendments to have a material impact on its financial statements.
(c) 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 mandatory effective date
of IFRS 9 is for annual periods beginning on or after January 1, 2018 and must be applied retrospectively,
with some exemptions, with early adoption permitted. The restatement of prior periods is not required and
is only permitted if information is available without the use of hindsight. The Company intends to adopt
IFRS 9 (2014) in its financial statements for the annual period beginning on January 1, 2018. The extent of the
impact of adoption of the standard has not yet been determined.
(d) IFrs 15, revenue from Contracts with Customers (“IFrs 15”)
In May 2014, the IASB issued IFRS 15, which provides a comprehensive framework for recognition,
measurement and disclosure of revenue from contracts with customers. It does not apply to insurance
contracts, financial instruments or lease contracts, which fall within the scope of other IFRSs. The
new standard is effective for annual periods beginning on or after January 1, 2018 and is to be applied
retrospectively with earlier application permitted. IFRS 15 will replace IAS 11 Construction Contracts, IAS 18
Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the Construction of Real Estate,
IFRIC 18 Transfer of Assets from Customers, and SIC 31 Revenue: Barter Transactions Involving Advertising
Services. The Company intends to adopt IFRS 15 in its financial statements for the annual period beginning
on January 1, 2018. The Company does not expect the standard to have a material impact on its financial
statements.
OUTsTAnDInG sHAre DATA
As at February 24, 2016, the Company’s authorized capital consists of an unlimited number of common shares,
of which 40,523,728 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 2015, the Company further increased the available borrowing limit of the credit facility to
complement the common shares and convertible debentures. The Company believes that the modest amount
of structural leverage gained from the debentures and credit facility 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.
24
Timbercreek Mortgage Investment Corporation
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, the credit facility and syndicating mortgage investments to partners.
The Company has a borrowing ability of $60.0 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
repayments and other working capital needs. As at December 31, 2015, the Company is in compliance with its
credit facility covenants and expects to remain in compliance going forward.
The Company routinely forecasts cash flow sources and requirements, including unadvanced commitments, to
ensure cash is efficiently utilized.
The following are the contractual maturities of financial liabilities as at December 31, 2015, including expected
interest payments:
Carrying
Contractual
Within
Following
values
cash flows
a year
year
3-5 years
Accounts payable and accrued expenses
$
1,104
$
1,104
$
1,104
$
elbayap sdnediviD
reganaM ot euD
Mortgage funding holdbacks
tseretni egagtrom diaperP
Credit facility1
serutnebed elbitrevnoC
seitilibail latoT
Unadvanced gross mortgage commitments2
Total contractual liabilities
134,2
524,2
822
071,1
218,35
877,23
134,2
524,2
822
071,1
107,55
916,14
134,2
524,2
822
071,1
107,55
191,2
$
−
−
−
−
−
−
−
−
−
−
−
−
191,2
732,73
$
$
245,49
$
272,501
$
448,56
$
191,2
$
732,73
–
119,888
119,888
−
−
94,542
$
225,160
$
185,732
$
2,191
$
37,237
1
Includes interest based upon the current prime interest rate plus 1.5% on the credit facility, assuming the outstanding balance is not repaid until its
maturity in October 2016.
2 Unadvanced mortgage commitments include syndication commitments from third party investors totaling $75.3 million.
As at December 31, 2015, the Company had a cash position of $140 (December 31, 2014 – $463) and an unutilized
credit facility of $6.2 million (December 31, 2014 – $25.9 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. Included within
the unadvanced mortgage commitments is $75.3 million (December 31, 2014 – $42.8 million) relating to the
Company’s syndication partners. The Company expects the syndication partners to fund this amount.
FInAnCIAL InsTrUMenTs
Financial assets
The Company’s other assets and mortgage investments, including mortgage syndications, are designated as
loans and receivables and are measured at amortized cost. The fair values of other assets approximate their
carrying amounts due to their short-term nature. The 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.
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
25
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. There have been no changes to the Company, which may affect the overall risk of the Company.
(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, 2015, $94.3 million of mortgage
investments bear interest at variable rates. Of these, $91.1 million of mortgage investments include a “floor
rate” to protect their negative exposure, while two mortgage investments totalling
$3.0 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 $16. 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 $53.8
million as at December 31, 2015. Based on the outstanding balance of the credit facility as at December 31,
2015, a 0.50% decrease in interest rates, with all other variables constant, would increase net income by $269
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 include 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) ensuring 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, 2015 is the carrying values of its net mortgage
investments, including interest receivable, amounting to $446.0 million (December 31, 2014 – $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.
26
Timbercreek Mortgage Investment Corporation
(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
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 COnTrOLs 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, 2015.
As at December 31, 2015, 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, 2015.
During 2015, the Manager implemented a new mortgage administration and portfolio management software.
This new software allows the Manager to monitor the portfolio in real time. The Manager has assessed that the
new software did not cause significant or material changes to the design of internal controls over financial
reporting.
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, 2015.
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 Internal Control ‒ Integrated
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.
Timbercreek Mortgage Investment Corporation
27
ADDITIOnAL InFOrMATIOn
Phone
Call the Company at 1-844-304-9967, Carrie Morris, Managing Director Capital Markets & Corporate
Communications.
Shareholders who wish to enroll in the dividend reinvestment plan or who would like further information about
the plan should contact Corporate Communications at (416) 923-9967 ext. 7266. (collect if calling long distance.)
