ANNUAL REPORT 2023
ABOUT
TIMBERCREEK FINANCIAL
Timbercreek Financial is a leading non-bank,
commercial real estate lender providing shorter-
to
duration, structured financing solutions
commercial
real estate professionals. Our
sophisticated, service-oriented approach allows
us to meet the needs of borrowers, including
faster execution and more flexible terms that
are not typically provided by Canadian financial
institutions. By employing thorough underwriting,
active management and strong governance, we
are able to meet these needs while generating
strong risk-adjusted yields for investors.
16+ YEAR
TRACK RECORD
100%
COMMERCIAL REAL ESTATE
FOCUSED
$950MM
INSTITUTIONAL-QUALITY
PORTFOLIO
$15B
IN ORIGINATIONS
SINCE INCEPTION
LETTER TO SHAREHOLDERS
These results were achieved while we navigated a
challenging period of the real estate cycle caused by
the rapid rise in interest rates and general economic
weakness. Consider that the prime rate in Canada
reached 7.2.% in July 2023, a cumulative increase of
4.75% over 16 months from the first increase in March
2022. Although we benefit from a high WAIR from an
income perspective, the interest costs on our debt
increase in this environment and some of our borrowers
feel the strain of much higher debt service payments. As
a result, we have carried a higher balance in our Stage 2
and 3 loans through much of 2023.
10.0%
WEIGHTED AVERAGE INTEREST RATE EXITING 2023
(9.7% EXITING 2022)
$124.2MM
NET INVESTMENT INCOME
(+13% FROM 2022)
$70.4MM
DISTRIBUTABLE INCOME
BLAIR TAMBLYN
CHIEF EXECUTIVE OFFICER
I’m pleased to report that we generated strong
financial performance in 2023, highlighted by record
investment income and healthy year-over-year
increases in net income and distributable income.
As with the prior fiscal year, the company benefited
from the sustained higher interest rate environment,
which acted as a continued tailwind to our top-line
income given the high exposure to floating rate loans
with rate floors (86% of our portfolio at year end). The
portfolio’s weighted average interest rate (WAIR) was
9.7% entering the year, and that increased modestly
during 2023, exiting the year at 10.0%. This fueled
record annual net investment income of $124.2 million,
up 13% from 2022, and a 6% increase in distributable
income to $70.4 million. Distributable income per
share rose from $0.79 per share in 2022 to $0.84 per
share in 2023 – also a record for the company – with
a low payout ratio of 81.9%. In addition to continuing
our regular monthly dividend, this strong income
performance enabled us to report a special dividend of
5.75 cents per share earlier this year.
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TIMBERCREEK FINANCIAL
86.0%
INCOME-PRODUCING
PROPERTIES
While there is work to be done, our team has made
great progress over the past several quarters, with
full repayment on the largest of these loans already
in 2024. As we have highlighted in the past, active
management is an occasional reality of our business
and a requisite skillset. Over the past 15 plus years,
through periods of economic and financial market
turbulence, our team has demonstrated the ability to
effectively navigate these situations to recover capital
and ensure the best outcomes for our shareholders.
(I would encourage you to review the additional
disclosure in our MD&A on this topic.)
Given that we continue to expect recovery of our
invested capital, we remain highly confident in the
book value of the portfolio. Shareholders’ equity
increased modestly to $701 million, or $8.45 per share,
at year end, well above the weighted average trading
price of the shares at the time of this report.
“ MOST IMPORTANTLY, THE COMPANY
REMAINS WELL POSITIONED TO
BUILD ON ITS LONG TRACK RECORD OF
STABLE MONTHLY DIVIDENDS.
AS INTEREST RATES BEGIN TO COME
DOWN, WE BELIEVE THIS MONTHLY
DIVIDEND WILL PROVIDE A COMPELLING
RISK-ADJUSTED RETURN FOR
OUR SHAREHOLDERS. ”
TIMBERCREEK FINANCIAL
3
“ OVER THE PAST 15 PLUS YEARS,
THROUGH PERIODS OF ECONOMIC
AND FINANCIAL MARKET TURBULENCE,
OUR TEAM HAS DEMONSTRATED
THE ABILITY TO EFFECTIVELY NAVIGATE
THESE SITUATIONS TO RECOVER
CAPITAL AND ENSURE THE BEST
OUTCOMES FOR OUR SHAREHOLDERS. ”
While origination volume was down temporarily,
how we invest remains largely unchanged. Our
conservative investment approach continues to be
underpinned by an emphasis on income-producing
commercial real estate in urban markets. At year end,
86% of our investments were in income-producing
properties, with multi-residential real estate assets
continuing to comprise the largest portion of the
portfolio at 57%. First mortgages represented 89% of
the portfolio at year end, and our weighted average
loan-to-value was at a conservative level of close to
66%, down from the start of the year.
In terms of the portfolio growth and composition, we
were intentionally cautious through much of 2023,
adjusting the pace of new investments while ensuring
sufficient lending to maintain a healthy payout ratio
and meet our income objectives. Higher rates and rate
instability create issues across many industries, and
in commercial real estate, we have seen a general
slowdown in transaction activity. For the full year,
we invested roughly $313 million in new mortgage
investments and additional advances on existing
mortgages, offset by repayments of approximately
$498 million, resulting in a net decrease in the
portfolio year-over-year to $946 million. After a period
of inactivity, many borrowers were able to execute
on their exit plans to either seek term financing
or sales. The higher turnover is beneficial in that it
increases the percentage of the portfolio invested at
current valuation metrics and generates additional
fee revenue as new loans are made and the portfolio
grows back to its historical levels.
$0.84
DISTRIBUTABLE INCOME PER SHARE
($0.79 PER SHARE IN 2022)
81.9%
PAYOUT RATIO ON
DISTRIBUTABLE INCOME
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TIMBERCREEK FINANCIAL
We ended the year on a note of optimism that interest
rate increases had reached their peak and inflation
levels were returning to normal. This sets the stage
for rate cuts that are expected to begin as early as
April or at some point during the latter part of 2024.
As stability returns to the cost of debt, commercial
real estate transaction volumes should rise, and this
presents an attractive environment for Timbercreek to
grow the portfolio back towards its historical size. We
believe we’re entering an advantageous period from a
competitive perspective, and we’re in a strong liquidity
position. We completed a renewal of our credit facility
earlier this year, including a revolver of $510 million
and an accordion option of up to $100 million, giving us
ample room to continue to deploy capital accretively
as activity in the commercial real estate market
accelerates.
Most importantly, the company remains well positioned
to build on its long track record of stable monthly
dividends. As interest rates begin to come down, we
believe this monthly dividend will provide a compelling
risk-adjusted return for our shareholders.
Thank you for your continuing support and confidence in
us. We look forward to reporting on a progress in 2024.
Sincerely,
Blair Tamblyn
WELL-DIVERSIFIED
PORTFOLIO
BY ASSET
5.3%
6.5%
3.1%
3.1%
8.0%
1.5%
15.9%
56.8%
BY REGION
4.0%
29.4%
32.4%
11.3%
22.9%
MULTI-RESIDENTIAL
RETAIL
RETIREMENT
OFFICE
UNIMPROVED
LAND
IMPROVED
LAND
INDUSTRIAL
SINGLE-FAMILY
RESIDENTIAL
ONTARIO
BRITISH COLUMBIA
ALBERTA
QUEBEC
OTHER
AS AT DEC 31, 2023 - NET OF MORTGAGE SYNDICATIONS
PORTFOLIO BREAKDOWN BY ASSET DOES NOT INCLUDE DOES NOT INCLUDE NET
MORTGAGE INVESTMENTS MEASURED AT FVTPL ($5.5MM AT DEC 31, 2023)
TIMBERCREEK FINANCIAL
5
Q&A
WITH SCOTT ROWLAND
Scott Rowland, our Chief Investment Officer, talks about key topics and areas of focus from our 2023 results
and the outlook for Timbercreek in 2024.
Q: THE RAPID RISE IN INTEREST RATES HAS
MADE IT CHALLENGING FOR CERTAIN OF
YOUR BORROWERS. WHAT’S THE OUTLOOK
FOR THE STAGED LOANS?
We did see a material increase in the Stage 2 and
3 loans this past year, which was not unexpected
given the spike in interest rates and overall economic
headwinds. Many real estate owners that already
faced stressed balance sheets coming out of the
pandemic now had the additional strain of much
higher debt service payments.
Advancing these staged loans toward repayment
was a key focus in 2023, and we made material
progress. Earlier this year, the largest of the staged
loan exposure, representing a balance of $146.1 million,
was fully resolved with complete recovery of principal
and interest. We are diligently advancing the others
and expect meaningful progress on several of these
loans in 2024. However, to ensure we get the best
outcomes for our shareholders, some of these will
take time, and continued active management. This is
part of the business. We invest in high-quality, mostly
income-producing real estate and underwrite loans as
if we may be the owners, so we’re confident both in
the quality of the underlying assets and our ability to
recover our investment through active management.
Q: HOW DID THE PORTFOLIO PERFORM
OVERALL IN 2023?
The broader portfolio has been resilient, which allowed
us to generate record net investment income and
strong distributable income with a conservative
payout ratio of 81.9%, well below our historical
SCOTT ROWLAND
CHIEF INVESTMENT OFFICER
Scott is a leading Canadian non-bank
lender, having been involved in over $25B
of transactions across a wide variety of
asset types and capital structures. Scott
is responsible for the development of
investment strategies and processes,
as well as the overall performance of
Timbercreek’s portfolios. Scott is a highly
seasoned investment professional with
over 25 years of industry experience,
including serving as the Co-Head of Debt
Strategies for Fiera Properties, Managing
Director for Blackstone’s debt business
in Canada and Managing Director for GE
Capital Real Estate.
6
TIMBERCREEK FINANCIAL average. In fact, we generated enough excess
income in 2023 to pay a special dividend. In short,
we delivered on the key objective for our investors –
stable monthly income – while navigating a challenging
period of the commercial real estate cycle.
Since inception, we have managed the portfolio
with a conservative philosophy, focusing on income-
producing, mostly multi-residential assets in urban
markets, and that generally serves us well in difficult
periods. We also carefully manage diversification and
risk within the portfolio, and the short-term nature
of our loans allows us to quickly adjust exposure
to a region, asset class, etc. I would highlight that
the portfolio loan-to-value (LTV) came down during
2023 – a reflection of our efforts to invest more
conservatively given the market conditions.
Q: THE MORTGAGE PORTFOLIO BALANCE WAS
CONSIDERABLY LOWER AT YEAR END –
WHY? HOW DO YOU SEE THAT TRENDING?
The mortgage portfolio balance was lower at
year end for several reasons, beginning with
the general slowdown in commercial real estate
transaction activity in 2023 caused by higher
interest rates and rate instability. As well, our
investment team was cautious throughout most
of last year. We allowed our leverage to come
down and the gross portfolio to decrease while
we worked through several challenging loans.
Lastly, we had higher turnover (a good thing)
in the fourth quarter, and it takes time to put that
capital back to work in new loans.
The ultra-low-rate environment that we were
operating in for much the last decade was challenging
for active lenders like Timbercreek. We enter 2024
cautiously positive, with the knowledge that cycles
end and conditions are favourable for improvement.
With interest rate stability, we expect buyers and
sellers to regain confidence in the market, which
should translate to higher transaction levels broadly
and new opportunities for the Timbercreek portfolio.
As the market resets, we feel good about our
competitive position and our ability to deploy capital
to grow the portfolio in productive investments
tied to high-quality assets. Between syndications,
repayments and line availability, we are very well
capitalized to take advantage of an improving market.
Q: HOW IS THE COMPETITIVE ENVIRONMENT
FOR THE COMPANY?
Nothing significant has changed in the competitive
landscape recently. That said, we often see lenders
adjust their appetite and come into the market
more aggressively or retrench depending on the
macro conditions or their financial position at the
time. At Timbercreek, we have a sizable capital base
and a strong standing and reputation in the market
nationally. And remember that we compete in a
specific segment of the market – shorter-term loans
that support assets during their value-add phase
– where our ability to act quickly and flexibly is a
competitive advantage.
From a seasonality perspective, we often see
institutional lenders allocate more capital at the
start of the year, which can impact our origination
activity. Overall, however, we expect to see a steadily
growing pipeline in 2024 given the expected uptick in
transaction activity.
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TIMBERCREEK FINANCIAL 2023
PORTFOLIO HIGHLIGHTS
94
~57%
MORTGAGE INVESTMENTS
MULTI-FAMILY RESIDENTIAL
$11.1MM
AVERAGE
MORTGAGE SIZE
65.6%
WEIGHTED AVERAGE
LOAN-TO-VALUE
96.0%
INVESTED IN
URBAN MARKETS
88.9%
FIRST
MORTGAGES
TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Management’s Discussion and Analysis
Timbercreek Financial
For the year ended December 31, 2023 and 2022
~57%
MULTI-FAMILY RESIDENTIAL
65.6%
WEIGHTED AVERAGE
LOAN-TO-VALUE
88.9%
FIRST
MORTGAGES
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
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 Financial Corp. (the “Company” or “Timbercreek Financial”). 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 Timbercreek Capital Inc. (“Manager”), a subsidiary to Timbercreek
Asset Management Inc.("TAMI"), (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 and other investments 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, geopolitical uncertainty, 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
System for Electronic Document Analysis and Retrieval (“SEDAR+”) website at www.sedarplus.ca
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 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 26, 2024. 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.timbercreekfinancial.com. Additional information about
the Company, including its AIF, can be found at www.sedarplus.ca.
10
TIMBERCREEK FINANCIAL 1
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
BUSINESS OVERVIEW
Timbercreek Financial is a leading non-bank lender providing financing solutions to qualified real estate investors
who are generally in a transitional phase of the investment process.
Timbercreek Financial fulfills a financing requirement that is not well serviced by the commercial banks: primarily
shorter duration, structured financing. Real estate investors typically use short-term mortgages to bridge a period
(generally one to five years) during which they conduct property repairs, redevelop the property or purchase
another investment. These short-term “bridge” mortgages are typically repaid with traditional bank mortgages
(lower cost and longer-term debt) once the transitional period is over, a restructuring is complete or from proceeds
generated on the sale of assets. Timbercreek Financial focuses primarily on lending against income-producing
real estate such as multi-residential, retail and office properties. This emphasis on cash-flowing properties is an
important risk management strategy.
Timbercreek Financial, through its Manager, has established preferred lender status with many active real estate
investors by providing quick execution on investment opportunities and by providing flexible terms to borrowers.
Timbercreek Financial works with borrowers throughout the terms of their mortgages to ensure that their capital
requirements are met and, if requested, considers modifications of or extensions to the terms of their mortgages
to accommodate additional opportunities that may arise or changes that may occur.
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”).
BASIS OF PRESENTATION
This MD&A has been prepared to provide information about the financial results of the Company for the three
months and year ended December 31, 2023. This MD&A should be read in conjunction with the consolidated
financial statements for the years ended December 31, 2023 and 2022, which are prepared in accordance with
IFRS Accounting Standards (“IFRS”) as issued by the International Accounting Standards Board.
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 SEDAR+
and may be accessed through the SEDAR+ website at www.sedarplus.ca.
NON-IFRS MEASURES
The Company prepares and releases consolidated financial statements in accordance with IFRS. In this MD&A,
and 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”).
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 recurring cash flows and earnings for dividends and
provide a clearer understanding of the Company’s financial performance.
TIMBERCREEK FINANCIAL 2
11
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
The Company’s financial performance is predominately generated from net investment income from net mortgage
investments. The Company may enter into certain mortgage participation agreements with other institutional
lenders, where such agreements may provide for the Company’s participation either on a pari-passu basis or in a
subordinated position with one or more institutional syndication partners. For IFRS presentation purposes, where
the derecognition criteria is not met, mortgage investments are reported on a gross basis, with the portion related
to the syndicated mortgages being included in the mortgage investments, including mortgage syndications and a
corresponding liability as mortgage syndication liabilities. Mortgage syndication liabilities are non-recourse
mortgages with period to period variances not impacting the Company’s performance. Refer to note 4 of the
consolidated financial statements. The relevant factors causing period to period variances include net mortgage
principal amounts, portfolio allocation, weighted average interest rate and turnover rate. These non-IFRS
measures should not be construed as alternatives to total net income and comprehensive income or cash flows
from operating activities as determined in accordance with IFRS.
Non-IFRS financial measures for net mortgage investments:
i. Net mortgage investments – represents total mortgage investments, net of mortgage syndication liabilities
and before adjustments for interest receivable, unamortized lender fees and expected credit loss as at the
reporting date.
ii. Weighted average loan-to-value ("WALTV") – 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 (at origination), or subsequently when the underlying collateral is revalued. For construction/
redevelopment mortgage investments, fair value is based on an “as completed” basis. For unimproved and
improved land, fair value is based on an "as is" basis. Net mortgage investments measured at fair value
through profit or loss ("FVTPL") are excluded from WALTV computation. This is a key measure to explain
period to period performance variances of net mortgage investments.
iii. Turnover ratio – represents total borrower repayments and syndications of mortgage investments that
occurred more than 30 days past the initial net mortgage investment advance date during the stated period,
expressed as a percentage of the average net mortgage investment portfolio for the stated period. The
Company makes mortgages or loans to only commercial borrowers that are short-term (generally one to five
years), and as such the portfolio turnover rate is higher than typical mortgage portfolios which include
individual or non-commercial borrower loans. This is a key measure to explain period to period performance
variances of net mortgage investments as turnover from both scheduled and early repayments impacts
revenue.
iv. 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 daily period. As a result, the Company
complements IFRS measures (which presents financial positions as a point of time basis) with weighted daily
average data to explain significant variances. This is a key measure to explain period to period performance
variances of net mortgage investments.
v. Weighted average lender fees for the period – 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. As a result, the
Company complements IFRS measures (which presents financial positions as a point of time basis) with
weighted average data to explain significant variances. This is a key measure to explain period to period
performance variances of net mortgage investments as lender fees are one of the main contributors to net
investment income and distributable income.
vi. Average net mortgage investment portfolio – represents the daily average of net mortgage investments for the
stated period. As a result, the Company complements IFRS measures (which presents financial positions as a
point of time basis) with weighted daily average data to explain significant variances. This is a key measure to
explain period to period performance variances of net mortgage investments as the average net mortgage
investment portfolio is a basis for interest income earned during the period.
12
TIMBERCREEK FINANCIAL 3
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
vii. Enhanced return portfolio – represents other investments and net equity in investment properties not included
in net mortgage investments.
Non-IFRS financial measures for Company’s assessment of its distribution paying capacity:
It is the Company’s view that IFRS net income and earnings per share ("EPS") measures do not necessarily
provide a complete measure of the Company’s operating performance as IFRS net income and EPS include non-
cash items such as amortization of lender fees, amortization of financing costs, unrealized fair value changes, and
expected credit loss, which are not representative of current year operating performance. Distributable income is
a non-IFRS financial measure of cash flows based on the definition set forth by the Company.
Distributable income is computed as IFRS consolidated net income, adjusted for the earlier mentioned items,
calculated on an IFRS basis. The Company uses Distributable Income to assess its dividend paying capacity. A
reconciliation of the distributable income is provided in “Analysis of Financial Information for the Period" section of
the MD&A.