Internet
Visit SEDAR at www.sedar.com; or the Company’s website at www.timbercreekmic.com
Mail
Write to the Company at:
Timbercreek Mortgage Investment Corporation
Attention: Corporate Communications
25 Price Street
Toronto, Ontario M4W 1Z1
28
Timbercreek Mortgage Investment Corporation
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Timbercreek Mortgage Investment Corporation
We have audited the accompanying consolidated financial statements of Timbercreek Mortgage Investment
Corporation (the “Company”), which comprise the consolidated statements of financial position as at December
31, 2015 and December 31, 2014, the consolidated statements of net income and comprehensive income, changes
in shareholders’ equity and cash flows for the years then ended, and notes, comprising a summary of significant
accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
entation of the consolidated financial 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
financial 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 financial 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 financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on our judgment, including the assessment of
the risks of material misstatement of the consolidated financial 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 financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness 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 financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for
our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial
position of the Company as at December 31, 2015 and December 31, 2014, and its consolidated financial performance
and its consolidated cash flows for the years then ended, in accordance with International Financial Reporting
Standards.
Chartered Professional Accountants, Licensed Public Accountants
February 24, 2016
Toronto, Canada
Timbercreek Mortgage Investment Corporation
29
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
stnelaviuqe hsac dna hsaC
))b(21 eton( stessa rehtO
Mortgage investments, including mortgage
)4 eton( snoitacidnys
Foreclosed properties held for sale
)5 eton(
,13 rebmeceD ta sA
2015
2014
$
178,931
$
290,364
590,450,3
830,285,3
770,307,057
926,371,616
664,638,21
125,058,31
stessa latoT
$
905,337,667
082,960,436 $
LIABILITIES AND EQUITY
Accounts payable and accrued
sesnepxe
$
565,301,1
$
725,558
Dividends payable (note 8(b)
)
))a(21 eton( reganaM ot euD
skcabdloh gnidnuf egagtroM
tseretni egagtrom diaperP
)6 eton( ytilicaf tiderC
)7 eton( serutnebed elbitrevnoC
Mortgage syndication liabilities (not
)4 e
seitilibail latoT
424,134,2
007,524,2
678,128
508,961,1
618,426,35
781,877,23
290,244,2
859,579,1
267,384
274,065,2
959,638,8
754,783,23
056,840,013
230,185,912
320,404,404
952,321,962
ytiuqe ’sredloherahS
Total liabilities and equity
Commitments and contingencies (notes 4 and 18)
684,923,263
120,649,463
$
766,733,509
$ 634,069,280
SS eeee aa cc cc oo mm pp aa nn yy ii nn gg nn oo tteess ttoo tthh ee cc oo nn ss oo llii dd aa tteedd ffii nn aa nn cc ii aa ll ss ttaa tteemm eenn ttss ..
30
Timbercreek Mortgage Investment Corporation
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 2
CONSOLIDATED STATEMENTS OF NET INCOME AND COMPREHENSIVE
INCOME
Years ended December 31,
2015
2014
:emocni tseretnI
Interest, including mortgage syndicatio
sn
$
940,292,94
$
393,340,73
Fees and other income, including mortgage syndications
5,901,313
5,144,675
emocni tseretni ssorG
263,391,55
860,881,24
Interest and fees expense on mortgage syndications (note 4(b))
(12,189,740)
(5,477,861)
emocni tseretni teN
226,300,34
702,017,63
:sesnepxE
)01 eton( seef tnemeganaM
)01 eton( seef ecnamrofreP
Provision for mortgage investments loss (note 4(c))
evitartsinimda dna lareneG
sesnepxe latoT
snoitarepo morf emocnI
439,559,5
680,034,2
900,000
413,769
686,124,5
755,459,1
250,000
376,118
433,352,01
619,734,8
32,750,288
28,272,291
Net operating loss from foreclosed properties held for sale
Fair value adjustment on foreclosed properties held for sale (note 5)
114,345
523,944
170,748
650,421
:stsoc gnicnaniF
)6 eton( ytilicaf tiderc no tseretnI
Interest on convertible debentures
)7 eton(
stsoc gnicnanif latoT
975,915,1
779,075,2
655,090,4
055,472
234,952,2
289,335,2
Net income and comprehensive in
emoc
$
344,120,82
$
041,719,42
)11 eton( erahs rep sgninraE
Basic and diluted
$
0.69
$
0.63
SS eeee aa cc cc oo mm pp aa nn yy ii nn gg nn oo tteess ttoo tthh ee cc oo nn ss oo llii dd aa tteedd ffii nn aa nn cc ii aa ll ss ttaa tteemm eenn ttss ..
Timbercreek Mortgage Investment Corporation
31
CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY
YYeeaarr eennddeedd DDeecceemmbbeerr 3311,, 22001155
CCoommmmoonn
SShhaarreess
RReettaaiinneedd
EEaarrnniinnggss
EEqquuiittyy
CCoommppoonneenntt
ooff CCoonnvveerrttiibbllee
DDeebbeennttuurreess
TToottaall
Shareholders’ equity, beginning of year
$
370,547,438 $
(6,145,974) $
544,557 $
364,946,021
Dividends
–
(29,252,594)
Issuance of common shares under
dividend reinvestment plan
Repurchase of common shares under
3,161,373
dividend reinvestment plan
(3,161,373)
Repurchase of common shares under
normal course issuer bid
(1,385,384)
–
–
–
Net income and comprehensive income
–
28,021,443
–
–
–
–
–
(29,252,594)
3,161,373
(3,161,373)
(1,385,384)
28,021,443
SShhaarreehhoollddeerrss’’ eeqquuiittyy,, eenndd ooff yyeeaarr
$$ 336699,,116622,,005544 $$ ((77,,337777,,112255)) $$
554444,,555577 $$ 336622,,332299,,448866
YYeeaarr eennddeedd DDeecceemmbbeerr 3311,, 22001144
CCoommmmoonn
SShhaarreess
RReettaaiinneedd
EEaarrnniinnggss
EEqquuiittyy
CCoommppoonneenntt
ooff CCoonnvveerrttiibbllee
DDeebbeennttuurreess
TToottaall
Shareholders’ equity, beginning of year
$
337,367,498 $
(799,787) $
– $
336,567,711
Issuance of common shares, net
33,179,940
Equity component of convertible
debentures, net
Dividends
Issuance of common shares under
dividend reinvestment plan
Repurchase of common shares under
–
–
3,047,862
dividend reinvestment plan
(3,047,862)
–
–
(30,263,327)
–
–
Net income and comprehensive income
–
24,917,140
–
33,179,940
544,557
544,557
–
–
–
–
(30,263,327)
3,047,862
(3,047,862)
24,917,140
SShhaarreehhoollddeerrss’’ eeqquuiittyy,, eenndd ooff yyeeaarr
$$ 337700,,554477,,443388 $$ ((66,,114455,,997744)) $$
554444,,555577 $$ 336644,,994466,,002211
SSeeee aaccccoommppaannyyiinngg nnootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss..
32
Timbercreek Mortgage Investment Corporation
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
OOPPEERRAATTIINNGG AACCTTIIVVIITTIIEESS
Net income and comprehensive income
Amortization of lender fees
Lender fees received
Provision for mortgage investment loss
Financing costs
Net foreign exchange loss
Fair value adjustment on foreclosed properties held for sale
Change in non-cash operating items:
Interest receivable
Other assets
Accounts payable and accrued expenses
Due to Manager
Prepaid mortgage interest
Mortgage funding holdbacks
FFIINNAANNCCIINNGG AACCTTIIVVIITTIIEESS
Proceeds from issuance of convertible debentures, net
Proceeds from issuance of common shares, net
Repurchase of common shares for cancellation
Advances from (repayments of) credit facility, net
Interest paid
Dividends paid
IINNVVEESSTTIINNGG AACCTTIIVVIITTIIEESS
Capital improvements to foreclosed properties held for sale
Proceeds from disposition of foreclosed properties held for sale
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
22001155
22001144
$
28,021,443 $
24,917,140
(4,965,838)
(4,437,326)
4,279,673
900,000
4,090,556
–
523,944
(2,485,665)
914,599
236,103
449,742
(1,390,667)
338,114
5,819,505
250,000
2,533,982
33,456
650,421
(2,595,527)
(2,277,526)
(339,195)
(373,778)
1,548,907
454,953
3300,,991122,,000044
2266,,118855,,001122
–
–
(1,385,382)
44,736,549
(3,679,818)
32,533,220
33,179,940
–
9,075,926
(1,694,372)
(29,263,262)
(30,297,827)
1100,,440088,,008877
4422,,779966,,888877
(59,703)
549,814
(331,838)
35,776,846
Funding of mortgage investments, net of mortgage syndications
(333,478,035)
(498,944,602)
Discharges of mortgage investments, net of mortgage syndications
291,344,612
382,632,338
Decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
((4411,,664433,,331122))
((8800,,886677,,225566))
(323,221)
463,092
(11,885,357)
12,348,449
CCaasshh aanndd ccaasshh eeqquuiivvaalleennttss,, eenndd ooff yyeeaarr
$$
113399,,887711 $$
446633,,009922
SSeeee aaccccoommppaannyyiinngg nnootteess ttoo tthhee ccoonnssoolliiddaatteedd ffiinnaanncciiaall ssttaatteemmeennttss..
Timbercreek Mortgage Investment Corporation
33
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
1. COrPOrATe InFOrMATIOn
Timbercreek Mortgage Investment Corporation (the “Company”) is a mortgage investment corporation
domiciled in Canada. The registered office of the Company is 25 Price Street, Toronto, Ontario M4W 1Z1. The
Company is incorporated under the laws of the Province of Ontario by Articles of Incorporation dated April
30, 2008. The common shares of the Company are traded on the Toronto Stock Exchange (“TSX”) under the
symbol “TMC”.
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.
The Company has entered into a management agreement with Timbercreek Asset Management Inc. (the
“Manager”) dated September 13, 2013. The Manager is responsible for the day-to-day operations and for
providing all general management, mortgage servicing and administrative services to the Company.
2. BAsIs OF PrePArATIOn
(a) statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
The consolidated financial statements were approved by the Board of Directors on February 24, 2016.
(b) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars, which is the functional
currency of the Company.
(c) Basis of measurement
These consolidated financial statements have been prepared on the historical cost basis except for
foreclosed properties held for sale, 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
34
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
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
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 16 – 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
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. 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 is 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.
Timbercreek Mortgage Investment Corporation
35
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
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.
(d) 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 remeasured 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.
(e) 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.
(f) 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 classified
as 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
36
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
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 16.
(g) 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.
(h) 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.
(i) non-executive director deferred share unit plan
Commencing January 1, 2015, the Company’s non-executive directors began participating in a deferred
share unit plan (the “Plan”) which allows the directors to elect to receive their compensation in the form
of deferred share units (“DSUs”). The benefit resulting from the grant of DSUs under the Plan is recorded
in profit and loss when awarded. DSUs granted are included within accrued expenses based on the fair
market value of the DSUs on the date of grant and are subsequently measured at each reporting date at
their fair value with changes in the carrying amount recognized in profit and loss.