Payout ratio on distributable income is a non-IFRS financial measure of the Company’s ability to generate cash
flows for dividends. Payout ratio on earnings per share, where earnings is calculated on an IFRS basis, is a
common measure of the sustainability of a company’s dividend payments and is useful when comparing it to other
companies of similar industries.
i. Distributable income – represents the Company’s ability to generate cash flows for dividends by removing the
effect of amortization, accretion, unrealized fair value adjustments, expected credit loss, and unrealized gain
or loss from total net income and comprehensive income.
ii. Distributable income per share – represents the total distributable income divided by the weighted average
common shares outstanding for the stated period.
iii. Payout ratio on distributable income – represents total common share dividends paid and declared for
payment, divided by distributable income for the stated period.
iv. Payout ratio on earnings per share – represents total common share dividends paid and declared for
payment, divided by total net income and comprehensive income for the stated period.
v. Adjusted distributable income – represents distributable income adjusted for the impact of a realized gain/
(loss) on an investment measured at FVTPL as well as non-recurring foreign currency gains on other
investments.
vi. Adjusted distributable income per share – represents the total adjusted distributable income divided by the
weighted average common shares outstanding for the stated period.
vii. Payout ratio on adjusted distributable income – represents total common share dividends paid and declared
for payment, divided by adjusted distributable income for the stated period.
viii. Adjusted net income and comprehensive income – represents adjusted net income and comprehensive
income for the stated period to exclude the impact from unrealized fair value (gain)/loss on financial assets
measured at FVTPL and on derivative contracts (interest rate swap) used for hedging purposes but hedge
accounting was not adopted. The fair value loss on financial assets represents the change in unrealized loss
determined based on the fair value that the Company determined using its valuation policies on the financial
assets. The fair value (gain)/loss on the interest rate swap contract represents the change in unrealized
appreciation or depreciation of fair value of the interest rate swap, determined based on the fair value that the
Company would pay or receive if the interest rate swap had been terminated as at the reporting date.
ix. Adjusted earnings per share – adjusted earnings per share is calculated in the same manner as earnings per
share using adjusted net income and comprehensive income for the stated period.
x. Payout ratio on adjusted earnings per share – represents total common share dividends paid and declared for
payment, divided by adjusted net income and comprehensive income for the stated period.
TIMBERCREEK FINANCIAL 4
13
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
RECENT DEVELOPMENTS AND OUTLOOK
The Company is pleased to report its Q4 2023 results, which were highlighted by net investment income of $29.7
million (Q4 2022 – $31.3 million), distributable income of $17.5 million (Q4 2022 – $18.4 million) as well as
material progress on the resolution of some Stage 3 assets. Earnings per share and distributable income per
share were $0.18 and $0.21 in Q4 2023 versus $0.18 and $0.22, respectively, in the same period last year,
demonstrating continued strong underlying fundamentals. The distributable income payout ratio continues to be
low at 82.0%, reinforcing the Company's ability to continue generating healthy cash flows and dividends.
In light of the strong full-year income results, and in addition to paying 69 cents per share in dividends through the
year, the Company has authorized a special dividend of 5.75 cents per share, for shareholders of record as at
March 5, 2024. The special dividend will be paid on March 11, 2024. The dividend equates to $4.8 million of
additional payout to shareholders. The balance of undistributed income is reflected in the Company’s book value
per share, ending at $8.45 for the year (before payment of special dividend expected in March 2024) versus $8.33
at the end of 2022.
From a macro perspective, it’s worthwhile to reflect on the significant changes in the commercial real estate
market over the last two years and the implications for Timbercreek Financial. As the world emerged from
Covid-19, substantial supply and demand imbalances resulted in high levels of inflation. Central Banks, including
the Bank of Canada, have combated this issue with a rapid rise in interest rates to cool the economy. The prime
rate in Canada reached 7.2.% in July 2023, a cumulative increase of 4.75% over 16-months from the first
increase in March 2022. Real estate owners, many of which already faced stressed balance sheets coming out of
Covid, now faced the additional strain of higher debt service payments. These negative conditions were reflected
in the outlook for the sector and led to declines in share prices of public real estate companies and mortgage
lenders such as Timbercreek Financial. Looking at the Company specifically, the pressure of this real estate cycle
has led to an increase in Stage 2 and 3 loans, and management has been reporting on these loans in detail
throughout 2023. The Timbercreek team is experienced in dealing with these scenarios and is pleased with the
progress to date, as discussed in further detail below. As a floating rate lender, the corollary of higher rates has
been a substantial increase in the Company’s income, providing significant cushion to offset the temporary
delinquency in the mortgage portfolio.
Q4 2023 ended with a high turnover ratio of 19.2% and a net mortgage portfolio balance of $946.2 million versus
$1,195.8 million at the end of 2022. The reduction in the size of the portfolio was driven by several factors. The
first was the natural turnover of the Company’s portfolio as assets emerge from the value-add programs that the
Company focuses on and borrowers logically seek to transition to lower cost conventional term financing.
Secondly, there was a marked slowdown in market transactions as fewer trades took place given uncertain asset
pricing. Finally, the Company was intentionally cautious on new lending given the uncertainty in 2023.
Management tightened underwriting standards and the pace of new investments while ensuring sufficient lending
to maintain a healthy payout ratio. As we look forward into 2024, management is optimistic about the current
investment environment. On the collateral side, the current down cycle is 18-months old, rent inflation is rolling
through to bottom lines, and optimism of future interest rate cuts will all act to enhance asset values. This creates
an ideal environment to expand the portfolio on an attractive risk-adjusted basis and Timbercreek enters 2024 in a
strong liquidity position to take advantage of this opportunity. As 2024 remains a transitional year, the Manager will
continue to act prudently and monitor the existing portfolio closely. On new loans, the Manager will continue to
focus on multi-family income producing loans, but there will likely be opportunities in non-income investments
such as land or condo-inventory with borrowers needing liquidity. The Manager will lean into some of these
opportunities where the risk-return profile is significantly enhanced given this moment in time in the cycle.
14
TIMBERCREEK FINANCIAL 5
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
Looking at the quarter-end and year-end results in more detail, the loan portfolio of $946.2 million had a weighted-
average interest rate for the quarter of 10.0%. In Q4 2023, the Company advanced net new mortgages of $61.2
million, and $16.2 million on existing mortgages, offset by total mortgage portfolio repayments of $199.7 million.
Mortgage repayment activity increased in the fourth quarter, and portfolio turnover increased to 19.2% compared
to 6.0% in Q3 2023. As expected, the Company experienced increased turnover in the fourth quarter as borrowers
executed on their exit plans to either seek term financing or sales. The higher turnover is beneficial in that it
increases the percentage of the Company's loan portfolio invested at current valuation metrics and will generate
additional fee revenue at origination. The Company ended the year on a note of optimism that interest rate
increases had reached their peak and would even be coming down in the latter part of 2024, which should drive
commercial real estate transaction volumes.
On the capital front, the Company recently completed a renewal of its credit facility including a revolver of $510.0
million and an accordion option of up to $100.0 million. The credit facility gives the Company ample room to
continue to deploy capital accretively as activity in the commercial real estate market accelerates.
With staged loans, the Company continues to see progress on these files and was very pleased to announce the
official sale of the portfolio of seven multi-family, Stage 3 loans in Quebec. These loans, representing a balance of
$146.1 million, were fully repaid in January 2024 with Timbercreek recovering all principal and accrued interest.
As a result the associated expected credit loss of $1.6 million was fully reversed in Q4 2023. An update on the
balance of other staged loans is provided below:
Stage 3 loans:
1. $12.4 million net mortgage investment in a multi-family loan currently part of a CCAA process in Montreal.
Status: In Q4 2023 the asset remained in Stage 3, however, a purchaser was selected through a bid
process run by the receiver. The new purchaser will join the existing joint-venture owner to complete the
construction of the multi-family asset. The borrowers have executed a forbearance agreement which
includes the requirement for the borrowers to inject more equity into the project. The Company expects
the loan to be performing in Q1 2024, including the Company being made current on its interest arrears.
The Company ultimately expects full repayment of the loan.
2. $15.6 million net mortgage investment condo inventory exposure in Edmonton.
Status: The Company is actively working to sell the remaining condo inventory. With the assumption that
interest rates will start to decline in 2024, the Company anticipates sales activity to increase in 2024. The
original inventory balance was $23.7 million.
3. $9.0 million net mortgage investment on a medical office building in Ottawa.
Status: The Company engaged a new property manager in Q2 2023 with deep expertise in the market to
complete the leasing strategy. The investment team is confident that the intended repositioning plan of the
asset will generate the best outcome for the property and the ultimate repayment of principal. At the same
time, the Company is exploring redevelopment potential with excess density and potentially targeting a
sales process in the first half of 2024.
4. $38.5 million net mortgage investments in two office properties and one retail property with the same
sponsor in Calgary
Status: The Company continues to be in discussions with the sponsorship group to execute on a
forbearance agreement along with potential plans for the near-term sale of one of the assets. The
Company expects to have a more fulsome update with its Q1 2024 financial results.
TIMBERCREEK FINANCIAL 6
15
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
Stage 2 loans:
1. $18.0 million net mortgage income producing multi-family loan in Edmonton.
Status: The loan was extended in Q4 2023 for a seven month period to enable the borrower to either sell
the property or seek CMHC financing. The Company continues to expect full principal repayment on the
loan.
2. $15.4 million net mortgage investment relating to one income producing office asset in Calgary.
Status: A forbearance agreement has been signed. Additional structure has been implemented which will
see bullet repayments on the loan subject to other non-Calgary related asset sales (via equity pledges) of
in 2024/2025.
Real Estate Inventory:
$62.0 million (net) in a portfolio of three senior living assets in Montreal
Status: The Company has been working with the property manager and has seen improvement in the
asset including an increase in the cash yield. The plan is to continue to stabilize the performance of the
asset and seek a 3rd party sale in due course. The Company does not expect principal losses on the
ultimate sale and will likely reverse its expected credit losses of $2.6 million.
$30.6 million in a portfolio of land in Simcoe County
Status: The Company continues to actively manage the portfolio and is advancing development options
with the city. The business plan will transition to the disposition phase in 2024 with select components of
the portfolio coming to sale.
PORTFOLIO ACTIVITY
In Q4 2023, the Company advanced $61.2 million on 7 new net mortgage investments and made additional
advances of $16.2 million. Portfolio turnover increased to 19.2% (with total mortgage portfolio repayments of
$199.7 million, including borrower repayments of $176.2 million), compared with 6.0% in Q3 2023. Net value of
the mortgage portfolio, excluding syndications, decreased by $122.4 million (from $1,068.6 million in Q3 2023 to
$946.2 million at the end of Q4 2023). The Company’s credit facility had a balance of $260.0 million at the end of
Q4 2023, compared to $405.1 million at the end of Q3 2023.
At the end of Q4 2023, 86.0% of the mortgage investments were secured by income-producing properties ("IPP"),
compared to 86.5% in Q3 2023. Multi-residential real estate assets (apartment buildings) continue to comprise the
largest portion of the portfolio at 56.5% at quarter end, compared to 58.2% in Q3 2023.
The Company's exposure to first mortgages was 88.9% of the net mortgage portfolio at year end. WALTV of
65.6% was lower compared to 67.0% WALTV in Q3 2023. The improvement in WALTV is mostly explained by
new loans funded at lower LTV while loans with higher LTV were discharged in the fourth quarter. Our weighted
average interest rate in Q4 2023 was 10.0% with an exit rate of 10.0% as at December 31, 2023, which is slightly
lower than the 10.1% exit rate at September 30, 2023. The distributable income payout ratio was 82.0% in Q4
2023.
The Company’s mortgage portfolio remains heavily weighted toward Canada’s largest provinces, with
approximately 96.0% of the capital invested in Ontario, British Columbia, Quebec and Alberta, and focused on
urban markets that generally experience better real estate liquidity. Originations in the quarter were largely
centered around low LTV multi-family assets. Management continues to see a good volume of opportunities in its
core multi-residential categories and industrial. The Company believes it can achieve the appropriate risk/return
while providing safety in additional diversification.
16
TIMBERCREEK FINANCIAL 7
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
FINANCIAL HIGHLIGHTS
KEY FINANCIAL
POSITION INFORMATION
Net mortgage investments1
Enhanced Return Portfolio1
Real estate inventory net of collateral liability
CAPITAL STRUCTURE
Total assets
Total liabilities
Shareholders' equity
Book value per share
Convertible debentures, par
Credit facility
Total debentures and credit facility utilized
Maximum credit limit available
Credit utilization rate
COMMON SHARE INFORMATION
Number of common shares outstanding
Closing trading price
Market capitalization
1. Refer to non-IFRS measures section.
December 31, 2023 December 31, 2022 December 31, 2021
$
$
$
$
$
$
$
$
$
$
$
$
$
946,222
62,658
92,556
1,785,957
1,084,818
701,139
8.45
146,000
259,704
405,704
515,537
78.7 %
83,009,516
6.67
553,673
$
$
$
$
$
$
$
$
$
$
$
$
$
1,195,809
72,945
30,245
1,916,039
1,217,496
698,543
8.33
146,000
450,347
596,347
700,528
85.1 %
83,887,516
7.11
596,440
$
$
$
$
$
$
$
$
$
$
$
$
$
1,159,634
84,603
—
1,732,064
1,047,481
684,583
8.33
146,000
449,869
595,869
711,690
83.7 %
82,219,602
9.61
790,130
TIMBERCREEK FINANCIAL 8
17
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
OPERATING RESULTS1
Three months ended
December 31,
Year ended
December 31,
NET INCOME AND COMPREHENSIVE INCOME
2023
2022
2023
2022
2021
Net investment income on financial assets measured
at amortized cost
Fair value gain and other income on financial assets
measured at FVTPL
Net rental income (loss)
Fair value gain (loss) on real estate properties
Expenses
Income from operations
$ 29,722
$ 31,342
$ 124,205
$ 109,803
$ 90,249
463
736
1,282
1,388
(10,291)
327
—
(5,443)
$ 25,069
(278)
82
(6,671)
$ 25,211
(595)
63
(19,140)
$ 105,815
(151)
(296)
(22,592)
$ 88,152
1,499
(4,374)
(16,237)
$ 60,846
Financing costs:
Financing cost on credit facility
Financing cost on convertible debentures
Fair value gain on derivative contract
Net income and comprehensive income
Payout ratio on earnings per share
(7,846)
(2,249)
—
(8,137)
(2,260)
—
$ 14,974 $ 14,814
97.7 %
95.8 %
(30,396)
(8,998)
—
$ 66,421 $
86.7 %
(23,234)
(9,022)
—
55,896 $
103.3 %
(16,734)
(6,745)
(3,940)
41,307
135.9 %
ADJUSTED NET INCOME AND COMPREHENSIVE INCOME
Net income and comprehensive income
$ 14,973
$ 14,814
$ 66,421
$ 55,896
$ 41,307
Add: fair value gain on derivative contract (interest
rate swap)
Add: Net unrealized (gain) loss on financial assets
measured at FVTPL
—
—
—
—
(3,940)
(292)
(122)
(342)
1,546
13,748
Add: Net unrealized loss on real estate properties
Adjusted net income and comprehensive income1
Payout ratio on adjusted earnings per share1
—
$ 14,681
97.7 %
—
$ 14,692
98.6 %
—
$ 66,078
87.2 %
95
$ 57,537
100.3 %
4,374
$ 55,489
101.2 %
PER SHARE INFORMATION
Dividends declared to shareholders
Weighted average common shares (in thousands)
Dividends per share
Earnings per share (basic)
Earnings per share (diluted)
Adjusted earnings per share (basic)1
Adjusted earnings per share (diluted)1
1. Refer to non-IFRS measures section.
$ 14,340
83,176
$ 14,480
83,970
$ 57,603
83,509
$ 57,721 $ 56,142
81,325
83,622
$ 0.17
$ 0.17
$ 0.18
$ 0.18
$ 0.18
$ 0.18
$ 0.18
$ 0.17
$ 0.18
$ 0.17
$
$
$
$
$
0.69
0.80
0.78
0.79
0.78
$
$
$
$
$
0.69 $
0.67 $
0.67 $
0.69 $
0.69 $
0.69
0.51
0.51
0.68
0.68
18
TIMBERCREEK FINANCIAL 9
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
OPERATING RESULTS1
DISTRIBUTABLE INCOME
Adjusted net income and comprehensive income1
Less: Amortization of lender fees
Add: Lender fees received and receivable
Add: Amortization of financing costs, credit
facility
Add: Amortization of financing costs, convertible
debentures
Add: Accretion expense, convertible debentures
Add: Unrealized fair value gain on DSU
Three months ended
December 31,
2022
2023
Year ended
December 31,
2022
2023
$
14,681
$
14,692
$
66,078
$
57,537
(1,886)
2,163
(1,748)
2,056
(8,279)
6,597
399
243
114
(8)
262
253
114
(33)
953
972
454
(67)
(8,726)
7,708
984
1,006
454
(201)
7,482
Add: Expected credit loss
1,782
2,800
3,649
Distributable income1
$
17,488
$
18,396
$
70,357
$
66,244
Payout ratio on distributable income1
82.0 %
78.7 %
81.9 %
87.1 %
PER SHARE INFORMATION
Dividends declared to shareholders
$
14,340
$
14,480 $
57,603
$
57,721
Weighted average common shares (in thousands)
83,176
83,970
83,509
83,622
Dividends per share
Distributable income per share1
1. Refer to non-IFRS measures section.
$
$
0.17
$
0.17 $
0.69
$
0.21
$
0.22 $
0.84
$
0.69
0.79
TIMBERCREEK FINANCIAL 10
19
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
For the three months ended December 31, 2023 (“Q4 2023”) and December 31, 2022 (“Q4 2022”)
•
The net mortgage investment portfolio has decreased by $122.4 million from $1,068.6 million at the end of Q3
2023, to $946.2 million at the end of Q4 2023 (Q4 2022 – $1,195.8 million). The Company advanced $77.3
million in net mortgage investments, offset by total mortgage portfolio repayments of $199.7 million, including
borrower repayments of $176.2 million.
• On net mortgage investment advances, the Company advanced 7 new net mortgage investments (Q4 2022 –
7) totaling $61.2 million (Q4 2022 – $138.6 million) and made additional advances on existing net mortgage
investments of $16.2 million (Q4 2022 – $13.1 million). The collateral on new advances in net mortgage
investments comprised of mainly multi-residential real estate assets. The weighted average interest rate on
new net mortgage investments' advances was 9.9%, an increase from 9.0% in Q3 2023 (Q4 2022 – 9.0%).
• On net mortgage investment repayments, 18 net mortgage investments (Q4 2022 – 14) were fully repaid. The
Company received total mortgage portfolio repayments of $199.7 million (Q4 2022 – $208.7 million), including
borrower repayments of $176.2 million (Q4 2022 – $211.4 million). The weighted average interest rate on fully
repaid net mortgage investments was 10.6%, consistent with 10.6% in Q3 2023 (Q4 2022 – 9.1%). The
turnover ratio was 19.2% for Q4 2023 compared to 17.2% in Q4 2022.