Timbercreek Mortgage Investment Corporation
37
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
(j) 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) Annual Improvements to IFrs (2012-2014) cycle
On September 25, 2014, the IASB issued narrow-scope amendments to a total of four standards
as part of its annual improvements process. One of the amendments was made to clarify the
disclosure of information “elsewhere in the interim financial report” under IAS 34 Interim Financial
Reporting. The amendment will apply for annual periods beginning on or after January 1, 2016.
Earlier application is permitted. The Company intends to adopt these amendments in its financial
statements for the annual period beginning on January 1, 2016. The Company does not expect the
amendments to have a material impact on its financial statements.
(ii) Disclosure Initiative: Amendments to IAs 1
On December 18, 2014 the IASB issued amendments to IAS 1 Presentation of Financial Statements as
part of its major initiative to improve presentation and disclosure in financial reports (the “Disclosure
Initiative”). The amendments are effective for annual periods beginning on or after January 1, 2016
with early adoption permitted. These amendments will not require any significant change to current
practice, but should facilitate improved financial statement disclosures. The Company intends to
adopt these amendments in its financial statements for the annual period beginning on January
1, 2016. The Company does not expect the amendments to have a material impact on its financial
statements.
(iii) 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 mandatory effective date of IFRS 9 is for annual periods beginning on or after
January 1, 2018 and must be applied retrospectively with some exemptions with early adoption
permitted. The restatement of prior periods is not required and is only permitted if information is
available without the use of hindsight. The Company intends to adopt IFRS 9 (2014) in its financial
statements for the annual period beginning on January 1, 2018. The extent of the impact of adoption
of the standard has not yet been determined.
(iv) IFrs 15, revenue from Contracts with Customers (“IFrs 15”)
In May 2014, the IASB issued IFRS 15 which provides a comprehensive framework for recognition,
measurement and disclosure of revenue from contracts with customers. It does not apply to
insurance contracts, financial instruments or lease contracts, which fall within the scope of other
IFRSs. The new standard is effective for annual periods beginning on or after January 1, 2018
and is to be applied retrospectively with earlier application permitted. IFRS 15 will replace IAS
11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, IFRIC 15
Agreements for the Construction of Real Estate, IFRIC 18 Transfer of Assets from Customers, and SIC
31 Revenue: Barter Transactions Involving Advertising Services. The Company intends to adopt IFRS
15 in its financial statements for the annual period beginning on January 1, 2018. The extent of the
impact of adoption of the standard has not yet been determined.
38
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
4. MOrTGAGe InvesTMenTs, InCLUDInG MOrTGAGe sYnDICATIOns
AAss aatt DDeecceemmbbeerr 3311,, 22001155
AAss aatt DDeecceemmbbeerr 3311,, 22001155
Mortgage investments, including mortgage
GGrroossss
mmoorrttggaaggee
GGrroossss
iinnvveessttmmeennttss
mmoorrttggaaggee
iinnvveessttmmeennttss
MMoorrttggaaggee
ssyynnddiiccaattiioonn
MMoorrttggaaggee
lliiaabbiilliittiieess
ssyynnddiiccaattiioonn
lliiaabbiilliittiieess
(309,751,038) $
NNeett
NNeett
439,474,178
syndications (notes 4(a) and (b))
Mortgage investments, including mortgage
Interest receivable
syndications (notes 4(a) and (b))
$
$
Interest receivable
Unamortized lender fees
749,225,216 $
749,225,216 $
7,648,090
(309,751,038) $
(1,113,951)
439,474,178
6,534,139
7,648,090
756,873,306
(1,113,951)
(310,864,989)
6,534,139
446,008,317
756,873,306
(5,020,229)
(310,864,989)
816,339
446,008,317
(4,203,890)
Unamortized lender fees
Allowance for mortgage investments loss (note 4(c))
(5,020,229)
(1,150,000)
816,339
–
(4,203,890)
(1,150,000)
Allowance for mortgage investments loss (note 4(c))
AAss aatt DDeecceemmbbeerr 3311,, 22001144
AAss aatt DDeecceemmbbeerr 3311,, 22001144
Mortgage investments, including mortgage
syndications (notes 4(a) and (b))
Mortgage investments, including mortgage
Interest receivable
syndications (notes 4(a) and (b))
Interest receivable
Unamortized lender fees
(1,150,000)
$$ 775500,,770033,,007777 $$ ((331100,,004488,,665500)) $$ 444400,,665544,,442277
(1,150,000)
–
$$ 775500,,770033,,007777 $$ ((331100,,004488,,665500)) $$ 444400,,665544,,442277
GGrroossss
mmoorrttggaaggee
GGrroossss
iinnvveessttmmeennttss
mmoorrttggaaggee
iinnvveessttmmeennttss
617,038,177
$
$
617,038,177
5,125,457
$
$
MMoorrttggaaggee
ssyynnddiiccaattiioonn
MMoorrttggaaggee
lliiaabbiilliittiieess
ssyynnddiiccaattiioonn
lliiaabbiilliittiieess
(219,697,422) $
NNeett
NNeett
397,340,755
(219,697,422) $
(733,560)
397,340,755
4,391,897
5,125,457
622,163,634
(733,560)
(220,430,982)
4,391,897
401,732,652
622,163,634
(5,740,005)
(220,430,982)
849,950
401,732,652
(4,890,055)
Unamortized lender fees
Allowance for mortgage investments loss (note 4(c))
(5,740,005)
(250,000)
849,950
−
(4,890,055)
(250,000)
Allowance for mortgage investments loss (note 4(c))
$$
(250,000)
616,173,629
$$
616,173,629
$$
$$
(219,581,032) $$
−
(250,000)
396,592,597
(219,581,032) $$
396,592,597
As at December 31, 2015, unadvanced mortgage commitments under the existing gross mortgage
investments amounted to $119,887,655 (December 31, 2014 – $107,366,854).
(a) net mortgage investments
Interest in first mortgages
Interest in first mortgages
Interest in non-first mortgages
Interest in non-first mortgages
DDeecceemmbbeerr 3311,,
22001155
DDeecceemmbbeerr 3311,,
22001155
342,572,965
$
$
342,572,965
96,901,213
%%
%%
69
69
31
%%
%%
78
78
22
DDeecceemmbbeerr 3311,,
22001144
DDeecceemmbbeerr 3311,,
22001144
276,022,401
276,022,401
121,318,354
$
$
22
110000
96,901,213
$$ 443399,,447744,,117788
31
110000
121,318,354
$$ 339977,,334400,,775555
110000
$$ 443399,,447744,,117788
110000
$$ 339977,,334400,,775555
The mortgage investments are secured by real property and mature between 2016 and 2018 (December
31, 2014 – 2015 and 2018). The weighted average interest rate earned on net mortgage investments for the
year ended December 31, 2015 was 9.1% (December 31, 2014 – 9.4%).
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, 2015, the Company received total lender fees, net of fees relating to
mortgage syndication liabilities, of $4,279,673 (December 31, 2014 – $5,819,505), which are amortized
to interest income over the term of the related mortgage investments using the effective interest rate
method.
Timbercreek Mortgage Investment Corporation
39
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
Principal repayments, net of mortgage syndications, based on contractual maturity dates are as follows:
2016
2017
2018
Total
$
199,567,023
157,207,885
82,699,270
$
439,474,178
(b) Mortgage syndication liabilities
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
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 derecognition 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
addition, the Company may sell pari-pasu interests in certain mortgage investments that meet the criteria
for derecognition under IFRS.
As at December 31, 2015, 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 $310,048,650 (December 31, 2014 – $219,581,032). For the year ended December 31, 2015, the
Company has also recognized interest income of $11,375,469 (December 31, 2014 – $4,998,260) and fee
income of $814,271 (2014 – $479,601) and a corresponding interest and fee expense of $12,189,740 (2014 –
$5,477,861) 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 12).
(c) Allowance for mortgage investments loss
During the year ended December 31, 2015, the Company has recognized a specific impairment allowance
of $900,000 (2014 – nil) relating to one impaired mortgage investment, which represents the outstanding
principal and accrued interest as at December 31, 2015.
The Company also assesses for impairment to identify potential future losses on a collective 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. For 2015, no additional collective impairment
allowance (December 31, 2014 – $250,000) was recognized.
During 2014, the Company foreclosed on the underlying security relating to one impaired mortgage
investment and reclassified $550,000 from allowance for mortgage investments loss to foreclosed
properties held for sale (“FPHFS”).
40
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
The changes in the allowance for mortgage investments loss during the years ended December 31, 2015
and 2014 were as follows:
Balance, beginning of year
Balance, beginning of year
Provision for mortgage investments loss
Provision for mortgage investments 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
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
22001144
22001144
550,000
550,000
250,000
250,000
(550,000)
(550,000)
250,000
250,000
22001155
22001155
250,000 $
250,000 $
900,000
900,000
−
−
1,150,000 $
1,150,000 $
$
$
$
$
5. FOreCLOseD PrOPerTIes HeLD FOr sALe
As at December 31, 2015, there are three FPHFS (December 31, 2014 – three), which are recorded at their fair
value of $12,836,466 (December 31, 2014 – $13,850,521). The fair value has been categorized as a level 3 fair
value, based on inputs to the valuation techniques used. The changes in the FPHFS during the years ended
December 31, 2015 and 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, net
Fair market value adjustment, net
Disposition of foreclosed properties
Disposition of foreclosed properties
BBaallaannccee,, eenndd ooff yyeeaarr
BBaallaannccee,, eenndd ooff yyeeaarr
$
$
22001155
22001155
13,850,521 $
13,850,521 $
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
22001144
22001144
11,351,435
11,351,435
75,681,402
75,681,402
331,838
331,838
(650,421)
(650,421)
(72,863,733)
(72,863,733)
$$ 1122,,883366,,446666 $$ 1133,,885500,,552211
$$ 1122,,883366,,446666 $$ 1133,,885500,,552211
−
−
59,703
59,703
(523,944)
(523,944)
(549,814)
(549,814)
During the year ended December 31, 2015, the Company closed on the sale of three (2014 – eight) residential
units in one of the foreclosed properties for net proceeds of $549,814 (2014 – $1,363,733). During the year
ended December 31, 2015, the Company recorded an unrealized fair market value adjustment of $523,944
(2014 – $800,000) on foreclosed properties.
During the year ended December 31, 2014, the Company foreclosed on underlying security of two mortgage
investments with outstanding principal and costs of $73,720,203 and accrued interest of $2,511,199. The
underlying security on one mortgage investment was subsequently sold, with the proceeds of sale repaying
all of the outstanding principal, 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 that
property.
Timbercreek Mortgage Investment Corporation
41
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
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
the following table:
Valuation
Valuation
Technique
Technique
Direct Capitalization
Direct Capitalization
Method. The
Method. The
valuation method is
valuation method is
based on stabilized
based on stabilized
net operating
net operating
income (‘NOI’)
income (‘NOI’)
divided by an overall
divided by an overall
capitalization rate.
capitalization rate.
Significant unobservable inputs
Significant unobservable inputs
• Stabilized NOI is based on the
• Stabilized NOI is based on the
location, type and quality of the
location, type and quality of the
property and supported by current
property and supported by current
market rents for similar properties,
market rents for similar properties,
adjusted for estimated vacancy rates
adjusted for estimated vacancy rates
and expected operating costs.
and expected operating costs.