•
The quarterly weighted average interest rate on net mortgage investments was 10.0% in Q4 2023, compared
to 9.9% in Q3 2023 (Q4 2022 – 9.7%).
◦
◦
In Q4 2023 first mortgage positions represented 88.9% of the net mortgage investments whereas first
mortgage positions represented 92.4% of the net mortgage investments in Q4 2022 .
Interest rate exposure in the existing portfolio was well protected at the end of Q4 2023 floating rate
loans with rate floors representing 86.1% (Q4 2022 – 88.5%). Of the remaining portfolio, 7.2% (Q4
2022 – 5.4%) is allocated to floating rate loans without floors and 6.7% (Q4 2022 – 6.0%) is allocated
to fixed rate loans.
• Other investments within the enhanced return portfolio were $62.7 million (Q4 2022 – $72.9 million), year-
over-year decrease of $10.2 million primarily due to loan repayments partially offset by investment in equity
instrument.
Net investment income on financial assets measured at amortized cost decreased by $1.6 million from the
previous year ($29.7 million in Q4 2023 compared to $31.3 million in Q4 2022), predominantly due to lower
average balance in net mortgage investments ($1,042.6 million in Q4 2023 compared to $1,227.4 million in
Q4 2022).
Fair value gain and other income on financial assets measured at FVTPL decreased from a net gain of $0.7
million in Q4 2022. to a net gain $463 in Q4 2023 due to lower fair value mortgage balance.
Net rental income of $327 (Q4 2022 – loss of $278) includes three months of net rental income of $0.7 million
(Q4 2022 – nil) from the real estate properties inventory which were acquired on August 31, 2023. Net rental
income was partially offset by net rental loss from land inventory of $332 (Q4 2022 – loss of $278) which was
acquired in May 2022.
No fair value gain or loss on real estate properties was recorded in Q4 2023 (Q4 2022 – loss of $296).
Expenses for the quarter were $5.4 million (Q4 2022 – $6.7 million).
◦ Management fees of $2.8 million (Q4 2022 – $3.0 million). The average gross assets were
$1,213.4 million compared to $1,344.3 million in Q4 2022.
•
•
•
•
•
20
TIMBERCREEK FINANCIAL 11
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
◦ General and administrative expenses of $0.7 million for Q4 2023 (Q4 2022 – $0.6 million), after
adjusting for the impact of DSU market-to-market gains of $8 (Q4 2022 – gains of $33) and foreign
exchange losses of $56 (Q4 2022 – losses of $211), adjusted general and administrative expenses
were $0.6 million (Q4 2022 – $430) for the quarter, representing an increase of $185 over the
comparable quarter. Increase is largely driven by an increase in professional fees in the quarter.
◦
Provisions for mortgage investment expected credit losses of $1.8 million for Q4 2023 (Q4 2022 –
$2.8 million), The reduction is largely driven by the recovery of $1.6 million provisions from Stage 3
loans which are now in Stage 1 and have subsequently been fully repaid with no losses. Offsetting
this is an increase in Stage 2 and 3 loan loss provisions of $1.4 million which include provisions for
interest not yet earned.
Income from operations saw a $100 decrease over the prior year ($25.1 million in Q4 2023 compared to
$25.2 million in Q4 2022) largely driven by a decrease in ECL provisions of $1.0 million as noted above,
partially offset by a decrease in net investment income of $1.6 million.
Financing cost on the credit facility was $7.8 million (Q4 2022 – $8.1 million), including interest expense of
$7.4 million (Q4 2022 – $7.9 million) and financing cost amortization of $401 (Q4 2022 – $262). A decrease in
interest expense of $428 over the prior year comparative period is primarily due to a $137.3 million decrease
in average credit utilization (Q4 2023 was $359.0 million compared to $496.3 million in Q4 2022), partially
offset by the increased base rate of borrowing of 75 basis points since the comparable quarter (Q4 2023 –
prime rate of 7.20% compared to Q4 2022 – 6.45%).
Financing cost on the convertible debentures was $2.2 million (Q4 2022 – $2.3 million), including interest
expense of $1.9 million (Q4 2022 – $1.9 million) and financing cost amortization and accretion expense of
$357 (Q4 2022 – $367).
Net income and comprehensive income of $15.0 million (Q4 2022 – $14.8 million) or basic earnings per share
of $0.18 (Q4 2022 – $0.18 basic earnings per share), representing a payout ratio of 95.8% (Q4 2022 –
97.7%).
After adjusting for the unrealized fair value gain from financial assets measured at FVTPL of $292 (Q4 2022 –
gain of $122), the Company generated adjusted net income and comprehensive income of $14.7 million (Q4
2022 – $14.7 million) or basic and diluted adjusted earnings per share of $0.18 and $0.18 (Q4 2022 – $0.17
and $0.17 basic and diluted adjusted earnings per share).
The Company declared $14.3 million in dividends to common shareholders (Q4 2022 – $14.5 million),
representing a payout ratio of 97.7% (Q4 2022 – 98.6%) on an adjusted earnings per share basis.
Non-refundable lender fees recorded were $2.2 million (Q4 2022 – $2.1 million), origination activity is lower in
the comparable quarter, $61.2 million in Q4 2023 versus $138.6 million issued in Q4 2022. The quarterly
weighted average lender fees on new and renewed mortgages was 1.0% during the quarter (Q4 2022 –
1.2%), while the quarterly weighted average lender fee on new mortgages only was 1.2% (Q4 2022 – 1.4%).
The Company generated distributable income of $17.5 million (Q4 2022 – $18.4 million) or distributable
income per share of $0.21 (Q4 2022 – $0.22 per share) representing a payout ratio of 82.0% (Q4 2022 –
78.7%) for the quarter.
The Company repurchased 332,600 common shares in Q4 2023 (Q4 2022 – 107,500) for cancellation at an
average price of $6.53 (Q4 2022 – $7.20) per share.
The Company paused its ATM program starting in Q3 2022 due to depressed stock price. Under the program,
the Company was allowed to issue common share from treasury for up to $90 million prior to July 11, 2023.
•
•
•
•
•
•
•
•
•
•
TIMBERCREEK FINANCIAL 12
21
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
For the years ended December 31, 2023 (“2023”) and December 31, 2022 (“2022”)
•
•
The net mortgage investment portfolio as at December 31, 2023 decreased by $249.6 million to $946.2
million from the net mortgage investment portfolio as at December 31, 2022 of $1,195.8 million. The Company
advanced $313.2 million in net mortgage investments, offset by total mortgage portfolio repayments of
$498.4 million, including borrower repayments of $427.6 million. In addition, the Company also exchanged a
mortgage investment of $64.4 million for ownership of the underlying collateral, which it intends to sell.
The Company advanced 27 new net mortgage investments (2022 – 48) totaling $223.4 million (2022 – $559.1
million), made additional advances on existing net mortgage investments totaling $89.8 million (2022 – $77.6
million).
• On net mortgage investment repayments, 46 (2022 – 44) were fully repaid with a balance of $390.9 million
(2022 – $395.3 million). Partial repayments on net mortgage investments were $36.6 million (2022 –
$77.8 million). Additionally, the Company syndicated out $70.8 million of its mortgage investments during
2023 (2022 – $93.7 million).
• WALTV decreased to 65.6% as at December 31, 2023 compared to 68.3% as at December 31, 2022. This is
primarily due to new mortgage originations at lower LTVs and repayment of loans with higher LTVs.
•
Net mortgage investments of $946.2 million bore a weighted average interest rate of 10.0% as at December
31, 2023 (December 31, 2022 – $1,195.8 million, 10.0%). Weighted average interest rate in the existing net
mortgage portfolio is well protected at the end of Q4 2023 with only 6.7% of the portfolio at fixed interest rates
(December 31, 2022 – 6.0%) and floating interest rate loans with rate floors representing 86.1% of the
portfolio (December 31, 2022 – 88.5%).
• Other investments within the enhanced return portfolio were $62.7 million, including an expected credit loss of
$337 (December 31, 2022 – $72.9 million and $0.7 million, respectively). The decrease in other investments
was primarily due to repayments of other loan investments of $13.5 million in the year, partially offset by an
investment of $3.0 million in equity instrument.
Net investment income on financial assets measured at amortized cost was $124.2 million (2022 – $109.8
million), an increase of $14.4 million, or 13.1% from 2022. The increase in net investment income was
primarily driven by 475 basis points Bank of Canada policy rate increases over past two years (December 31,
2023 – prime rate of 7.20% compared to December 31, 2022 - prime rate of 6.45%, and January 1, 2022 –
prime rate of 2.45%), partially offset by lower average net mortgage investments through the year.
Fair value gain and other income on financial assets measured at FVTPL was consistent with prior year, a net
gain of $1.3 million in 2023 compared to a net gain of $1.4 million in 2022.
Net rental loss from real estate inventory was $0.6 million (2022 – loss of $151), consists of four months of net
rental income of $0.9 million (2022 – nil) from the real estate properties inventory which was acquired on
August 31, 2023. Net rental income from the real estate properties inventory was offset by the net rental loss
from land inventory of $1.5 million (2022 – loss of $0.7 million) which was acquired in May 2022.
Fair value gain of $63 on real estate properties was recorded in 2023 (2022 – loss of $296).
Expenses for 2023 were $19.1 million (2022 – $22.6 million).
◦ Management fees of $11.8 million (2022 – $12.2 million). The average gross assets were lower at
$1,243.3 million compared to $1,362.2 million in 2022.
◦ General and Administrative expenses of $2.9 million (2022 – $2.1 million), after adjusting for the
impact of DSU mark-to-market gains of $67 (2022 – gains of $201) and foreign exchange losses of
$71 (2022 – gains $144), adjusted general and administrative expenses were $2.9 million (2022 –
$2.5 million). Included in general and administration expenses for the year are $0.8 million of legal
costs associated with Stage 3 loans in Quebec which may be recovered by the Company.
•
•
•
•
•
22
TIMBERCREEK FINANCIAL 13
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
◦
Provisions for mortgage investment losses for the year were $3.6 million (2022 – $7.5 million), higher
provisions in 2022 were related to new Stage 3 loans, which either reversed/transferred or remained
consistent in 2023. 2023 provisions are reflective of the recovery of a $0.8 million provision from
Stage 3 loans which are now in Stage 1 and have subsequently been fully repaid with no losses.
Offsetting this are additional Stage 2 and Stage 3 loan loss provisions of $3.4 million which include
provisions for interest not yet earned.
The Company generated income from operations of $105.8 million (2022 – $88.4 million). This is an increase
of $17.6 million or 20.0% from 2022 driven by the factors noted above.
Financing costs on credit facility were $30.4 million (2022 – $23.0 million), including interest expense of $29.4
million (2022 – $22.0 million) and financing cost amortization of $1.0 million (2022 – $1.0 million). The
significant increase in financing costs was primarily due to 475 basis points of Bank of Canada policy rate
increases over the two year comparable period (December 31, 2023 – prime rate of 7.20% compared to
December 31, 2022 at 6.45% and January 1, 2022 at 2.45%), partially offset by a 24% lower average
utilization of the credit facility (2023 – $390.9 million versus 2022 – $510.9 million).
Financing costs on convertible debentures were $9.0 million (2022 – $9.0 million), including interest expense
of $7.6 million (2022 – $7.6 million), same as prior year and amortization and accretion of $1.4 million (2022 –
$1.5 million).
The Company generated net income and comprehensive income of $66.4 million (2022 – $56.3 million) or
basic and diluted earnings per share of $0.80 and $0.78 (2022 – basic and diluted earnings per share of
$0.67), representing a payout ratio on earnings per share of 86.7% (2022 – 103.3%). The results were
significantly improved over the prior year period as a result of higher top-line interest income and lower
expected credit loss.
The Company generated adjusted net income and comprehensive income of $66.1 million (2022 – $57.5
million) or basic and diluted adjusted earnings per share of $0.79 and $0.78 (2022 – basic and diluted
adjusted earnings per share of $0.69). The Company declared $57.6 million in dividends (2022 – $57.7
million) to common shareholders, representing a payout ratio of 87.2% (2022 – 100.3%) on an adjusted
earnings per share basis.
Non-refundable lender fees recorded were $6.6 million (2022 – $7.7 million). Lender fees decreased mainly
due to lower origination activities. The overall weighted average lender fee on new and renewed mortgages
during the year was 1.0% (2022 – 1.1%), while the weighted average lender fee on only new mortgages
funded in 2023 was 1.3% (2022 – 1.2%)
The Company generated distributable and adjusted distributable income of $70.4 million (2022 – $66.2
million) or distributable and adjusted distributable income per share of $0.84 (2022 – distributable and
adjusted distributable income per share of $0.79), representing a payout ratio of 81.9% (2022 – 87.1%) on a
distributable and adjusted distributable income basis.
The Company repurchased 878,000 common shares (2022 – 117,500) for $6.2 million (2022 – $0.8 million) at
an average price of $7.09 (2022 – $7.20) per share.
The company paused its ATM program from Q3 2022. During 2023, the Company did not issue any common
shares from treasury under the program. During 2022, the Company issued 1,504,300 common shares for
gross proceeds of $14.3 million at an average price of $9.52 per common share.
•
•
•
•
•
•
•
•
•
TIMBERCREEK FINANCIAL 14
23
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
ANALYSIS OF FINANCIAL INFORMATION FOR THE PERIOD
Net investment income on financial assets measured at amortized cost
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.
During Q4 2023 and 2023, the Company earned net investment income on financial assets measured at
amortized cost of $29.7 million and $124.2 million (Q4 2022 – $31.3 million; 2022 – $109.8 million). Net
investment income includes the following:
a.
Interest income
During Q4 2023 and 2023, the Company earned interest income on mortgage investments at amortized cost of
$26.5 million and $110.2 million (Q4 2022 – $28.9 million; 2022 – $96.0 million). The decrease in interest income
for the quarter was due to higher turnover on loan repayments, resulting in net mortgage investments balance
decreasing from $1,195.8 million at December 31, 2022, to $946.2 million at December 31, 2023. The overall
increase in interest income for the year is primarily explained by higher weighted average interest rate of 9.9% on
$1,110.9 million average net mortgage balance, compared to weighted average interest rate of 8.1% on $1,187.4
million in 2022.
During Q4 2023 and 2023, the Company earned $1.2 million and $5.0 million (Q4 2022 – $1.1 million; 2022 –
$5.3 million) of interest income on other loan investments in the enhanced return portfolio. Quarter over quarter
interest income is consistent, average interest rate increased slightly driving revenues up, offset by lower average
loan balance in other loan investments. The decrease in interest income for the year is a result of lower average
balance in other loan investments.
b. Lender fee income
During Q4 2023 and 2023, the Company recognized income from amortization of lender fees on net mortgage
investments, net of fees relating to mortgage syndication liabilities of $1.8 million and $7.9 million (Q4 2022 – $1.8
million; 2022 – $8.5 million). Additionally, in Q4 2023 and 2023, the Company recorded non-refundable lender
fees on net mortgage investments, net of fees relating to mortgage syndication liabilities, of $2.2 million and $6.3
million (Q4 2022 – $2.0 million; 2022 – $7.4 million), which are amortized to interest income over the term of the
related net mortgage investments using the effective interest rate method.
During Q4 2023 and 2023, the Company recognized income from amortization of lender fees on other loan
investments of $66 and $407 (Q4 2022 – reversal of $78; 2022 – income of $267). Additionally, in Q4 2023 and
2023, the Company recorded non-refundable upfront cash lender fees of nil and $300 (Q4 2022 – $103; 2022 –
$296), which are amortized over the term of the related other loan investments using the effective interest rate
method.
The weighted average lender fee on new and renewed mortgages of 1.0% and 1.0% for 2023, respectively (Q4
2022 – 1.2%; 2022 – 1.1%), while the weighted average lender fee on new mortgages only was 1.2% and 1.3%
for 2023, respectively (Q4 2022 – 1.4%; 2022 – 1.2%).
c. Other income/loss
During 2023, the Company recognized other income of $177 and $0.7 million (Q4 2022 – $177; 2022 – $487),
attributable to bank interest income and income from lease receivables.
24
TIMBERCREEK FINANCIAL 15
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
Fair value gains (losses) and other income on financial assets measured at FVTPL
During Q4 2023 and 2023, the Company recognized fair value gain and other income on financial assets
measured at FVTPL of $463 and $1.3 million (Q4 2022 – $0.7 million; 2022 – $1.4 million).
The Company generated net interest income and other income on net mortgage investments measured at FVTPL
of $171 in Q4 2023 and $0.7 million in 2023 (Q4 2022 – $0.7 million; 2022 – $1.9 million). The Company
continues to measure its FVTPL assets using the direct comparison method, comparing the assets to directly
comparable properties and has not recorded any fair value adjustments during the year (Q4 2022 – fair value loss
of $122; 2022 – fair value loss of $1.7 million).
On investment in participating debentures measured at FVTPL, during Q4 2023 and 2023, the Company received
total cash distribution of nil and $1.0 million, respectively (Q4 2022 – $46; 2022 – $0.6 million), out of which nil
and $0.7 million were a return of capital on the investment (Q4 2022 – $1; 2022 – $174), nil and $274 were a
distribution of income (Q4 2022 – $45; 2022 – $452). During Q4 2023 and 2023, the Company recognized an
unrealized fair value gain of $292 and $342 (Q4 2022 – gain $409; 2022 – loss of $67).
Net rental income (loss) from real estate inventory
Real estate inventory generated net rental income of $327 during Q4 2023 and net rental loss of $0.6 million
during 2023, respectively (Q4 2022 – loss of $278; 2022 – loss of $151).
Land inventory operations which were acquired in May 2022, incurred net rental loss of $332 in Q4 2023 and $1.5
million in 2023 (Q4 2022 – loss of $278; 2022 – loss of $0.7 million).
Real estate properties inventory which were acquired in August 2023, generated net rental income of $0.7 million
in Q4 2023 and $0.9 million in 2023 (Q4 2022 – nil; 2022 – nil).
In 2022, net rental income for the year includes $0.5 million that was related to investment properties which were
disposed on April 28, 2022.
Fair value loss on real estate properties
In the year ended 2023, no fair value loss recognized on current real estate properties. The Company received
$63 in final distributions of working capital release from an investment property disposed in 2022. Recovery
received in 2023 partially offsets loss of $296 recognized in 2022.
Expenses
Management, Servicing and Arrangement Fees
The management agreement has a term of 10 years that commenced on April 1, 2020 and is automatically
renewed for successive five year terms at the expiration of the initial term and pays (i) management fee equal to
0.85% per annum of the gross assets of the Company, calculated and paid monthly in arrears, plus applicable
taxes, and (ii) servicing fee equal to 0.10% of the amount of any senior tranche of a mortgage that is syndicated
by the Manager to a third party investor on behalf of the Company, where the Company retains the corresponding
subordinated portion. Gross assets are defined as the total assets of the Company less unearned revenue before
deducting any liabilities, less any amounts that are reflected as mortgage syndication liabilities.