• Capitalization rate is based on
• Capitalization rate is based on
location, size and quality of the
location, size and quality of the
property and takes into account
property and takes into account
market data at the valuation date.
market data at the valuation date.
Direct Sales
Direct Sales
Comparison
Comparison
The fair value is based on comparison to
The fair value is based on comparison to
recent sales of properties of similar types,
recent sales of properties of similar types,
locations and quality.
locations and quality.
Inter-relationship between key
Inter-relationship between key
unobservable inputs and fair
unobservable inputs and fair
value measurement
value measurement
The estimated fair value would
The estimated fair value would
increase (decrease) if:
increase (decrease) if:
• Stabilized NOI was higher
• Stabilized NOI was higher
(lower)
(lower)
• Overall capitalization rates
• Overall capitalization rates
were lower (higher)
were lower (higher)
The significant unobservable
The significant unobservable
input is adjustments due to
input is adjustments due to
characteristics specific to each
characteristics specific to each
property that could cause the
property that could cause the
fair value to differ from the
fair value to differ from the
property to which it is being
property to which it is being
compared.
compared.
6. CreDIT FACILITY
Credit facility balance
Credit facility balance
Unamortized financing costs
Unamortized financing costs
TToottaall ccrreeddiitt ffaacciilliittyy
TToottaall ccrreeddiitt ffaacciilliittyy
DDeecceemmbbeerr 3311,,
DDeecceemmbbeerr 3311,,
$
$
22001155
22001155
53,812,475
53,812,475
(187,659)
(187,659)
5533,,662244,,881166
5533,,662244,,881166
$$
$$
DDeecceemmbbeerr 3311,,
DDeecceemmbbeerr 3311,,
22001144
22001144
9,075,926
9,075,926
(238,967)
(238,967)
88,,883366,,995599
88,,883366,,995599
$
$
$$
$$
The Company has a credit facility with a syndicate of lenders with an available limit of $60,000,000
(December 31, 2014 – $35,000,000) bearing interest at either the prime rate of interest plus 1.5%, or bankers’
acceptances (“BA”) with a stamping fee of 2.5% of the face amount of such BA. The credit facility is secured by
a general security agreement over the Company’s assets. The credit facility matures on October 31, 2016.
Interest on the credit facility is recorded in financing costs using the effective interest rate method. For the
year ended December 31, 2015, included in financing costs is interest on the credit facility of $1,298,407 (2014
– $145,222) and financing costs amortization of $221,172 (2014 – $129,328).
7. COnverTIBLe DeBenTUres
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
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 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.
42
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
The debentures will not be redeemable prior to March 31, 2017. On and after March 31, 2017 and prior to
March 31, 2018, the debentures will be redeemable by the Company, 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
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.
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.
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
equity components. The issue costs allocated to the liability component are amortized over the term of the
debentures using the effective interest rate method.
The debentures are allocated as follows:
Issued
Issue costs, net of amortization
Equity component
Issue costs attributed to equity component
Cumulative accretion of equity component
DDeebbeennttuurreess,, eenndd ooff yyeeaarr
DDeecceemmbbeerr 3311,, 22001155
$
34,500,000
(1,386,828)
(577,478)
32,921
209,572
$$
3322,,777788,,118877
Interest costs related to the debentures are recorded in financing costs using the effective interest rate
method. Interest on the debentures is included in financing costs and is made up of the following:
Interest on the convertible debentures
$
2,180,247
$
1,860,638
Amortization of issue costs
Accretion of equity component of the convertible debentures
Total
277,408
113,322
302,544
96,250
$
2,570,977
$
2,259,432
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
22001155
22001144
8. COMMOn sHAres
The Company is authorized to issue an unlimited number of common shares. Holders of common shares are
entitled to receive notice of and to attend and vote at all shareholder meetings. The holders of the common
shares are entitled to receive dividends as and when declared by the Board of Directors.
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.
Timbercreek Mortgage Investment Corporation
43
Balance, beginning of year
Issued
Repurchased under normal course issuer bid
Repurchased under dividend reinvestment plan
Issued under dividend reinvestment plan
BBaallaannccee,, eenndd ooff yyeeaarr
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
22001155
22001144
40,701,528
36,964,028
–
3,737,500
(177,800)
(397,612)
397,612
–
(332,009)
332,009
40,523,728
40,701,528
Interest on the convertible debentures
$
2,180,247
$
1,860,638
Amortization of issue costs
Accretion of equity component of the convertible debentures
Total
277,408
113,322
302,544
96,250
$
2,570,977
$
2,259,432
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
22001155
22001144
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
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
proceeds of $34,945,625 and incurred $1,765,685 in issuance costs.
The changes in the number of common shares outstanding were as follows:
Balance, beginning of year
Issued
Repurchased under normal course issuer bid
Repurchased under dividend reinvestment plan
Issued under dividend reinvestment plan
BBaallaannccee,, eenndd ooff yyeeaarr
YYeeaarrss eennddeedd DDeecceemmbbeerr 3311,,
22001155
22001144
40,701,528
36,964,028
–
3,737,500
(177,800)
(397,612)
397,612
–
(332,009)
332,009
40,523,728
40,701,528
(a) Dividend reinvestment plan
The Company’s dividend reinvestment plan (the “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. Under the 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, 2015, 397,612 (2014 – 332,009) common shares were purchased on the open market.
(b) Dividends
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, 2015, the Company declared dividends of $29,252,594, or
$0.72 per share (2014 – $30,263,327, $0.762 per share). As at December 31, 2015, $2,431,424 (December 31,
2014 – $2,442,092) was payable to the holders of common shares. Subsequent to December 31, 2015, the
Board of Directors declared dividends of $0.06 per common share, paid on February 12, 2016 to common
shareholders of record on January 29, 2016.
(c) normal course issuer bid
On November 13, 2014, the Company received the approval of the TSX to reinstitute a normal course
issuer 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, at that time, on November 11, 2014 and expired
on November 16, 2015. During the year ended December 31, 2015, the Company acquired 177,800
common shares (2014 – nil) for cancellation at a cost of $1,385,384 (2014 – nil).
On January 4, 2016, the Company received TSX approval to commence a normal course issuer bid
(the “Bid”) to purchase for cancellation up to a maximum of 4,105,569 common shares, representing
approximately 10% of the public float of common shares as of December 22, 2015. The Bid commenced
on January 6, 2016 and provides the Company with the flexibility to repurchase common shares for
cancellation until its expiration on January 5, 2017, or such earlier date as the Bid is complete. From
January 6, 2016 to February 24, 2016, the Company did not acquire any common shares for cancellation.
9. nOn-eXeCUTIve DIreCTOr DeFerreD sHAre UnIT PLAn
Commencing January 1, 2015, the Company instituted a non-executive director deferred share unit plan,
whereby up to 100% of the compensation for a director may be paid in the form of DSUs, credited quarterly
in arrears. Directors may elect annually, in accordance with the Plan, as to how much (if any) of the
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 fair market value is the volume weighted average price of a common share
as reported on the TSX for the 20 trading days immediately preceding that day (the “Fair Market Value”).
44
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
DSUs granted entitle the directors to also accumulate DSUs equal to the monthly cash dividends, assuming
reinvestment of the dividends into units based upon the Fair Market Value of the common shares on the
dividend payment date.
Following each calendar quarter, the director DSU accounts will be credited with the number of DSUs
calculated by multiplying the total compensation payable in DSUs divided by the Fair Market Value. Each
director is also entitled to an additional number of DSUs that is equal to the result of multiplying 25% of the
DSU issued in the quarter up to a maximum value of $5,000 per annum.
The Plan will pay a lump sum payment in cash equal to the number of DSUs held by each director
multiplied by the Fair Market Value of one common share as of the 24th business day after publication of the
consolidated financial statements following a director’s departure from the Board of Directors.
For the year ended December 2015, 17,022 DSUs were issued and outstanding and no DSUs were exercised or
cancelled resulting in a DSU expense of $124,774 based on a Fair Market Value of $7.33 per common share. As
at December 31, 2015, $50,938 in DSUs relating to Q4 2015 will be issued subsequent to year-end which are
included in accrued expenses.
10. 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. Under the 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 management
agreement is 10 years from September 13, 2013 and is renewed for successive five year terms at the expiration
of the initial term. For the year ended December 31, 2015, the Company incurred management fees of
$5,955,934 (2014 – $5,421,686).
Under the management agreement, the Manager is 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. For the year ended December 31, 2015, the performance fee was $2,430,086
(2014 – 1,954,557).
11. eArnInGs Per sHAre
Basic and diluted earnings per share is calculated by dividing net income and comprehensive income by the
weighted average number of common shares during the period.
Numerator for earnings per share:
Net income and comprehensive income
Denominator for earnings per share:
Years ended December 31,
2015
2014
$
28,021,443
$ 24,917,140
Weighted average number of common shares (basic and diluted)
40,631,219
39,544,439
Earnings per share – basic
detulid dna
$
96.0
$
36.0
Timbercreek Mortgage Investment Corporation
45
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
12. reLATeD PArTY TrAnsACTIOns
(a) As at December 31, 2015, due to Manager includes management and performance fees payable of
$2,425,700 (December 31, 2014 – $1,970,131) and no amounts payable (December 31, 2014 – $5,827)
related to costs incurred by the Manager on behalf of the Company.
(b) As at December 31, 2015, included in other assets is $2,188,556 (December 31, 2014 – $3,044,234) of
cash 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, prepaid mortgage interest and lender fees received from various borrowers.
(c) In addition to the above related party transactions, the Company has transacted with other funds managed
by the Manager, or one of its subsidiaries. As at December 31, 2015, the Company, Timbercreek Senior
Mortgage Investment Corporation (“TSMIC”), Timbercreek Four Quadrant Global Real Estate Partners
(“T4Q”), Timbercreek Global Real Estate Fund and Timbercreek Canadian Direct LP, related parties by virtue
of common management, have coinvested in several gross mortgage investments totaling $702,623,518
(December 31, 2014 – $701,930,591). During the year ended December 31, 2015, the Company, along with its
related parties, funded $355,733,675 in co-invested gross mortgage investments and received repayments
of $364,633,157. As at December 31, 2015, the Company’s share in these gross mortgage investments is
$286,310,931 (December 31, 2014 – $268,906,244). Included in these amounts is a net mortgage investment
of $1,265,625 (December 31, 2014 – $1,147,226) loaned to a limited partnership in which T4Q is invested.
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.
13. InCOMe TAXes
As of December 31, 2015, the Company has non-capital losses carried forward for income tax purposes of
$24,511,000 (December 31, 2014 – $19,938,146), which will expire between 2028 and 2035 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 $10,524,000 (December 31, 2014 – $14,608,322).
14. 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, 2015, 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, 2015, the
Company was in compliance with all financial covenants.