TIMBERCREEK FINANCIAL 16
25
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
As compensation for the Manager’s work on syndicating any mortgage investments, the Management Agreement
permits the Manager to collect a portion of the lender fee paid by borrowers of mortgage investments. The
Management Agreement provides that, in respect of each mortgage investment made on or after April 1, 2020
involving syndication to another party of a senior tranche with the Company retaining a subordinated component,
the Manager shall be entitled to retain, from any lender fee generated in respect of such loan, an amount equal to
0.20% of the whole loan amount ("Arrangement Fee") if such syndication occurs within 90 days of closing of the
mortgage. The Arrangement Fee will not apply to any renewal of existing mortgage investments which already
include syndicated senior and subordinated components. The Manager may make an annual election, subject to
approval of the independent Directors of the Board, to receive the Arrangement Fee in common shares of the
Company instead of cash.
For Q4 2023 and 2023, the Company incurred management fees of $2.8 million and $11.8 million (Q4 2022 –
$3.0 million; 2022 – $12.2 million). The average gross assets were $1,213.4 million and $1,243.3 million (Q4 2022
– $1,344.3 million and 2022 – $1,362.2 million). For Q4 2023 and 2023, the Company incurred $177 and $0.7
million, respectively (Q4 2022 – $217 and 2022 – $0.8 million) in servicing fees. For Q4 2023 and 2023,
Arrangement Fees of $299 and $0.8 million, respectively, paid by borrower were retained by the Manager (Q4
2022 – $202 and 2022 – $0.8 million).
Loan loss provisions
Provisions for mortgage investment losses for Q4 2023 and 2023 were $1,782 and $3.6 million (Q4 2022 – $2.8
million; 2022 – $7.5 million). Higher provisions in 2022 was related to new Stage 3 loans recognized in the
previous year, which either reversed or remained consistent this year. Lower provisions in the current year are
largely driven by the recovery of a $1.6 million provision from Stage 3 loans which are now in Stage 1 and have
subsequently been fully repaid with no losses. Offsetting this are additional Stage 2 and Stage 3 loan loss
provisions which include a provision for 12 month forward interest not yet earned. The loan loss provisions are an
approximation of losses on the Stage 2 and Stage 3 loans and include future interest on the loans until the
anticipated exit/resolution date of the loan.
General and administrative
For Q4 2023 and 2023, the Company incurred general and administrative expenses of $0.7 million and $2.9
million, respectively (Q4 2022 – $0.6 million; 2022 – $2.1 million). General and administrative expenses consist
mainly of audit fees, professional fees, director fees, legal fees, non-reimbursable legal fees, other operating
costs, administration of the mortgage and other investments portfolio, DSU expense including mark-to-market
adjustments and foreign exchange net losses.
After adjusting for foreign currency net realized and unrealized losses of $56 and $71 for Q4 2023 and 2023, and
non-cash mark to market gains on DSUs of $8 and $67, for Q4 2023 and 2023 respectively, general and
administrative expenses would have been $0.6 million and $2.9 million for Q4 2023 and 2023 ($430 and
$2.5 million for Q4 2022 and 2022). The adjusted increase compared to prior quarter relates to professional fees,
while an increase in the year was mainly due to non-reimbursable legal costs associated with Stage 3 loans in
Quebec.
Financing Costs
Financing cost on credit facility
Interest on the credit facility is recorded in financing costs using the effective interest rate method. For Q4 2023
and 2023, included in financing costs is interest on the credit facility of $7.4 million and $29.4 million (Q4 2022 –
$7.9 million; 2022 – $22.0 million), respectively. Additionally, financing costs amortization of $400 and $1.0 million
(Q4 2022 – $262; 2022 – $1.0 million) were included in financing costs.
26
TIMBERCREEK FINANCIAL 17
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
The quarterly interest expense on credit facility was $0.5 million lower in Q4 2023 compared to Q4 2022 mainly
due to lower average credit utilization (Q4 2023 $359.0 million compared to $496.3 million in Q4 2022). Higher
interest expense on credit facility in 2023 compared to 2022 was mainly due to higher borrowing rates (prime rate
increased by 475 bps from 2022 to 2023), partially offset by the overall lower average credit utilization of $390.9
million in 2023 (2022 – $510.9 million).
For 2022 comparative period, the company incurred interest on the credit facility relating to investment properties
disposed on April 2022, Q4 2022 and 2022 financing costs were nil and $253, respectively.
Financing cost on convertible debentures
The Company has $46.0 million of 5.00% convertible unsecured subordinated debentures, $55.0 million of 5.25%
convertible unsecured subordinated debentures, and $45.0 million of 5.30% convertible unsecured subordinated
debentures outstanding as at December 31, 2023. 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
Amortization of issue costs and accretion of the convertible debentures
Total financing cost on convertible debentures
Earnings per share
PER SHARE INFORMATION
Dividends per share
Earnings per share (basic)
Earnings per share (diluted)
Adjusted earnings per share (basic)1
Adjusted earnings per share (diluted)1
Distributable income per share1
1. Refer to non-IFRS measures section.
Three months ended
December 31,
2022
1,893 $
367
2,260 $
2023
1,893 $
357
2,250 $
$
$
Year ended
December 31,
2022
7,562
1,460
9,022
2023
7,572 $
1,426
8,998 $
Three months ended
December 31,
Year ended
December 31,
2023
0.17 $
0.18 $
0.18 $
0.18 $
0.18 $
0.21 $
2022
0.17 $
0.18 $
0.18 $
0.17 $
0.17 $
0.22 $
2023
0.69 $
0.80 $
0.78 $
0.79 $
0.78 $
0.84 $
2022
0.69
0.67
0.67
0.69
0.69
0.79
$
$
$
$
$
$
In accordance with IFRS Accounting Standards, convertible debentures are considered for potential dilution in the
calculation of the diluted earnings per share. Each series of convertible debentures is considered individually and
only those with dilutive effect on earnings are included in the diluted earnings per share calculation. Convertible
debentures that are considered dilutive are required by IFRS Accounting Standards to be included in the diluted
earnings per share calculation notwithstanding that the conversion price of such convertible debentures may
exceed the market price and book value of the Company’s common shares.
Diluted earnings per share are calculated by adding back the interest expense relating to the dilutive convertible
debentures to total net income and comprehensive income and increasing the weighted average number of
common shares by treating the dilutive convertible debentures as if they had been converted on the later of the
beginning of the reporting period or issuance date.
TIMBERCREEK FINANCIAL 18
27
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
STATEMENTS OF FINANCIAL POSITION
Net Mortgage Investments
The Company’s exposure to the financial returns is related to the net mortgage investments as mortgage
syndication liabilities are non-recourse mortgages with periodic variance having no impact on Company's financial
performance. Reconciliation of gross and net mortgage investments balance is as follows:
Net Mortgage Investments
Mortgage investments, excluding mortgage syndications
Mortgage syndications
Mortgage investments, including mortgage syndications
Mortgage syndication liabilities
Interest receivable
Unamortized lender fees
Expected credit loss
Net mortgage investments
December 31, 2023 December 31, 2022
1,189,215
$
611,291
1,800,506
(611,291)
1,189,215
(10,812)
6,801
10,605
1,195,809
943,488 $
601,624
1,545,112
(601,624)
943,488
(14,585)
5,226
12,093
946,222 $
$
Three months ended
December 31,
2022
113
10,862 $
1,227,371 $
Net mortgage investments
statistics and ratios1
Total number of mortgage investments
Average net mortgage investment
Average net mortgage investment portfolio
Weighted average interest rate for the period
Weighted average lender fees for the period
Turnover ratio
Average remaining term to maturity (years)
Net mortgage investments secured by cash-
$
$
flowing properties
WALTV
1. Refer to non-IFRS measures section.
2023
94
11,092 $
1,042,629 $
10.0 %
1.0 %
19.2 %
0.7
86.0 %
65.6 %
9.7 %
1.2 %
17.2 %
0.9
87.4 %
68.3 %
Year ended
December 31,
2022
113
10,862
1,187,365
8.1 %
1.1 %
39.8 %
0.9
87.4 %
68.3 %
2023
94
11,092 $
1,110,926 $
9.9 %
1.0 %
44.9 %
0.7
86.0 %
65.6 %
28
TIMBERCREEK FINANCIAL 19
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
Portfolio allocation
The Company’s net mortgage investments were allocated across the following categories:
a. Security position
December 31, 2023
December 31, 2022
Interest in first mortgages
Interest in second and third mortgages1
Net Mortgage
Investments
1,105,431
90,378
1,195,809
1Included in the Company's interest in second and third mortgages as at December 31, 2023 was $14.1 million of the net mortgage
investments in which the Company holds a subordinated position (December 31, 2022 – $12.5 million). The Company's syndicated partners
who hold a senior position as at December 31, 2023 was $16.4 million (December 31, 2022 – $14.2 million).
Net Mortgage
Investments
841,264
104,958
946,222
Number
82
12
94
Number
102
11
113
$
$
$
$
b. Region
Quebec
Ontario
British Columbia
Alberta
Other (Saskatchewan, Nova Scotia, Manitoba and
New Brunswick)
c. Maturity
2023
2024
2025
2026
2027
December 31, 2023
December 31, 2022
Number
25
32
17
10
10
94
Net Mortgage
Investments
278,226
306,163
217,125
107,190
37,518
946,222
$
$
Number
36
33
25
9
10
$
Net Mortgage
Investments
449,571
295,664
298,778
99,936
51,860
113
$
1,195,809
December 31, 2023
December 31, 2022
Number
—
62
22
9
1
94
Net Mortgage
Investments
—
679,801
198,624
67,672
125
946,222
$
$
Number
65
41
5
2
—
113
Net Mortgage
Investments
676,561
398,124
45,284
75,840
—
1,195,809
$
$
d. Asset Type / WALTV at origination
December 31, 2023
December 31, 2022
WALTV at
origination
Number
Multi-Residential1
Retail
Unimproved Land2
Improved Land3
Office
Retirement
Industrial
Single-Residential
Net mortgage investments
measured at FVTPL
Number
62 $
9
2
3
6
1
7
3
93
1
Net Mortgage
Investments
534,209
149,127
28,755
28,816
75,028
14,299
61,090
49,398
940,722
5,500
94 $
946,222
69.2 %
70.3 %
36.7 %
55.4 %
58.8 %
71.3 %
51.9 %
55.4 %
65.3 %
n/a
Net Mortgage
Investments
627,892
151,806
30,143
25,954
83,556
78,649
109,424
82,885
68 $
12
2
3
6
2
16
3
112
1,190,309
1
5,500
113 $
1,195,809
WALTV at
origination
70.4 %
70.4 %
61.6 %
55.2 %
62.5 %
80.8 %
60.1 %
54.0 %
67.9 %
n/a
1 Includes 6 construction loans (December 31, 2022 – 6) totaling $40.3 million (December 31, 2022 – $27.2 million). Construction loans are
provided for the purposes of building a new asset.
2 Unimproved land means serviced or unserviced lands that do not contemplate construction during the loan period.
3 Improved land means serviced land with non-income producing properties intended to be substantially renovated or demolished that do not
contemplate construction during the loan period.
TIMBERCREEK FINANCIAL 20
29
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
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. 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. In one
participation agreement, an option is provided to the third-party lender to sell their senior position back to the
Company, at a purchase price equal to the outstanding principal amount of $35.1 million, the lenders'
proportionate share together with all accrued interest. The Company has mortgage syndication liabilities of $601.6
million (December 31, 2022 – $611.3 million). In general, mortgage syndication liabilities vary from quarter to
quarter and are dependent on the type of investments seen at any particular time and are not necessarily
indicative of a future trend.
Expected Credit Loss (“ECL”)
The expected credit losses are maintained at a level that management considers adequate to absorb credit-
related losses on our mortgage and other loan investments, measured at amortized cost. The expected credit
losses amounted to $12.4 million as at December 31, 2023 (December 31, 2022 – $11.4 million), of which $12.1
million (December 31, 2022 – $10.6 million) was recorded against mortgage investments and $337
(December 31, 2022 – $0.7 million) was recorded against other investments.
Multi-residential
Mortgage Investments
Mortgages, including mortgage
syndications1
Mortgage syndication liabilities1
Net mortgage investments
Expected credit losses2
As at December 31, 2023
As at December 31, 2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$ 943,841 $ 58,235 $ 51,293 $ 1,053,369 $ 1,020,893 $
417,639
40,280
526,202
17,955
780
525,422
280
17,675
38,862 496,781 382,077
12,431 556,588 638,816
1,424
1,455
12,036 555,133 637,392
395
— $ 132,767 $ 1,153,660
60,361 442,438
—
—
—
—
72,406 711,222
1,409
2,833
70,997 708,389
Other Mortgage Investments
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Mortgages, including mortgage
syndications1
Mortgage syndication liabilities1
Net mortgage investments
Expected credit losses2
425,157
107,493
15,357
—
317,664
15,357
560
317,104
732
14,625
65,641 506,155 628,128
— 107,493 170,508
65,641 398,662 457,620
414
10,638
56,295 388,024 457,206
9,346
—
—
—
—
—
32,227 660,355
— 170,508
32,227 489,847
7,358
7,772
24,869 482,075
Other loan Investments
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Mortgages, including mortgage
syndications1
Mortgage syndication liabilities1
Net mortgage investments
Expected credit losses2
47,399
—
47,399
337
$ 47,062 $
—
—
—
—
— $
—
—
—
47,399
—
47,399
337
60,742
—
60,742
—
— $ 47,062 $ 59,997 $
745
—
—
—
—
— $
—
—
—
60,742
—
60,742
—
745
— $ 59,997
1Including interest receivable.
2Expected credit losses in finance lease receivable and unadvanced commitments are all considered to be with minimal ECL.
30
TIMBERCREEK FINANCIAL 21
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
The changes in the expected credit losses year to date are shown in the following tables:
Multi-residential Mortgage
Investments
Balance at beginning of period
Expected credit losses:
Remeasurement
Transfer to/(from)
Stage 1
Stage 2
Stage 3
Total expected credit losses
Fundings
Gross Write-Offs
Recoveries
Discharges
Derecognition against inventory
Balance at end of period
Other Mortgage Investments
Balance at beginning of period
Expected credit losses:
Remeasurement
Transfer to/(from)
Stage 1
Stage 2
Stage 3
Total expected credit losses
Fundings
Gross Write-Offs
Recoveries
Discharges
Balance at end of period
Other loan Investments
Balance at beginning of period
Expected credit losses:
Remeasurement
Transfer to/(from)
Stage 1
Stage 2
Stage 3
Total expected credit losses
Fundings
Gross Write-Offs
Recoveries
Discharges
Year Ended December 31, 2023
Year Ended December 31, 2022
Stage 1
$ 1,424 $
Stage 2
Stage 3
— $ 1,409 $
Total
2,833 $
Stage 1
Stage 2
Stage 3
882 $
— $
— $
Total
882
(623)
239
1,556
1,172
352
—
1,277
1,629
(41)
—
—
760
218
—
—
(198)
—
780 $
—
41
—
280
—
—
—
—
—
280 $
—
—
—
2,965
—
—
—
—
(2,570)
395 $
(41)
41
—
4,005
218
—
—
(198)
(2,570)
1,455 $ 1,424 $
(132)
—
—
1,102
698
—
—
(376)
—
$
(132)
—
—
—
—
—
132
132
—
2,511
1,409
—
698
—
—
—
—
—
—
—
—
(376)
—
—
—
—
—
— $ 1,409 $ 2,833
Stage 1
Stage 2
Stage 3
$
414 $
— $ 7,358 $
Total
7,772 $
Stage 1
283 $
Stage 2
Stage 3
Total
52 $ 1,753 $ 2,088
269
727
1,925
2,921
119
—
5,553
5,672
(68)
—
—
615
25
—
—
(80)
560 $
$
—
5
—
732
—
—
—
—
—
—
63
9,346
—
—
—
—
732 $ 9,346 $ 10,638 $
(68)
5
63
10,693
25
—
—
(80)
—
—
—
402
58
—
—
(46)
414 $
—
—
—
(52)
—
(52)
52
52
—
7,760
7,358
—
58
—
—
—
—
—
—
—
—
—
(46)
—
— $ 7,358 $ 7,772
Stage 1
Stage 2
Stage 3
$
745 $
— $
— $
Total
745 $
Stage 1
Stage 2
Stage 3
898 $
— $
— $
Total
898
(364)
—
—
(364)
(111)
—
—
(111)
—
—
—
381
—
—
—
(44)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
381
—
—
—
(44)
—
—
—
787
22
—
—
(64)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
787
22
—
—
(64)
745
Balance at end of period
$
337 $
— $
— $
337 $
745 $
— $
— $
TIMBERCREEK FINANCIAL 22
31
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
The following is a brief summary of the other loans reported in Stage 3 and Stage 2:
Stage 3 loans:
1. $12.4 million net mortgage investment in a multi-family loan currently part of a CCAA process in Montreal.
Status: In Q4 2023 the asset remained in Stage 3, however, a purchaser was selected through a bid
process run by the receiver. The new purchaser will join the existing joint-venture owner to complete the
construction of the multi-family asset. The borrowers have executed a forbearance agreement which
includes the requirement for the borrowers to inject more equity into the project. The Company expects
the loan to be performing in Q1 2024, including the Company being made current on its interest arrears.
The Company ultimately expects full repayment of the loan.
2. $15.6 million net mortgage investment condo inventory exposure in Edmonton.
Status: The Company is actively working to sell the remaining condo inventory. With the assumption that
interest rates will start to decline in 2024, the Company anticipates sales activity to increase in 2024. The
original inventory balance was $23.7 million.
3. $9.0 million net mortgage investment on a medical office building in Ottawa.
Status: The Company engaged a new property manager in Q2 2023 with deep expertise in the market to
complete the leasing strategy. The investment team is confident that the intended repositioning plan of the
asset will generate the best outcome for the property and the ultimate repayment of principal. At the same
time, the Company is exploring redevelopment potential with excess density and potentially targeting a
sales process in the first half of 2024.
4. $38.5 million net mortgage investments in two office properties and one retail property with the same
sponsor in Calgary
Status: The Company continues to be in discussions with the sponsorship group to execute on a
forbearance agreement along with potential plans for the near-term sale of one of the assets. The
Company expects to have a more fulsome update with its Q1 2024 financial results.
Stage 2 loans:
1. $18.0 million net mortgage income producing multi-family loan in Edmonton.
Status: The loan was extended in Q4 2023 for a seven month period to enable the borrower to either sell
the property or seek CMHC financing. The Company continues to expect full principal repayment on the
loan.
2. $15.4 million net mortgage investment relating to one income producing office asset in Calgary.
Status: A forbearance agreement has been signed. Additional structure has been implemented which will
see bullet repayments on the loan subject to other non-Calgary related asset sales (via equity pledges) of
in 2024/2025.
32
TIMBERCREEK FINANCIAL 23
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
The following table presents the gross carrying amounts of mortgage and other loan investments, net of
syndication liabilities, subject to IFRS 9 impairment requirements by internal risk ratings used by the Company for
credit risk management purposes.