15. 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
46
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
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, 2015, $94,286,772 of net
mortgage investments bear interest at variable rates. Of these, $91,066,433 of net mortgage investments
include a “floor rate” to protect their negative exposure, while two mortgage investments totalling
$3,022,339 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 $16,102. 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 $471,434. 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
$53,812,475 as at December 31, 2015. Based on the outstanding credit facility balance as at December
31, 2015, a 0.50% decrease in interest rates, with all other variables constant, will increase net income by
$269,062 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, as well as interest receivable, accounts receivable other, 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 risk 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) ensuring 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, 2015 is the carrying values of its net mortgage
investments, including interest receivable, amounting to $446,008,316 (December 31, 2014 –
$401,732,652). 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 the normal operations from fluctuations in cash flow as a result
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
utilized.
Timbercreek Mortgage Investment Corporation
47
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
The following are the contractual maturities of financial liabilities as at December 31, 2015, including
expected interest payments:
DDeecceemmbbeerr 3311,, 22001155
vvaalluuee
ccaasshh ffllooww
CCaarrrryyiinngg
CCoonnttrraaccttuuaall
WWiitthhiinn
aa yyeeaarr
FFoolllloowwiinngg
yyeeaarr
33––55 yyeeaarrss
Accounts payable and
accrued expenses
$
1,103,565
$
1,103,565
$
1,103,565
$
Dividends payable
2,431,424
2,431,424
Due to Manager
2,425,700
2,425,700
2,431,424
2,425,700
Mortgage funding
holdbacks
Prepaid mortgage
interest
Credit facility1
821,876
821,876
821,876
1,169,805
1,169,805
1,169,805
53,812,475
55,701,072
55,701,072
$
–
–
–
–
–
–
–
–
–
–
–
–
Convertible debentures
32,778,187
41,618,437
2,190,750
2,190,750
37,236,937
Total liabilities
$
94,543,032
$
105,271,879
$
65,844,192
$
2,190,750
$
37,236,937
Unadvanced mortgage
commitments2
TToottaall ccoonnttrraaccttuuaall
–
119,887,655
119,887,655
–
–
lliiaabbiilliittiieess
$$ 9944,,554433,,003322
$$ 222255,,115599,,553344
$$
118855,,773311,,884477
$$
22,,119900,,775500
$$
3377,,223366,,993377
1
Includes interest based upon the current prime rate of interest plus 1.5% on the credit facility assuming the outstanding balance is not repaid until its
maturity in October 2016.
2 Unadvanced mortgage commitments include syndication commitments.
As at December 31, 2015, the Company had a cash position of $139,871 (December 31, 2014 – $463,092)
and an unutilized credit facility balance of $6,187,525 (December 31, 2014 – $25,924,074). 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 $75,274,469 relating to the
Company’s syndication partners. The Company expects the syndication partners to fund this amount.
48
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
16. FAIr vALUe MeAsUreMenTs
The following table shows the carrying amounts and fair values of assets and liabilities:
As at December 31, 2015
Assets measured at fair value
CCaarrrryyiinngg VVaalluuee
FFaaiirr vvaalluuee
OOtthheerr
LLooaannss aanndd
tthhrroouugghh pprrooffiitt
ffiinnaanncciiaall
rreecceeiivvaabbllee
aanndd lloossss
lliiaabbiilliittiieess
FFaaiirr
vvaalluuee
Foreclosed properties held for sale
$
–
$
12,836,466 $
– $
12,836,466
Assets not measured at fair value
Cash and cash equivalents
Other assets
139,871
3,054,095
Mortgage investments, including mortgage
syndications
750,703,077
Financial liabilities not measured at fair value
Accounts payable and accrued expenses
Dividends payable
Due to Manager
Mortgage funding holdbacks
Prepaid mortgage interest
Credit facility
Convertible debentures
Mortgage syndication liabilities
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
139,871
3,054,095
750,703,077
1,103,565
1,103,565
2,431,424
2,431,424
2,425,700
2,425,700
821,876
821,876
1,169,805
1,169,805
53,624,816
53,624,816
32,778,187
34,758,750
310,048,650
310,048,650
Timbercreek Mortgage Investment Corporation
49
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
As at December 31, 2014
Assets measured at fair value
CCaarrrryyiinngg VVaalluuee
OOtthheerr
ffiinnaanncciiaall
FFVVTTPPLL
lliiaabbiilliittiieess
FFaaiirr
vvaalluuee
LLooaannss aanndd
rreecceeiivvaabbllee
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
Prepaid mortgage interest
Credit facility
Convertible debentures
Mortgage syndication liabilities
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
2,560,472
2,560,472
8,836,959
8,836,959
32,387,457
35,017,500
219,581,032
219,581,032
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 mortgage investments, mortgage syndication liabilities
and foreclosed properties held for sale. 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) Convertible debentures
The fair value of the convertible debentures is based on a level 1 input, which is the market closing price
of convertible debentures at the reporting date.
There were no transfers between level 1, level 2 and level 3 of the fair value hierarchy during the year
ended December 31, 2015 and 2014.
50
Timbercreek Mortgage Investment Corporation
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
17. COMPensATIOn OF KeY MAnAGeMenT PersOnneL
The compensation expense of the members of the Board of Directors amounts to $182,849 (2014 - $83,981),
which is paid in a combination of DSUs and cash. The compensation to the senior management of the
Manager is paid through the management fees paid to the Manager (note 10).
18. 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.
Timbercreek Mortgage Investment Corporation
51
Notes to the Consolidated Financial Statements Years ended December 31, 2015 and 2014
52
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
25 Price Street
Toronto, ON M4W 1Z1
T 844.304.9967
e info@timbercreek.com
timbercreekmic.com
Stock Exchange Listing
TSX: TMC, TMC.DB
Auditors
KPMG LLP
Transfer Agent & Registrar
CST Trust Company
320 Bay Street
Toronto, ON M5H 4A6
Legal Counsel
McCarthy Tétrault LLP
timbercreekmic.com