In assessing credit risk, the Company utilizes a risk rating framework that considers the following factors:
collateral type, property rank that is applicable to the Company's security and/or priority positions, loan-to-value,
population of location of the collateral and an assessment of possible loan deterioration factors. These factors
include consideration of the guarantor's ability to make interest payments, the condition of the asset and cash
flows, economic and market factors as well as any changes to business plans that could affect the execution risk
of the loan.
The internal risk ratings presented in the table below are defined as follows:
Low Risk: Mortgage and loan investments that exceed the credit risk profile standard of the Company with a
below average probability of default. Yields on these investments are expected to trend lower than the Company’s
average portfolio.
Medium-Low: Mortgage and loan investments that are typical for the Company’s risk appetite, credit standards
and retain a below average probability of default. These mortgage and loan investments are expected to have
average yields and would represent a significant percentage of the overall portfolio.
Medium-High: Mortgage and loan investments within the Company’s risk appetite and credit standards with an
average probability of default. These investments typically carry attractive risk-return yield premiums.
High Risk: Mortgage and loan investments within the Company’s risk appetite and credit standards that have an
additional element of credit risk that could result in an above average probability of default. These mortgage and
loan investments carry a yield premium in return for their incremental credit risk. These mortgage and loan
investments are expected to represent a small percentage of the overall portfolio.
Default: Mortgage and loan investments that are more than 90 days past due on interest payment, or that are
more than 90 days past due maturity date and/or the Company assesses that there has been a deterioration of
credit quality to the extent the Company no longer has reasonable assurance as to the timely collection of the full
amount of principal and interest and/or when the Company has commenced enforcement remedies available to it
under its contractual agreements.
TIMBERCREEK FINANCIAL 24
33
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
As at December 31, 2023
As at December 31, 2022
Multi-residential Mortgage
Investments
Low risk
Medium-Low risk
Medium-High risk
High risk
Default
Net
Expected credit losses
Mortgage investments1
Other Mortgage Investments
Low risk
Medium-Low risk
Medium-High risk
High risk
Default
Net
Expected credit losses
Mortgage investments1
Other loan Investments
Low risk
Medium-Low risk
Medium-High risk
High risk
Default
Net
Expected credit losses
Other loan Investments1
1
Net of mortgage syndications.
Stage 2
Stage 3
Stage 1
— $
— $
$ 184,985 $
—
248,215
—
—
93,002 17,955
—
—
— 12,431
526,202 17,955 12,431
395
525,422 17,675 12,036
—
—
780
280
Stage 2
Stage 3
Stage 1
—
—
39,213
—
178,835
—
—
99,616 15,357
—
—
— 65,641
317,664 15,357 65,641
9,346
317,104 14,625 56,295
—
—
732
560
Total
Stage 1
184,985 $ 117,051 $
248,215 324,592
110,957 194,748
2,425
—
556,588 638,816
1,424
555,133 637,392
—
12,431
1,455
Total
Stage 1
39,213 107,417
178,835 233,874
114,973 116,329
—
—
398,662 457,620
414
388,024 457,206
—
65,641
10,638
Stage 2
Stage 3
Total
— $ 117,051
— $
— 324,592
—
— 194,748
—
—
2,425
—
— 72,406 72,406
— 72,406 711,222
—
2,833
1,409
— 70,997 708,389
Stage 2
Stage 3
Total
— 107,417
—
— 233,874
—
— 116,329
—
—
—
—
— 32,227 32,227
— 32,227 489,847
—
7,772
7,358
— 24,869 482,075
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
—
—
—
47,399
—
47,399
337
$ 47,062 $
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
47,399 60,742
—
47,399 60,742
745
337
—
47,062 $ 59,997 $
—
—
—
—
—
—
—
— $
Stage 3
Total
—
—
—
—
—
—
— 60,742
—
—
— 60,742
—
745
— $ 59,997
Enhanced return portfolio
As at
December 31, 2023 December 31, 2022
Other loan investments, net of expected credit loss
$
47,033 $
Finance lease receivable, measured at amortized cost
Investment in participating debentures, measured at FVTPL
Investment in equity instrument, measured at FVTPL
Joint venture investment in indirect real estate development
6,020
4,380
3,000
2,225
Total Enhanced Return Portfolio
$
62,658 $
59,956
6,020
4,744
—
2,225
72,945
As at December 31, 2023, the Company held $47.0 million in other loan investments, net of expected credit loss
(December 31, 2022 – $60.0 million).
In October 2017, the Company entered into a 20-year emphyteutic lease under which the lessee has the
obligation to purchase the property at $9.9 million at the end of the lease term on September 2038 and the option
to purchase the property earlier based on a prescribed purchase price schedule. Refer to note 4(e) of the
Consolidated Financial Statements for the years ended December 31, 2023, and 2022.
34
TIMBERCREEK FINANCIAL 25
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
As at December 31, 2023, the Company is invested in junior debentures of Timbercreek Real Estate Finance
Ireland Fund 1 ("TREF Ireland 1") Private Debt Designated Activity Company totaling $4.4 million or €3.0 million
(December 31, 2022 – $4.7 million or €3.3 million).
As at December 31, 2023, the Company invested in equity instrument of Timbercreek Mortgage Servicing Inc.
("TMSI") totaling $3.0 million (December 31, 2022 – nil).
As at December 31, 2023, the Company held $2.2 million (December 31, 2022 – $2.2 million) in indirect real
estate developments through joint venture and associate, using the equity method.
Real estate inventory
Land inventory
On April 12, 2022, the Company obtained title to parcels of land, which it intends to sell, in exchange for the
discharge of certain mortgage investments at FVTPL. On exchange the Company recognized a $95 fair value loss
on real estate properties.
As at December 31, 2023, the Company has land inventory of $30.6 million (December 31, 2022 – $30.2 million),
which is recorded at the lower of cost and net realizable value.
Real estate properties inventory
On August 31, 2023, the Company, along with its syndication partners, elected to credit bid three properties which
were subject to CCAA proceedings. The properties were previously the collateral for a mortgage investment at
amortized cost. Effective August 31, 2023, the Company obtained the beneficial interest in the three properties in
exchange for the discharge of the associated mortgage investments, on a non-cash basis. The Company intends
to sell the properties, it has accordingly recorded them as inventory at the lower of cost and net realizable value
less costs to sell. At the time of the exchange, the mortgage investment, net of syndication liability, had a carrying
value of $63.9 million comprised of net mortgage investment of $64.4 million, net interest receivable of
$2.1 million and an ECL provision of $2.6 million. The Company recognized the three properties as real estate
inventory and accordingly recorded them along with associated working capital of $1.9 million at a cost of
$132.9 million inclusive of the syndication partner's 50% share and recognized a corresponding real estate
inventory collateral liability of $69.0 million to the remaining participants in the discharged mortgage investment.
As at December 31, 2023, the Company has real estate properties inventory of $131.0 million (December 31,
2022 – nil), which is recorded as the lower of cost and net realizable value.
As at
Real Estate Inventory
Real Estate Inventory Collateral Liability
Real Estate Inventory, net of collateral liability
December 31, 2023
December 31, 2022
$
$
$
130,987 $
(69,008) $
61,979 $
—
—
—
TIMBERCREEK FINANCIAL 26
35
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
Credit facility
As at
Credit facility
Unamortized financing costs
Credit facility, end of period
December 31, 2023
$
$
260,000 $
(296)
259,704 $
December 31, 2022
451,000
(653)
450,347
As of December 31, 2023, the Company has an aggregate credit limit of $600.0 million on its credit facility. The
facility is secured by a general security agreement over the Company’s assets. The credit facility agreement has a
maturity date of February 10, 2024.
The interest rates and fees of the Tenth Amending Credit Agreement are either at the prime rate of interest plus
1.00% per annum (December 31, 2022 – prime rate of interest plus 1.00% per annum) or bankers’ acceptances
with a stamping fee of 2.00% (December 31, 2022 – 2.00%) and standby fee of 0.40% per annum (December 31,
2022 – 0.40%) on the unutilized credit facility balance. As at December 31, 2023, the Company’s qualified credit
facility limit, which is subject to a borrowing base as defined in the Tenth Amending Credit Agreement is $369.5
million.
Subsequent to year end, the credit facility was renewed on February 8, 2024, the Company entered into an
amendment and restatement to its existing credit facility agreement ("Third Amended and Restated Credit
Agreement") in order to, among other things, extend the maturity date to February 8, 2026, decrease the
aggregate credit limit to $510,000 and reinstate accordion feature to $100,000. The interest rates of the Third
Amended and Restated Credit Agreement are either at the prime rate of interest plus 1.25% per annum or term
CORRA at 2.25% per annum. All other general terms of the credit facility remain unchanged.
During Q4 2023 and 2023, the Company incurred financing costs of $462 and $0.6 million (Q4 2022 – nil; 2022 –
$0.8 million). The financing costs are netted against the outstanding balance of the credit facility and are
amortized over the term of the credit facility agreement.
Convertible debentures
As at December 31, 2023, and December 31, 2022, the Company's obligations under the convertible unsecured
debentures are as follows:
Series
Ticker
Interest
Rate
Date of
Maturity
Interest
Payment Date
Conversion
Price per
share
Equity
Component
December
31, 2023
December 31,
2022
June 2017
Debentures
July 2021
Debentures
TF.DB.C
TF.DB.D
December 2021
Debentures
TF.DB.E
5.30 % June 30,
2024
June 30 and
December 31
$
5.25 %
July 31,
2028
5.00 % December
31, 2028
January 31 and
July 31
June 30 and
December 31
Unsecured Debentures, principal
Unamortized financing cost and amount allocated to equity component
Debentures, end of period
11.10 $
560 $ 45,000 $
45,000
11.40
1,107
55,000
55,000
11.40
1,405
46,000
46,000
146,000
146,000
(5,155)
(6,580)
$ 140,845 $
139,420
36
TIMBERCREEK FINANCIAL 27
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
Interest costs related to the convertible 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
Amortization of issue costs and accretion of the convertible debentures
Total
June 2017 Debentures
Year ended December 31,
2022
7,562
1,460
9,022
2023
7,572 $
1,426
8,998 $
$
$
On June 13, 2017, the Company completed a public offering of $40.0 million, plus an over-allotment option of $5.0
million on June 27, 2017, of 5.30% convertible unsecured subordinated debentures for net proceeds of $42.3
million (the “June 2017 Debentures”).
The June 2017 Debentures are 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 up to, but excluding, the date of
redemption, on not more than 60 days’ and not less than 30 days’ prior written notice. The Company may also
elect to redeem debentures by issuing common shares at a 5% premium to prevailing market price at the date of
redemption.
The issue costs of $2.2 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.
July 2021 Debentures
On July 8, 2021 the Company completed a public offering of $50.0 million, plus an over-allotment option of $5.0
million on July 15, 2021, of 5.25% convertible unsecured subordinated debentures for net proceeds of $52.1
million (the “July 2021 Debentures”).
The July 2021 Debentures are redeemable on or after July 31, 2024 and prior to July 31, 2026 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 volume weighted average trading price of the common shares on the TSX
during the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of
the redemption is given is not less than 125% of the conversion price. The Company may also elect to redeem
debentures by issuing common shares at a 5% premium to prevailing market price at the date of redemption.
On and after July 31, 2026 and prior to the maturity date, the July 2021 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 up to, but excluding, the date of redemption, on not more than 60 days’ and not less
than 30 days’ prior written notice.
The issue costs of $2.9 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.
TIMBERCREEK FINANCIAL 28
37
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
December 2021 Debentures
On December 3, 2021 the Company completed a public offering of $40.0 million plus an over-allotment option of
$6.0 million on December 10, 2021, of 5.00% convertible unsecured subordinated debentures for net proceeds of
$43.8 million (the “December 2021 Debentures”). The December 2021 Debentures are redeemable on or after
December 31, 2024 and prior to December 31, 2026 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
volume weighted average trading price of the common shares on the TSX during the 20 consecutive trading days
ending on the fifth trading day preceding the date on which the notice of the redemption is given is not less than
125% of the conversion price.
On and after December 31, 2026 and prior to the maturity date, the December 2021 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 up to, but excluding, the date of redemption, on not more than
60 days’ and not less than 30 days’ prior written notice. The Company may also elect to redeem debentures by
issuing common shares at a 5% premium to prevailing market price at the date of redemption.
The issue costs of $2.2 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
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 as well as to receive dividends as
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.
On June 10, 2021, the Company filed a 25-month period base shelf prospectus in all provinces and territories of
Canada which allows the Company to offer and issue common shares, debt securities, subscription receipts,
warrants, and units (collectively, the “Securities”) from time to time up to an aggregate offering price of $500.0
million. The base shelf prospectus expired on July 10, 2023.
The changes in the number of common shares were as follows:
Balance, beginning of year
Issuance of common shares
Common shares issued under dividend reinvestment plan
Common shares repurchased for dividend reinvestment plan
Common shares repurchased under normal course issuer bid
Balance, end of year
Year ended December 31,
2022
2023
82,219,602
1,504,300
641,944
(360,830)
(117,500)
83,887,516
83,887,516
—
801,704
(801,704)
(878,000)
83,009,516
38
TIMBERCREEK FINANCIAL 29
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
(a) At-the-market equity program (the "ATM Program")
The Company announced on June 18, 2021 that it has established an ATM Program which allows the Company
to issue common shares from treasury having an aggregate gross sales amount of up to $90 million to the public
from time to time, at the Company’s discretion. Sales of the common shares under the equity distribution
agreement were made through “at-the-market distributions” as defined in National Instrument 44-102 - Shelf
Distributions, including sales made directly on the Toronto Stock Exchange (the "TSX"). The common shares
distributed under the ATM Program were at the market prices prevailing at the time of sale, and therefore prices
varied between purchasers and over time. The ATM Program was active between June 2021 and August 2022
and expired on July 10, 2023.
During Q4 2023 and 2023, the Company did not issue any common shares under the ATM program.
During Q4 2022, the Company did not issue any common shares under the ATM program. During 2022, the
Company issued 1,504,300 common shares for gross proceeds of $14.3 million at an average price of $9.52 per
common share and paid $246 in commissions to the agent, pursuant to the equity distribution agreement.
(b) Dividend reinvestment plan ("DRIP")
The DRIP provided eligible beneficial and registered holders of common shares with a means to reinvest
dividends declared and payable on such common shares into additional common shares. Under the DRIP,
shareholders could enroll to have their cash dividends reinvested to purchase additional common shares.
The common shares can be purchased from the open market based upon the prevailing market rates or from
treasury at a price of 98% of the average of the daily volume weighted average closing price on the TSX for the 5
trading days preceding payment, the price of which will not be less than the book value per common share.
During Q4 2023 and 2023, the Company purchased from the open market 229,153 and 801,704 common shares
(Q4 2022 – 192,271; 2022 – 360,830) for total amount of $1.5 million and $6.0 million (Q4 2022 – $1.4 million;
2022 – $2.8 million) at an average price of $6.69 and $7.43 (Q4 2022 – $7.52; 2022 – $7.89) per common share.
During Q4 2023 and 2023, the company did not issue common shares from treasury. During Q4 2022 and 2022,
the Company issued from treasury nil and 281,114 common shares and retained nil and $2.6 million in dividends
at an average price of $9.08 per common share.
(c) Dividends to holders of common shares
The Company intends to pay dividends to holders of common shares monthly within 15 days following the end of
each month. During Q4 2023 and 2023, the Company declared dividends of $14.3 million or $0.1725 per share
and $57.6 million or $0.69 per share (Q4 2022 – $14.5 million or $0.1725 per share and 2022 – $57.7 million or
$0.69 per share).
As at December 31, 2023, $4.7 million in aggregate dividends (December 31, 2022 – $4.8 million) were payable
to the holders of common shares by the Company. Subsequent to December 31, 2023, the Board of Directors of
the Company declared dividends of $0.0575 per share to be paid on January 15, 2024 to the common
shareholders of record on December 31, 2023.
TIMBERCREEK FINANCIAL 30
39
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
(d) Normal course offering bid
On May 24, 2022, the Company announced that the TSX approved the Company's normal course issuer bid (the
"NCIB") to repurchase for cancellation up to 8,330,591 common shares over a 12-month period. Repurchases
under the NCIB were permitted to commence on May 26, 2022 and expired on May 25, 2023.
On May 24, 2023, the Company announced that the TSX approved the Company's renewal of the NCIB to
repurchase for cancellation up to 8,305,467 common shares over a 12-month period. Repurchases under the
NCIB were permitted to commence on May 26, 2023 and continue until May 25, 2024 upon expiry.
The Company may repurchase under the NCIB by means of open market transactions or otherwise as permitted
by the TSX. All repurchases under the NCIB will be repurchased on the open market through the facilities of the
TSX and alternative Canadian trading platforms at the prevailing market price at the time of such transaction.
During Q4 2023 and 2023, the Company repurchased 332,600 and 878,000 common shares (Q4 2022 – 107,500
and 2022 – 117,500) for a total amount of $2.2 million and $6.2 million (Q4 2022 – $0.8 million and 2022 – $0.8
million). The average price per common share repurchased was $6.53 and $7.09 (Q4 2022 – $7.16 and 2022 –
$7.20).
Non-executive director deferred share unit plan ("DSU Plan")
Commencing June 30, 2016, the Company instituted a non-executive director deferred share unit plan, whereby a
director can elect up to 100% of the compensation be paid in the form of DSUs, credited quarterly in arrears. 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 of the DSU 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”).
The directors are entitled to also accumulate additional DSUs equal to the monthly cash dividends, on the DSUs
already held by that director determined based on the Fair Market Value of the common shares on the dividend
payment date.
Following each calendar quarter, the director DSU accounts are credited with the number of DSUs calculated by
multiplying the total compensation payable in DSUs divided by the Fair Market Value.
The DSU 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 as of the 24th business day after publication of the Company’s financial statements
following a director’s departure from the Board of Directors.
During Q4 2023 and 2023, 10,273 and 39,022 units were issued (Q4 2022 – 8,452 and 2022 – 36,704 units) and
as at December 31, 2023, 138,059 units were outstanding (December 31, 2022 – 99,037 units). During Q4 2023
and 2023, no DSUs were exercised (Q4 2022 – nil and 2022 – 82,807 units).
DSU expense for Q4 2023 and 2023 was $102 and $397 (2022 – $102 and $377). The units related to Q4
Director's compensation will be issued subsequent to December 31, 2023.
40
TIMBERCREEK FINANCIAL 31
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
STATEMENT OF CASH FLOWS
Cash from operating activities
Cash from operating activities for Q4 2023 and 2023 was $25.0 million and $90.2 million (Q4 2022 – $30.1 million;
2022 – $83.2 million).
Cash used in financing activities
The net cash used in financing activities for Q4 2023 was $173.2 million and net cash used in 2023 was $291.4
million (net cash used in Q4 2022 – $89.4 million and net cash used in 2022 – $42.5 million).
During the quarter, cash used in financing activities for Q4 2023 consisted of net repayments on the credit facility
of $145.1 million (Q4 2022 – $64.0 million net repayments). The Company paid interest on the debentures and
credit facility of $11.6 million (Q4 2022 – $9.9 million). The Company paid common share dividends of $12.8
million (Q4 2022 – $13.0 million). The company repurchased shares on the open market under the NCIB and
DRIP programs of $3.7 million (Q4 2022 – $2.2 million).
During the year, cash used in financing activities in 2023 consisted of the Company’s net repayments on the credit
facility of $191.0 million (2022 – $31.0 million net draws). The Company paid interest on the debentures and credit
facility of $36.5 million (2022 – $31.6 million). The company did not issue any common shares in 2023 (2022 –
$14.1 million) The Company paid common share dividends of $51.7 million (2022 – $52.2 million). The Company
repurchased shares on the open market under the NCIB and DRIP programs of $12.2 million (2022 – $3.7
million).
Cash from (used in) investing activities
The net cash from investing activities was $119.9 million for Q4 2023 and $203.2 million in 2023 (net cash
received in Q4 2022 – $60.2 million; net cash used in 2022 – $44.2 million).
During the quarter, net cash from investing activities for Q4 2023 consisted of the Company's funding of net
mortgage investments of $90.0 million (Q4 2022 – $144.6 million). The Company received cash from discharge of
net mortgage investments of $212.9 million (Q4 2022 – $206.2 million). The Company funded other investments
of $3.0 million (Q4 2022 – $1.4 million). The Company received cash from repayments of other investments $30
(Q4 2022 – $202). The Company paid cash on maturity of currency forward hedging contracts of $18 (Q4 2022 –
paid cash of $265).
During the year, net cash from investing activities for 2023 consisted of the Company's funding of net mortgage
investments of $360.6 million (2022 – $746.6 million). The Company received cash from discharge of net
mortgage investments of $552.6 million (2022 – $693.5 million). The Company funded other investments of $3.8
million (2022 – $9.5 million). The Company received cash proceeds from repayments of other investments of
$14.7 million (2022– $10.8 million). The Company received cash of $1.0 million relating to distribution from
investment in participating debentures, measured at FVTPL (2022 – nil). The company received final distribution
cash of $63 from investment properties (2022 - $7.5 million). The Company paid cash on maturity of currency
forward hedging contracts of $0.6 million (2022 – $94).
TIMBERCREEK FINANCIAL 32
41
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
QUARTERLY FINANCIAL INFORMATION
The following is a quarterly summary of the Company’s results for the eight most recently completed quarters:
NET INCOME AND COMPREHENSIVE INCOME
Q4
2023
Q3
2023
Q2
2023
Q1
2023
Q4
2022
Q3
2022
Q2
2022
Q1
2022
Net Investment Income on financial assets
measured at amortized cost
Fair value gain (loss) and other income on
financial assets measured at FVTPL
Fair value gain / (loss) on real estate properties
Net rental income (loss)
Expenses
Income from operations
Financing costs:
$ 29,722 $ 30,303 $ 31,471 $ 32,709 $ 31,342 $ 29,982 $ 25,802 $ 22,677
463
—
327
231
—
(270)
(103)
—
382
(5,443) (4,115) (5,139) (4,443) (6,671) (7,530) (4,150) (4,241)
25,069 26,149 26,345 28,252 25,211 22,564 21,662 18,715
306
—
(293)
282
63
(359)
403
—
(291)
736
82
(278)
352
(378)
36
Financing cost on credit facilities
Financing cost on debentures
(7,846) (7,444) (7,208) (7,898) (8,137) (6,788) (4,749) (3,560)
(2,249) (2,250) (2,249) (2,250) (2,260) (2,256) (2,233) (2,273)
Net income and comprehensive income
14,974 $ 16,455 $ 16,888 $ 18,104 $ 14,814 $ 13,520 $ 14,680 $ 12,882
ADJUSTED NET INCOME AND COMPREHENSIVE INCOME
Net income and comprehensive income
Add: net unrealized loss (gain) on financial
assets measured at FVTPL
Add: net unrealized loss on real estate
properties
Adjusted net income and
comprehensive income1
PER SHARE INFORMATION
Dividends per share
Earnings per share (basic)
Earnings per share (diluted)
Adjusted earnings per share (basic)1
Adjusted earnings per share (diluted)1
Distributable income and adjusted distributable
income per share1
1
Refer to non-IFRS measures section.
$ 14,974 $ 16,455 $ 16,888 $ 18,104 $ 14,814 $ 13,520 $ 14,680 $ 12,882
(292)
(61)
68
(57)
(122)
369
377
946
—
—
—
—
—
—
95
—
$ 14,681 $ 16,394 $ 16,956,000 $ 18,047 $ 14,692 $ 13,889 $ 15,152 $ 13,828
$ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.17 $ 0.17
$ 0.18 $ 0.20 $ 0.20 $ 0.22 $ 0.18 $ 0.16 $ 0.17 $ 0.16
$ 0.18 $ 0.19 $ 0.20 $ 0.21 $ 0.18 $ 0.16 $ 0.17 $ 0.16
$ 0.18 $ 0.20 $ 0.20 $ 0.21 $ 0.17 $ 0.17 $ 0.18 $ 0.17
$ 0.18 $ 0.19 $ 0.20 $ 0.21 $ 0.17 $ 0.17 $ 0.18 $ 0.17
$ 0.21 $ 0.20 $ 0.21 $ 0.22 $ 0.22 $ 0.20 $ 0.19 $ 0.18
The variations in total net income and comprehensive income by quarter are mainly attributed to the following:
i.
ii.
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;
In any given quarter, the Company is subject to volatility from fair value adjustments to financial assets
measured at FVTPL and allowance for mortgage investments resulting in fluctuations in quarterly total net
income and comprehensive income; and
iii. The utilization of the credit facility to fund mortgage investments results in higher net interest income, which is
partially offset by higher financing costs.
42
TIMBERCREEK FINANCIAL 33
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
RELATED PARTY TRANSACTIONS
In addition to the related party transactions disclosed elsewhere, related party transactions include the following:
(a) As at December 31, 2023, Due to Manager consists of management and servicing fees payable of $1.0
million (December 31, 2022 – $1.1 million).
(b) During Q4 2023 and 2023, Arrangement Fees of $299 and $0.8 million paid by borrower were retained by the
Manager (Q4 2022 – $202 and 2022 – $0.8 million).
(c) As at December 31, 2023, included in other assets is $3.2 million (December 31, 2022 – $6.1 million) of cash
held in trust by TMSI, the Company’s mortgage servicing and administration provider, a company controlled
by the Manager. The balance relates to mortgage and other loan funding holdbacks, repayments and prepaid
mortgage interest received from various borrowers.
(d) During 2023 the Company advanced $3,000 to TMSI in exchange for 300,000 non-voting shares in order to
fund TMSI's capital requirements necessary to service the Company's mortgage portfolio.
(e) As at December 31, 2023, the Company has a first mortgage investment which a director of the Manager is
also an officer and part-owner of an entity which holds a subordinate loan position.
•
A mortgage investment with a total gross commitment of $48.8 million (December 31, 2022 – $48.8
million). The Company’s share of the commitment is $4.4 million (December 31, 2022 – $4.4 million).
During Q4 2023 and 2023, the Company has recognized net interest income of $199 and $0.8 million
(2022 – $163 and $0.5 million).
(f) As at December 31, 2023, the Company and Timbercreek Real Estate Finance U.S. Holding LP are related
parties as they are managed by the Manager, and they have co-invested in 2 other loan investments
(December 31, 2022 – 2) totaling $34.6 million (December 31, 2022 – $35.5 million). The Company’s share in
these mortgage investments is $10.3 million (December 31, 2022 – $10.5 million).
(g) As at December 31, 2023, the Company is invested in junior debentures of Timbercreek Real Estate Finance
Ireland Fund 1 ("TREF Ireland 1") Private Debt Designated Activity Company totaling $4.4 million or €3.0
million (December 31, 2022 – $4.7 million or €3.3 million), which is included in loan investments within other
investments. TREF Ireland 1 is managed by a wholly-owned subsidiary of the Manager.
(h) As at December 31, 2023, the Company and Timbercreek North American Mortgage Fund are related parties
as they are managed by the Manager, and they have co-invested in 1 mortgage (December 31, 2022 – 1)
totaling $22.8 million (December 31, 2022 – $20.0 million). The Company’s share in this mortgage investment
is $11.4 million (December 31, 2022 – $10.0 million).
TIMBERCREEK FINANCIAL 34
43
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
COMMITMENTS AND CONTINGENCIES
In the ordinary course of business activities, the Company may be contingently liable for litigation and claims
arising from investing in mortgage investments and other investments. Where required, management records
adequate provisions in the accounts. As of December 31, 2023 there are no provisions recognized.
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.
On April 28, 2022, the Company disposed of its interest in the investment properties in Saskatchewan Portfolio.
The investment properties were pledged as security for the credit facility where the Company remained a
guarantor for its share of the outstanding principal until September 26, 2023. The Company is no longer a
guarantor on the aforementioned credit facility as of December 31, 2023.
In one syndicated mortgage participation agreement, an option is provided to the third-party lender to sell their
senior position of $35.1 million back to the Company, at a purchase price equal to the outstanding principal
amount of the lenders' proportionate share together with all accrued interest.
CRITICAL ACCOUNTING ESTIMATES
In the preparation of the Company's consolidated financial statements, Timbercreek Capital Inc. (the “Manager”),
has made judgements, estimates and assumptions that affect the application of the Company’s accounting
policies and the reported amounts of assets, liabilities, income and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. In making
estimates, the Manager relies on external information and observable conditions where possible, supplemented
by internal analysis as required. Those estimates and judgements have been applied in a manner consistent with
the prior period and there are no known trends, commitments, events or uncertainties, other than the global
market volatility, that the Manager believes will materially affect the methodology or assumptions utilized in
making those estimates and judgements in these consolidated financial statements.
The significant estimates and judgements used in determining the recorded amount for assets and liabilities in the
consolidated financial statements are as follows:
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).
44
TIMBERCREEK FINANCIAL 35
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
The Company reviews significant unobservable inputs and valuation adjustments. If third party information, such
as broker quotes or appraisals are used to measure fair values, the Company will assess the evidence obtained
from the third parties to support the conclusion that such valuations meet the requirements of IFRS Accounting
Standards, 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:
Financial Statement Note 4 – Mortgage and other loan investments, including mortgage syndications; and
Financial Statement Note 18 – Fair value measurements.
Measurement of expected credit loss
The determination of the expected credit loss takes into account different factors and varies by nature of
investment. These judgements include changes in circumstances that may cause future assessments of credit
risk to be materially different from current assessments, which would require an increase or decrease in the
expected credit loss. The Company exercises significant credit judgement in the determination of a significant
increase in credit risk since initial recognition, credit impairment of debt investments and expected recoverable
amount of credit impaired debt investments. Refer to Financial Statement note 4(d).
Syndication liabilities
The Company applies judgement in assessing the relationship between parties with which it enters into
participation agreements in order to assess the derecognition of transfers relating to mortgage and other loan
investments.
Classification of mortgage and other loan investments
Mortgage investments and other loan investments are classified based on the business model for managing
assets and the contractual cash flow characteristics of the asset. The Company exercises judgement in
determining both the business model for managing the assets and whether cash flows of the financial asset
comprise solely payments of principal and interest.
Net realizable value of real estate inventory
Real estate inventory is measured at the lower of cost and net realizable value. In determining the net realizable
value of land inventory, the Company estimates the selling prices of land parcels based on assumptions
surrounding zoning and density approvals on those lands, prevailing market prices, and selling costs. The
determination of net realizable value for the measurement of land inventory includes management estimates of
the ultimate disposal values of various plots of land when in consideration with different sales strategies.
Management applies judgement with respect to the potential scenarios for which the land can be disposed of
including assumptions around zoning and permitting of said lands and has applied a probability to each scenario.
In determining the net realizable value of real estate properties inventory, the Company estimates the selling
prices based on the direct capitalization method using assumptions based on market comparables as well as
probabilities surrounding assumptions on ultimate disposal of the asset. In determining the net realizable value of
the properties, the Company also considers relevant selling costs in the ultimate disposal of the properties.
MATERIAL ACCOUNTING POLICIES
The material accounting policies are outlined in note 3 to the consolidated financial statements.
TIMBERCREEK FINANCIAL 36
45
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
OUTSTANDING SHARE DATA
As at February 26, 2024, the Company’s authorized capital consists of an unlimited number of common shares, of
which 83,009,516 are issued and outstanding.
DISCLOSURE CONTROLS AND INTERNAL CONTROLS
Management maintains appropriate information systems, procedures and controls to provide reasonable
assurance that information that is publicly disclosed is complete, reliable and timely.
The Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”) of Timbercreek Financial, along
with the assistance of senior Management of the Manager with their supervision, have designed Disclosure
Controls and Procedures ("DC&P") and Internal Controls over Financial Reporting ("ICFR"), as those terms are
defined in National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings ("NI
52-109"), to provide reasonable assurance that all material information relating to the Company that is required to
be publicly disclosed is recorded, processed, summarized and reported on a timely basis and within the time
period specified in securities legislation, and have designed ICFR to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with IFRS.
The CEO and the CFO have evaluated, or caused an evaluation under their direct supervision of, the design and
operating effectiveness of DC&P and ICFR. As a result of this evaluation, Management has concluded that as of
December 31, 2023, the design and operation of the Company’s DC&P and ICFR were effective.
No changes were made in the design of ICFR during the period ended December 31, 2023, that have materially
affected, or are reasonably likely to materially affect, the Company's ICFR
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. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance of control issues,
including whether instances of fraud, if any, have been detected. These inherent limitations include, among other
items:
i.
ii.
iii.
that Management’s assumptions and judgments could ultimately prove to be incorrect under varying
conditions and circumstances;
the impact of any undetected errors; and
that controls may be circumvented by the unauthorized acts of individuals, by collusion of two or more
people, or by Management override.
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. The
Company believes that the conservative amount of structural leverage gained from the debentures and credit
facility is accretive to net earnings, appropriate for 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.
46
TIMBERCREEK FINANCIAL 37
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
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 and credit facilities. The Company has an aggregate borrowing ability of $510.0 million
through its renewed credit facility and it intends to utilize the credit facility to fund mortgage investments, and other
working capital needs. As at December 31, 2023, the Company’s qualified credit facility limit is subject to a
borrowing base as defined in the Tenth Amending Credit Agreement, which is $369.5 million. Pursuant to the
terms of the credit facility renewal, the Company is required to meet certain financial covenants, including a
minimum interest coverage ratio, minimum adjusted shareholders’ equity, maximum non-debenture indebtedness
to adjusted shareholders’ equity and maximum consolidated debt to total assets. As at September 30, 2023, the
Company did not meet the minimum adjusted shareholder's equity covenant under its existing credit facility due to
increased exposure in non-performing mortgages and on October 6, 2023 obtained a waiver of such default.
There is a risk that further increases in exposure to non-performing mortgages could require repayment of
advances under the credit facility as a result of reductions to the borrowing base or the minimum adjusted
shareholders’ equity covenant no longer being achieved. As at December 31, 2023, the Company is in
compliance with its credit facility's covenants.
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, excluding mortgage syndication liabilities as at
December 31, 2023, including expected interest payments:
Accounts payable and accrued expenses
Dividends payable
Due to Manager
Mortgage and other loans funding holdbacks
Prepaid mortgage and other loans interest
Credit facility1
Real estate inventory collateral liability
Convertible debentures2
Contractual
cash flow
Following
year
3 – 5
years
$
Carrying
value
4,644 $
4,742
1,005
2,029
1,217
259,704
69,008
140,845
$ 483,194 $
4,644 $
4,742
1,005
2,029
1,217
Within
a year
4,644 $
4,742
1,005
2,029
1,217
262,168 262,168
69,008
51,380
69,008
171,927
516,740 $ 396,193 $
383,884 383,884
— $
—
—
—
—
—
—
— $
—
—
—
—
—
—
5,188 115,359
5,188 $ 115,359 $
5 +
Years
—
—
—
—
—
—
—
—
—
—
Unadvanced mortgage commitments3
Total contractual liabilities, excluding mortgage
syndication liabilities4
1 Credit facility includes interest based upon December 2023 interest rate on the credit facility assuming the outstanding balance is not repaid
until its maturity on February 10, 2024. Subsequent to year end, the Company has extended its credit facility agreement by two years
maturing on February 8, 2026.
900,624 $ 780,077 $
5,188 $ 115,359 $
$ 483,194 $
—
—
—
—
2 The convertible debentures include interest based on coupon rate on the convertible debentures assuming the outstanding balance is not
repaid until its contractual maturity on June 30, 2024, July 31, 2028 and December 31, 2028.
3 Unadvanced mortgage commitments include syndication commitments of which $240.1 million belong to the Company's syndicated
partners.
4 The principal repayments of $600.0 million mortgage syndication liabilities by contractual maturity date is shown net with mortgage
investments.
As at December 31, 2023, the Company had a cash position of $4.8 million (December 31, 2022 – $2.8 million)
and an unutilized credit facility balance of $109.5 million (December 31, 2022 – $103.5 million). Management
believes it will be able to finance its operations using the cash flow generated from operations, investing activities
and the credit facility.
TIMBERCREEK FINANCIAL 38
47
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
FINANCIAL INSTRUMENTS
Financial assets
The Company’s cash and cash equivalents, other assets, mortgage investments and other investments, including
mortgage syndications, are designated as loans and receivables and are measured at amortized cost. The fair
values of cash and cash equivalents and other assets approximate their carrying amounts due to their short-term
nature. The fair value of mortgage investments, including mortgage syndications, approximate their carrying value
given the mortgage and other investments consist of short-term mortgages 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 and
other loan funding holdbacks, prepaid mortgage interest, credit facility, real estate inventory collateral liability,
convertible debentures, derivative liability (interest rate swap contract) 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 mortgages 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.
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, change in currency rates 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.
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, 2023, $921.9 million of net mortgage
investments and $5.0 million of other investments bear interest at variable rates (December 31, 2022 – $1,173.7
million and $5.0 million, respectively). As of December 31, 2023, $855.6 million of net mortgage investments have
a "floor rate" (December 31, 2022 – $1,105.7 million).
If there were a decrease or increase of 0.50% in interest rates, with all other variables constant, the impact from
variable rate mortgage investments and other investments to net income and comprehensive income for the next
12 months would be a decrease in net income of $3.3 million (December 31, 2022 – 0.50% and $5.7 million) or an
increase in net income of $4.5 million (December 31, 2022 – 0.50% and $5.9 million). The Company manages its
sensitivity to interest rate fluctuations by managing the fixed/floating ratio and its use of floor rates in its
investment portfolio.
48
TIMBERCREEK FINANCIAL 39
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
The Company is also exposed to interest rate risk on the credit facility. As at December 31, 2023, net exposure to
interest rate risk was $260.0 million (December 31, 2022 – $451.0 million), and assuming it was outstanding for
the entire period, a 0.50% decrease or increase in interest rates, with all other variables constant, will increase or
decrease net income and comprehensive income for the next 12 months by $1.3 million (December 31, 2022 –
$2.3 million per 0.50% decrease or increase in interest rates).
The Company's other assets, interest receivable, accounts payable and accrued expenses, prepaid mortgage
interest, mortgage and other loan funding holdbacks, dividends payable and due to Manager have no significant
exposure to interest rate risk due to their short-term nature. Convertible debentures carry a fixed rate of interest
and are not subject to interest rate risk. Cash and cash equivalents carry a variable rate of interest and are
subject to minimal interest rate risk.
Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to
changes in foreign exchange rates. The Company is exposed to currency risk primarily from other investments
that are denominated in a currency other than the Canadian dollar. The Company uses foreign currency forwards
and swaps to approximately economically hedge the principal balance of future earnings and cash flows caused
by movements in foreign exchange rates. Under the terms of the foreign currency forward and swap contracts, the
Company buys or sells a currency against another currency at a set price on a future date.
As at December 31, 2023, the Company has US$7.5 million and €3.0 million in other investments denominated in
foreign currencies (December 31, 2022 – US$7.1 million and €3.3 million). The Company has entered into a
series of foreign currency contracts to reduce its exposure to foreign currency risk. As at December 31, 2023, the
Company has one U.S. dollars currency contract with an aggregate notional value of US$7.0 million, at a forward
contract rate of 1.3222, that matured in January 2024. The Company also has one Euro currency contract with an
aggregate notional value of €3.0 million at a contract rate of 1.4674, that matures in March 2024.
The fair value of the foreign currency forward contracts as at December 31, 2023 is an asset of $21 which is
included in other assets. The valuation of the foreign currency forward contracts was computed using Level 2
inputs which include spot and forward foreign exchange rates.
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 new mortgage and other investments are approved by the Investment Committee before
funding; and
iii. actively monitoring the mortgage and other investments and initiating recovery procedures, in a timely
manner, where required.
The exposure to credit risk at December 31, 2023 relating to net mortgages and other investments amount to
$1,024.8 million (December 31, 2022 – $1,276.7 million).
The Company has recourse under these mortgages and the majority of other investments in the event of default
by the borrowers; in which case, the Company would have a claim against the underlying collateral. Management
believes that the potential loss from credit risk with respect to cash that is held in trust at a Schedule I bank by the
Company’s transfer agent and operating cash held also at a Schedule I bank, to be minimal.
TIMBERCREEK FINANCIAL 40
49
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
The Company is exposed to credit risk from the collection of accounts receivable from tenants relating to real
estate inventory.
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.
SUBSEQUENT EVENTS
The following are events that occurred subsequent to December 31, 2023:
Credit Facility Renewal
On February 8, 2024, the Company entered into an amendment and restatement to its existing credit facility
agreement ("Third Amended and Restated Credit Agreement") in order to, among other things, extend the
maturity date to February 8, 2026, decrease the aggregate credit limit to $510.0 million and reinstate accordion
feature to $100.0 million. The interest rates of the Third Amended and Restated Credit Agreement are either at the
prime rate of interest plus 1.25% per annum or term CORRA at 2.25% per annum. All other general terms of the
credit facility remain unchanged. As at December 31, 2023, the Company’s qualified credit facility limit calculated
using the terms of the Third Amended and Restated Credit Agreement is $365.8 million.
Sale of Groupe Huot Assets
On December 7, 2023, the Company announced the official sale of the portfolio of seven multi-family, Stage 3
loans in Quebec. These loans, representing a balance of $124.9 million, were fully repaid in January 2024 with
Timbercreek recovering all principal and accrued interest. As a result the associated expected credit loss of $1.6
million was fully reversed in Q4 2023.
Special Dividend
In light of the strong full-year income results, and in addition to paying 69 cents per share in dividends through the
year, the Company has authorized a special dividend of 5.75 cents per share, for shareholders of record as at
March 5, 2024. The special dividend will be paid on March 11, 2024. The dividend equates to $4.8 million of
additional payout to shareholders. The balance of undistributed income is reflected in the Company’s book value
per share (shareholders' equity divided by number of shares outstanding), ending at $8.45 for the year (before
payment of special dividend expected in March 2024) versus $8.33 at the end of 2022.
50
TIMBERCREEK FINANCIAL 41
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK FINANCIAL
Management's Discussion and Analysis
For the three months and year ended December 31, 2023
In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted
ADDITIONAL INFORMATION
Dividend Reinvestment Plan
Timbercreek Financial offers a dividend reinvestment plan ("DRIP") so that shareholders may automatically
reinvest their dividends in new shares of Timbercreek Financial. These common shares can be purchased from
the open market at the prevailing market price or from treasury at a 2% discount from market price and with no
commissions. This provides an easy way to realize the benefits of compound growth of their investment in
Timbercreek Financial. Shareholders can enroll in the DRIP program by contacting their investment advisor or
investment dealer.
Phone
Blair Tamblyn, CEO
Tracy Johnston, CFO
Karynna Ma, Vice President, Investor Relations
416-923-9967
Internet
Visit SEDAR+ at www.sedarplus.ca; or the Company’s website at www.timbercreekfinancial.com
Mail
Write to the Company at:
Timbercreek Financial
Attention: Corporate Communications
25 Price Street Toronto, Ontario M4W 1Z1
TIMBERCREEK FINANCIAL 42
51
TIMBERCREEK FINANCIALMANAGEMENT’S DISCUSSION AND ANALYSISFor the three months and year ended December 31, 2023 In thousands of Canadian dollars, except units, per unit amounts and where otherwise noted TIMBERCREEK MORTGAGE INVESTMENT CORPORATION
Consolidated Financial Statements of
Timbercreek Financial
For the year ended December 31, 2023 and 2022
52
TIMBERCREEK FINANCIAL
TIMBERCREEK FINANCIAL
INDEPENDENT AUDITOR'S REPORT
To the Shareholders of Timbercreek Financial Corp.,
Opinion
We have audited the consolidated financial statements of Timbercreek Financial Corp. (the Entity), which
comprise:
•
•
•
•
•
the consolidated statements of financial position as at December 31, 2023, and December 31, 2022
the consolidated statements of net income and comprehensive income for the years then ended
the consolidated statements of changes in shareholders’ equity for the years then ended
the consolidated statements of cash flows for the years then ended
and notes to the consolidated financial statements, including a summary of material accounting policy
information
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated
financial position of the Entity as at December 31, 2023, and December 31, 2022, and its consolidated financial
performance and its consolidated cash flows for the years then ended in accordance with IFRS Accounting
Standards as issued by the International Accounting Standards Board.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the "Auditor’s Responsibilities for the Audit of the Financial
Statements" section of our auditor’s report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the
financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matter
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements for the year ended December 31, 2023. These matters were addressed in the context of
our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
We have determined the matter described below to be the key audit matter to be communicated in our auditor’s
report.
TIMBERCREEK FINANCIAL 1
53
TIMBERCREEK FINANCIAL TIMBERCREEK FINANCIAL
Evaluation of allowance for expected credit losses on mortgage and other loan investments classified at
amortized cost
Description of the matter
We draw attention to Note 2(d), Note 3(b) and Note 4(d) of the financial statements. The Entity has recorded an
allowance for expected credit losses on mortgage and other loan investments classified at amortized cost ("Debt
Investments") of $12.4 million.
The expected credit loss for non-credit impaired Debt Investments reflects a probability-weighted outcome that
considers the Entity's assessment of all expected cash shortfalls over 12 months after the reporting date or
expected life, as applicable, and reasonable and supportable information about past events, current conditions
and forecasts of future events and economic conditions is considered. The significant assumptions include
probability-weighting and expected cash shortfalls.
Expected credit losses for credit impaired Debt Investments are recorded for individually identified credit impaired
Debt Investments to reduce their carrying value to the probability-weighted expected recoverable amount based
on the estimated future cash flows discounted at the Debt Investment's original effective interest rate. The
significant assumptions include the capitalization rates and comparable transactions.
The Entity exercises significant credit judgment in the determination of a significant increase in credit risk since
initial recognition, credit impairment of Debt Investments and expected recoverable amount of credit impaired
Debt Investments.
Why the matter is a key audit matter
We identified the evaluation of the allowance for expected credit losses on Debt Investments classified at
amortized cost as a key audit matter. Evaluation of expected credit losses on Debt Investments represented an
area of significant risk of material misstatement given the high degree of measurement uncertainty associated
with the estimate of the expected credit losses. Significant auditor judgment was required to evaluate the results
of our audit procedures regarding the Entity's significant assumptions. Further, professionals with specialized
skills and knowledge were needed to evaluate the Entity's methodology and significant assumptions for non-credit
and credit impaired Debt Investments.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
For a selection of non-credit impaired Debt Investments, we evaluated the Entity's assigned credit risk ratings
against the Entity's borrower risk rating scale, and the Entity's assessment of significant increase in credit risk and
of credit impairment. Our evaluation was based on information prepared by the Entity and assessed against
source documents, as applicable.
For a selection of credit impaired Debt Investments, we assessed the recoverable amount by comparing the
capitalization rates and comparable transactions assumptions to reports of real estate commentators and
available industry transaction databases, considering the features of the specific property.
We involved credit risk and valuation professionals with specialized skills, industry knowledge and relevant
experience who assisted in:
•
•
evaluating the expected credit loss model methodology including the assessment of the Entity’s definition
of significant increase in credit risk and of credit impairment, in accordance with relevant accounting
standards
assessing the probability-weighting and assessing expected cash shortfalls by comparing to publicly
available information
54
TIMBERCREEK FINANCIAL 2
TIMBERCREEK FINANCIAL TIMBERCREEK FINANCIAL
•
evaluating the capitalization rates and comparable transactions assumptions by comparing to reports of
real estate commentators and available industry transaction databases, considering the features of the
specific property for a selection of credit impaired Debt Investments.
Other Information
Management is responsible for the other information. Other information comprises:
•
•
the information included in Management's Discussion and Analysis filed with the relevant Canadian
Securities Commissions;
the information, other than the financial statements and the auditor’s report thereon, included in a
document likely to be entitled "Annual Report."
Our opinion on the financial statements does not cover the other information and we do not and will not express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, and remain alert for indications that the other information
appears to be materially misstated.
We obtained the information included in Management's Discussion and Analysis filed with the relevant Canadian
Securities Commissions as at the date of this auditor’s report. If, based on the work we have performed on this
other information, we conclude that there is a material misstatement of this other information, we are required to
report that fact in the auditor’s report.
We have nothing to report in this regard.
The information, other than the financial statements and the auditor’s report thereon, included in a document likely
to be entitled "Annual Report" is expected to be made available to us after the date of this auditor’s report. If,
based on the work we will perform on this other information, we conclude that there is a material misstatement of
this other information, we are required to report that fact to those charged with governance.
Responsibilities of Management and Those Charged with Governance for the Financial
Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance
with IFRS Accounting Standards as issued by the International Accounting Standards Board, and for such internal
control as management determines is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity's ability to continue as a
going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Entity or to cease operations, or has no realistic
alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's financial reporting process.
TIMBERCREEK FINANCIAL 3
55
TIMBERCREEK FINANCIAL TIMBERCREEK FINANCIAL
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion.
Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance
with Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit 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.
•
•
•
•
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Entity's ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report.
However, future events or conditions may cause the Entity to cease to continue as a going concern.
Evaluate the overall presentation, structure, and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence and communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the group Entity to express an opinion on the financial statements. We are responsible for
the direction, supervision, and performance of the group audit. We remain solely responsible for our audit
opinion.
56
TIMBERCREEK FINANCIAL 4
TIMBERCREEK FINANCIAL TIMBERCREEK FINANCIAL
•
Determine, from the matters communicated with those charged with governance, those matters that were
of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our auditor’s report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
Chartered Professional Accountants, Licensed Public Accountants
The engagement partner on the audit resulting in this auditor's report is Thomas Rothfischer.
Toronto, Canada
February 26, 2024
TIMBERCREEK FINANCIAL 5
57
TIMBERCREEK FINANCIAL TIMBERCREEK FINANCIAL
CONSOLIDATED STATEMENTS
OF FINANCIAL POSITION
(In thousands of Canadian dollars)
ASSETS
Cash
Other assets
Real estate inventory
Mortgage investments, including mortgage syndications
Other investments
Total assets
LIABILITIES AND EQUITY
Accounts payable and accrued expenses
Dividends payable
Due to Manager
Mortgage and other loans funding holdbacks
Prepaid mortgage and other loans interest
Credit facility
Mortgage syndication liabilities
Real estate inventory collateral liability
Convertible debentures
Total liabilities
Shareholders’ equity
Total liabilities and equity
Commitments and contingencies
Subsequent events
Note
December 31, 2023 December 31, 2022
14(c)
5
4
4(e)
8(c)
14(a)
14(c)
14(c)
6
4(a)(c)
5
7
$
4,802
11,821
161,564
1,545,112
62,658
$
2,832
9,511
30,245
1,800,506
72,945
$
1,785,957
$
1,916,039
4,644
4,742
1,005
2,029
1,217
259,704
601,624
69,008
140,845
1,084,818
4,450
4,824
1,098
1,345
4,721
450,347
611,291
—
139,420
1,217,496
8
701,139
1,785,957
$
698,543
1,916,039
$
4, 6 and 20
4, 6, 8(c) and 21
The accompanying notes are an integral part of these consolidated financial statements.
58
TIMBERCREEK FINANCIAL 6
TIMBERCREEK FINANCIAL
TIMBERCREEK FINANCIAL
CONSOLIDATED STATEMENTS
OF NET INCOME AND COMPREHENSIVE INCOME
(In thousands of Canadian dollars, except per share amounts)
Year ended December 31,
Note
2023
2022
Investment income on financial assets measured at amortized cost
Gross interest and other income, including mortgage syndications
$
174,985 $
147,263
Interest and other expenses on mortgage syndications
(50,780)
(37,460)
Net investment income on financial assets measured at amortized cost
4(b)(e)
124,205
109,803
Fair value gain and other income on financial assets measured at FVTPL
4(a)(e)
1,282
1,388
Total income on financial assets
Income on real estate properties
Revenue from real estate properties
Property operating costs
Expense on real estate inventory collateral liability
Net rental loss
Fair value gain (loss) on real estate properties
Total loss on real estate properties
Expenses
Management fees
Servicing fees
Expected credit loss
General and administrative
Total expenses
Income from operations
Financing costs
Financing cost on credit facilities
Financing cost on convertible debentures
Total financing costs
5
10
10
4(d)
125,487
111,191
5,986
(5,692)
(889)
(595)
63
(532)
1,379
(1,530)
—
(151)
(296)
(447)
11,842
12,230
735
3,649
2,914
19,140
105,815
771
7,482
2,109
22,592
88,152
23,234
9,022
32,256
6
7
30,396
8,998
39,394
Net income and comprehensive income
$
66,421 $
55,896
Earnings per share
Basic
Diluted
The accompanying notes are an integral part of these consolidated financial statements.
11 $
11 $
0.80 $
0.78 $
0.67
0.67
TIMBERCREEK FINANCIAL 7
59
TIMBERCREEK FINANCIAL
TIMBERCREEK FINANCIAL
CONSOLIDATED STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands of Canadian dollars)
Year ended December 31, 2023
Balance, December 31, 2022
Repurchase of common shares under normal course issuer bid
Dividends declared to shareholders
Issuance of common shares under dividend reinvestment plan
Repurchase of common shares for dividend reinvestment plan
Total net income and comprehensive income
Common
shares Deficiency
Equity
component
of convertible
debentures
$
739,162 $
(6,222)
—
5,959
(5,959)
—
(45,069) $
—
(57,603)
—
—
66,421
4,450 $
—
—
—
—
—
Total
698,543
(6,222)
(57,603)
5,959
(5,959)
66,421
Balance, December 31, 2023
$
732,940 $
(36,251) $
4,450 $
701,139
Year ended December 31, 2022
Common
shares Deficiency
Equity
component
of convertible
debentures
Total
Balance, December 31, 2021
$
723,377 $
(43,244) $
4,450 $
684,583
Issuance of common shares, net of issue costs
Repurchase of common shares under normal course issuer bid
Dividends declared to shareholders
Issuance of common shares under dividend reinvestment plan
Repurchase of common shares for dividend reinvestment plan
Total net income and comprehensive income
14,077
(846)
—
—
—
(57,721)
5,401
(2,847)
—
—
—
55,896
—
—
—
—
—
—
14,077
(846)
(57,721)
5,401
(2,847)
55,896
Balance, December 31, 2022
$
739,162 $
(45,069) $
4,450 $
698,543
The accompanying notes are an integral part of these consolidated financial statements.
60
TIMBERCREEK FINANCIAL 8
TIMBERCREEK FINANCIAL
TIMBERCREEK FINANCIAL
CONSOLIDATED STATEMENTS
OF CASH FLOW
(In thousands of Canadian dollars)
Year ended December 31,
Note
2023
2022
OPERATING ACTIVITIES
Net income
Amortization of lender fees
Lender fees received
Interest income, net of syndications
Interest income received, net of syndications
Financing costs
Fair value (gain) loss and interest income on financial assets measured at FVTPL
Interest received from financial assets measured at FVTPL
Fair value (gain) loss on real estate properties
Net additions to real estate inventory
Net realized and unrealized foreign exchange gain
Expected credit loss
Net change in non-cash operating items
$
12
FINANCING ACTIVITIES
Net credit facility (repayments) draws
Net proceeds from issuance of common shares
Interest and financing costs paid
Dividends paid to shareholders
Repurchase of common shares
INVESTING ACTIVITIES
Distribution from financial assets measured at FVTPL
Net proceeds from investment properties
Net (payments) receipts on maturity of forward contracts
Funding of other investments
Proceeds from other investments
Funding of mortgage investments, net of syndications
Discharges of mortgage investments, net of syndications
66,421 $
(8,279)
5,997
(115,647)
102,300
39,394
(1,191)
661
(63)
(333)
(15)
3,649
(2,708)
90,186
(191,000)
—
(36,482)
(51,726)
(12,181)
(291,389)
981
63
(556)
(3,823)
14,658
(360,636)
552,557
203,244
55,896
(8,726)
8,210
(103,312)
90,928
32,256
1,012
—
363
(270)
(144)
7,483
(525)
83,171
31,001
14,079
(31,616)
(52,224)
(3,693)
(42,453)
—
7,510
94
(9,525)
10,786
(746,589)
693,544
(44,180)
Increase (decrease) in cash
Net foreign exchange loss on cash accounts
Cash, beginning of period
Cash, end of period
2,041
(71)
2,832
4,802 $
(3,462)
(50)
6,344
2,832
$
The accompanying notes are an integral part of these consolidated financial statements.
TIMBERCREEK FINANCIAL 9
61
TIMBERCREEK FINANCIAL
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
1. CORPORATE INFORMATION
Timbercreek Financial Corp. (the “Company”, “TF” or “Timbercreek Financial”) is a mortgage investment
corporation domiciled in Canada. The Company is incorporated under the laws of the Province of Ontario. The
registered office of the Company is 25 Price Street, Toronto, Ontario M4W 1Z1. The common shares of the
Company are listed on the Toronto Stock Exchange (“TSX”) under the symbol “TF”.
The investment objective of the Company is to secure and grow a diversified portfolio of high quality mortgage
and other loan investments, generating an attractive risk adjusted return and monthly dividend payments to
shareholders, balanced by a strong focus on capital preservation.
2. BASIS OF PRESENTATION
(a) Statement of compliance
These consolidated financial statements of the Company have been prepared by management in accordance with
IFRS Accounting Standards as issued by the International Accounting Standards Board.
These consolidated financial statements were approved for issuance by the Company's Board of Directors on
February 26, 2024.
(b) Principles of consolidation
These consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries,
including Timbercreek Mortgage Investment Fund. The financial statements of the subsidiaries included in these
consolidated financial statements are from the date that control commences until the date that control ceases. All
intercompany transactions and balances are eliminated upon consolidation.
(c) Basis of measurement
These consolidated financial statements have been prepared on both a going concern and the historical cost
basis except for certain items which have been measured at fair value through profit or loss ("FVTPL") at each
reporting date and include: debt investments not meeting the solely payments of principal and interest criterion,
investment in participating debentures, investment in equity instrument and foreign currency forward contracts.
(d) Critical accounting estimates, assumptions and judgements
In the preparation of the Company's consolidated financial statements, Timbercreek Capital Inc. (the “Manager”),
has made judgements, estimates and assumptions that affect the application of the Company’s accounting
policies and the reported amounts of assets, liabilities, income and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to estimates are recognized prospectively. In making
estimates, the Manager relies on external information and observable conditions where possible, supplemented
by internal analysis as required. Those estimates and judgements have been applied in a manner consistent with
the prior period and there are no known trends, commitments, events or uncertainties, other than the global
market volatility, that the Manager believes will materially affect the methodology or assumptions utilized in
making those estimates and judgements in these consolidated financial statements.
62
TIMBERCREEK FINANCIAL 10
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
The significant estimates and judgements used in determining the recorded amount for assets and liabilities in the
consolidated financial statements are as follows:
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 Company reviews significant unobservable inputs and valuation adjustments. If third party information, such
as broker quotes or appraisals are used to measure fair values, the Company will assess the evidence obtained
from the third parties to support the conclusion that such valuations meet the requirements of IFRS Accounting
Standards, 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 4 – Mortgage and other loan investments, including mortgage syndications; and
Note 18 – Fair value measurements.
Measurement of expected credit loss
The determination of the expected credit loss takes into account different factors and varies by nature of
investment. These judgements include changes in circumstances that may cause future assessments of credit
risk to be materially different from current assessments, which would require an increase or decrease in the
expected credit loss. The Company exercises significant credit judgement in the determination of a significant
increase in credit risk since initial recognition, credit impairment of debt investments and expected recoverable
amount of credit impaired debt investments. Refer to note 4(d).
Syndication liabilities
The Company applies judgement in assessing the relationship between parties with which it enters into
participation agreements in order to assess the derecognition of transfers relating to mortgage and other loan
investments.
Classification of mortgage and other loan investments
Mortgage investments and other loan investments are classified based on the business model for managing
assets and the contractual cash flow characteristics of the asset. The Company exercises judgement in
determining both the business model for managing the assets and whether cash flows of the financial asset
comprise solely payments of principal and interest.
Net realizable value of real estate inventory
TIMBERCREEK FINANCIAL 11
63
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
Real estate inventory is measured at the lower of cost and net realizable value. In determining the net realizable
value of land inventory, the Company estimates the selling prices of land parcels based on assumptions
surrounding zoning and density approvals on those lands, prevailing market prices, and selling costs. The
determination of net realizable value for the measurement of land inventory includes management estimates of
the ultimate disposal values of various plots of land when in consideration with different sales strategies.
Management applies judgement with respect to the potential scenarios for which the land can be disposed of
including assumptions around zoning and permitting of said lands and has applied a probability to each scenario.
In determining the net realizable value of real estate properties inventory, the Company estimates the selling
prices based on the direct capitalization method using assumptions based on market comparables as well as
probabilities surrounding assumptions on ultimate disposal of the asset. In determining the net realizable value of
the properties, the Company also considers relevant selling costs in the ultimate disposal of the properties.
(e) Functional and Presentation Currency
These consolidated financial statements are presented in Canadian dollars, which is the Company's functional
currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.
3. MATERIAL ACCOUNTING POLICIES
(a) Cash and cash equivalents
As at December 31, 2023 and December 31, 2022, the Company did not hold any cash equivalents.
(b) Financial instruments
Recognition and initial measurement
All financial assets and financial liabilities are initially recognized when the Company becomes a party to the
contractual provisions of the instrument.
A financial asset or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction
costs that are directly attributable to its acquisition or issue.
Classification and subsequent measurement - financial assets
On initial recognition, a financial asset is classified as measured at: amortized cost; fair value through other
comprehensive income ("FVOCI") - debt investment; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its
business model for managing financial assets, in which case all affected financial assets are reclassified on the
first day of the first reporting period following the change in the business model.
A financial asset is measured at amortized cost if it meets both of the following conditions and is not designated
as at FVTPL:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
64
TIMBERCREEK FINANCIAL 12
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated
as at FVTPL:
•
•
it is held within a business model whose objective is achieved by both collecting contractual cash flows
and selling financial assets; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
The Company has no debt investments measured at FVOCI.
All financial assets not classified as measured at amortized cost or FVOCI as described above are measured at
FVTPL. This includes all derivative financial assets.
Financial assets - Business model assessment
The Company makes an assessment of the objective of the business model in which a financial asset is held at a
portfolio level because this best reflects the way the business is managed and information is provided to
management.
Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered
sales for this purpose, consistent with the Company's continuing recognition of the syndicated assets.
The Company’s mortgage and loan investments portfolio has a hold-to-collect business model. The objective of
the business model for these financial instruments is to collect the amounts due from the Company’s borrowers
and to earn contractual interest income and lender fees on the amounts collected.
Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value
basis are measured at FVTPL.
Financial assets - assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial
recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with
the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g.
liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Company
considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash flows such that it would not meet this
condition. In making this assessment, the Company considers:
•
•
•
•
contingent events that would change the amount or timing of cash flows;
terms that may adjust the contractual coupon rate, including variable-rate features;
prepayment and extension features; and
terms that limit the Company's claim to cash flows from specified assets.
A prepayment feature is consistent with the solely payments of principal and interest criterion if the prepayment
amount substantially represents unpaid amounts of principal and interest on the principal amount outstanding,
which may include reasonable additional compensation for early termination of the contract.
TIMBERCREEK FINANCIAL 13
65
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
Subsequent measurement and gains and losses - financial assets
Financial assets at
FVTPL
Measured at fair value. Net gains and losses, including any interest or dividend income, are
recognized in profit or loss.
Financial assets at
amortized cost
Measured at amortized cost using the effective interest method. The amortized cost is reduced by
impairment losses. Interest income, foreign exchange gains and losses and impairment are
recognized in profit or loss. Any gain or loss on derecognition is recognized in profit or loss.
Debt investments at
FVOCI
Measured at fair value. Interest income calculated using the effective interest method, foreign
exchange gains and losses and impairment are recognized in profit or loss. Other net gains and losses
are recognized in Other Comprehensive Income ("OCI"). On derecognition, gains and losses
accumulated in OCI are reclassified to profit or loss.
Classification, subsequent measurement and gains and losses - financial liabilities
Financial liabilities are classified as measured at amortized cost or FVTPL. A financial liability is classified as
measured at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any
interest expense, are recognized in profit or loss. Other financial liabilities are subsequently measured at
amortized cost using the effective interest method. Interest expense and foreign exchange gains and losses are
recognized in profit or loss. Any gain or loss on derecognition is also recognized in profit or loss.
Impairment of financial assets
The Company recognizes loss allowances for expected credit loss ("ECL") on financial assets measured at
amortized cost, unfunded loan commitments and financial guarantee contracts. The Company applies a three-
stage approach to measure expected credit loss. The Company measures loss allowance at an amount equal to
12 months of expected credit losses for mortgage and other loan investments, if their credit risk at the reporting
date has not increased significantly since initial recognition (Stage 1) and at an amount equal to lifetime expected
credit losses on mortgage and other loan investments that are not credit impaired, but have experienced a
significant increase in credit risk since initial recognition (Stage 2) and on credit impaired mortgage and other loan
investments (Stage 3).
The determination of a significant increase in credit risk takes into account different factors and varies by nature of
underlying security of the investment. The Company uses investment specific factors in assessing significant
change in credit risk, which include:
•
•
•
Investments secured by income producing properties - borrower or guarantor’s financial position, change
in market conditions, deterioration in cash flows due to vacancy, rental rates or increased operating costs,
property conditions, loss of major tenants, and change in execution of business plan.
Investments secured by construction type of properties - borrower or guarantor’s financial position,
change in market conditions, property conditions, material cost-to-complete concerns, delays or changes
in execution of business plan.
Investments secured by unimproved and improved land - borrower or guarantor’s financial position,
change in market conditions, change in execution of business plan, adverse zoning change.
The Company assumes the credit risk on a financial asset has increased significantly since initial recognition,
•
•
•
if the interest payment is more than 30 days past due, or
if the maturity date is more than 30 days past due, and/or
borrower or underlying security criteria as identified by the Manager has deteriorated.
66
TIMBERCREEK FINANCIAL 14
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
As typical in shorter duration structured financing, the Manager does not solely believe there has been a
significant increase in credit risk if a mortgage or other loan investment goes into an overhold position past the
maturity date for a period greater than 30 days, but less than 90 days. The Manager actively monitors these
mortgage and other loan investments and applies judgement in determining whether there has been a significant
increase in credit risk. The Company considers a financial asset to be credit impaired when:
•
•
•
the interest payment is more than 90 days past due, or
if the maturity date is more than 90 days past due and/or when the Company has commenced
enforcement remedies available to it under its contractual agreements, or
the Company assesses that there has been a deterioration of credit quality to the extent the Company no
longer has reasonable assurance as to the timely collection of the full amount of principal and/or interest.
The assessment of significant increase in credit risk requires significant credit judgement. In determining whether
there has been a significant increase in credit risk and in calculating the amount of expected credit losses, we rely
on estimates and exercise judgement regarding matters for which the ultimate outcome is unknown. These
judgements include changes in circumstances that may cause future assessments of credit risk to be materially
different from current assessments, which could require an increase or decrease in the expected credit loss.
In cases where a borrower experiences financial difficulties, the Company may grant certain concessionary
modifications to the terms and conditions of a mortgage or other loan investment. Modifications may include
payment deferrals, extension of amortization periods, debt consolidation, forbearance and other modifications
intended to minimize the economic loss and to avoid foreclosure or repossession of collateral. The Company
determines the appropriate remediation strategy based on the individual borrower.
If the Company determines that a modification results in derecognition, the original asset is derecognized while a
new asset is recognized based on the new contractual terms. In this case, significant increase in credit risk of the
new asset is subsequently assessed relative to the risk of default on the date of modification.
If the Company determines that a modification does not result in derecognition, significant increase in credit risk is
subsequently assessed based on the risk of default at initial recognition of the original asset.
Expected cash flows arising from the modified contractual terms are considered when calculating the ECL for the
modified asset.
For mortgage and other loan investments that were modified while having a lifetime ECL, the mortgage and other
loan investments can revert to having 12-month ECL after a period of performance and improvement in
investment specific factors.
Measurement of Expected for Credit Loss ("ECL") - non credit impaired financial assets
The ECL for non credit impaired financial assets reflects a probability-weighted outcome that considers the
Company's assessment of all expected cash shortfalls over 12-months after the reporting date or expected life as
applicable, and reasonable and supportable information about past events, current conditions and forecasts of
future events and economic conditions is considered. The probability weighting and expected cash shortfalls are
significant assumptions.
Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial
instrument. 12-month ECLs are the portion of ECLs that result from default events that are possible within the 12
months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual period over which the
Company is exposed to credit risk.
TIMBERCREEK FINANCIAL 15
67
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
When determining the expected credit loss allowance, the Company considers reasonable and supportable
information that is relevant and available without undue cost or effort. We consider past events, current market
conditions and reasonable forward-looking supportable information about future economic conditions. In
assessing information about possible future economic conditions, we utilized multiple economic scenarios
including our base case, which represents the most probable outcome and is consistent with our view of the
portfolio. In considering the lifetime of a mortgage or other loan investment, the contractual period of the loan,
including prepayment, extension and other options is generally used.
The calculation of expected credit losses includes the explicit incorporation of forecasts of future economic
conditions. The estimation of future cash flows also includes assumptions about local real estate market
conditions, 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 forecast is developed internally by the Manager. We exercise experienced credit
judgement to incorporate multiple economic forecasts which are probability-weighted in the determination of the
final expected credit loss. The allowance is sensitive to changes in both economic forecast and the probability-
weight assigned to each forecast scenario.
Measurement of ECL - credit impaired financial assets
ECL for Stage 3 are recorded for individually identified credit impaired mortgage and other loan investments to
reduce their carrying value to the probability-weighted expected recoverable amount. The capitalization rates and
comparable transactions are significant assumptions. We review our mortgage and other loan investments on an
ongoing basis to assess whether any mortgage and other loan investment carried at amortized cost should be
classified as credit impaired and whether an allowance or write-off should be recorded.
The review of individually credit impaired mortgage and other loan investments is conducted at least quarterly by
the Manager, who assesses the ultimate collectability and estimated recoveries for a specific debt investment
based on all events and conditions that are relevant to the mortgage and other loan investment. To determine the
amount we expect to recover from an individually credit impaired debt investment, we use the value of the
estimated future cash flows discounted at the debt investment’s original effective interest rate. The determination
of estimated future cash flows of a collateralized impaired debt investment reflects the expected realization of the
underlying security, net of expected costs and any amounts legally required to be paid to the borrower.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for financial asset measured at amortized cost are deducted from the gross carrying amount of
the asset.
Write-offs
The gross carrying amount of a financial asset is written off when the Company has no reasonable expectation of
recovering a financial asset in its entirely or a portion thereof. However, financial assets that are written off could
still be subject to enforcement activities in order to comply with the Company's procedures for recovery of
amounts due.
68
TIMBERCREEK FINANCIAL 16
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
(c) Real Estate Inventory
Real estate inventory includes land inventory and real estate properties inventory that will be sold by the
Company and are measured at the lower of cost and net realizable value. Impairment is reviewed at each
reporting date, with any losses recognized in net income when the carrying value of the inventory exceeds its net
realizable value. The net realizable value is defined as the entity-specific future selling price in the ordinary course
of business less estimated costs of completion, if any, and selling costs.
(d) Convertible debentures
Compound financial instruments issued by the Company comprise convertible debentures that can be converted
to ordinary shares at the option of the holder, when the number of shares to be issued is fixed and does not vary
with changes in fair value. The convertible debentures are a compound financial instrument as they contain both a
liability and an equity component.
At the date of issuance, the liability component of the convertible debentures is recognized at its estimated fair
value of a similar liability that does not have an equity conversion option and the residual is allocated to the equity
component. Any directly attributable transaction costs are allocated to the liability and equity components in
proportion to their initial carrying amounts. Subsequent to initial recognition, the liability component of a
convertible debenture is measured at amortized cost using the effective interest rate method. The equity
component is not re-measured subsequent to initial recognition. Interest, losses and gains relating to the financial
liability are recognized in profit or loss.
(e) Gross interest and other income
Gross interest and other income includes interest earned on the Company’s mortgage and other loan
investments, lender fees and interest earned on cash and cash equivalents. Interest income earned on mortgage
and other loan investments is accounted for using the effective interest rate method. Lender fees, an integral part
of the yield on mortgage and other loan investments, are amortized to profit and loss over the expected life of the
specific mortgage and other loan 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.
(f) Leases
When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an
operating lease. Leases are classified as finance leases if all the risks and rewards incidental to ownership of the
leased asset are substantially transferred to the lessee. Otherwise they are classified as operating leases.
As lessor in a financing lease, a receivable is recognized equal to the investment in the lease, which is calculated
as the present value of the minimum payments to be received from the lessee, discounted at the interest rate
implicit in the lease, plus any unguaranteed residual value the Company expects to recover at the end of the
lease. Finance lease income is recognized in gross interest and other income, including mortgage syndications in
the consolidated statement of net income and comprehensive Income.
As a lessor in an operating lease, payments received are recognized in profit or loss on a straight-line basis over
the lease term. Revenue from operating leases include rent, parking and other sundry revenue from investment
properties.
TIMBERCREEK FINANCIAL 17
69
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
(g) Derecognition of financial assets and liabilities
Financial assets - syndications
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 does not 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 or other loan 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 or other loan 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 assets - modifications
The Company defines mortgage or other loan investments modification as changes to the original contractual
terms of the financial asset that represents a fundamental change to the contract, or changes that may have a
significant impact on the contractual cash flow of the asset, including solely for payments of principal and interest
criterion. The Company derecognizes the original asset when the modification results in substantial change or
expiry in the original cash flows; a new asset is recognized based on the new contractual terms. The new asset is
initially recognized in Stage 1, and then assessed for significant increase in credit risk on an ongoing basis. If the
Company determines the modifications do not result in derecognition, then the asset will retain its original staging
and significant increase in credit risk assessment.
Financial liabilities
The Company derecognizes a financial liability when the obligation under the liability is discharged, cancelled
or expires.
(h) Foreign currency forward contract and interest rate swap
The Company may enter into foreign currency forward contracts and interest rate swaps to economically hedge its
foreign currency risk and interest rate risk exposure of its mortgage and other loan investments. The value of
forward currency contracts and interest rate swaps entered into by the Company is recorded as the difference
between the value of the contract on the reporting period and the value on the date the contract originated. Any
resulting gain or loss is recognized in the statement of net income and comprehensive income unless the foreign
currency contract or interest rate swap is designated and effective as a hedging instrument under IFRS
Accounting Standards. The Company has elected to not account for the foreign currency contracts and interest
rate swaps as an accounting hedge.
70
TIMBERCREEK FINANCIAL 18
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
(i) 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.
(j) Changes in material accounting policies
Disclosure initiative – Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
The Company adopted Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2
Making Materiality Judgements) from January 1, 2023. Although the amendments did not result in any changes to
the accounting policies themselves, they impacted the accounting policy information disclosed in the financial
statements.
The key amendments include:
•
•
•
requiring companies to disclose their 'material' accounting policies rather than their 'significant'
accounting policies;
clarifying that accounting policies related to immaterial transactions, other events or conditions are
themselves immaterial and as such need not be disclosed; and
clarifying that not all accounting policies that relate to material transactions, other events or conditions
are themselves material to a company’s financial statements.
Management reviewed the accounting policies and made updates to the information disclosed in note 3 Material
accounting policies (2022 - Significant accounting policies) in certain instances in line with the amendments.
TIMBERCREEK FINANCIAL 19
71
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
4. MORTGAGE AND OTHER INVESTMENTS, INCLUDING MORTGAGE SYNDICATIONS
(a) Mortgage investments
As at December 31, 2023
Mortgage investments, including mortgage syndications -
at amortized cost
Interest receivable
Unamortized lender fees
Allowance for ECL
Mortgages,
including
mortgage
syndications
Note
Mortgage
syndication
liabilities
Net Mortgage
Investments
4(b)(c) $
1,540,678 $
(599,956) $
940,722
18,846
(4,318)
1,559,524
(604,274)
(7,876)
(12,093)
2,650
—
14,528
955,250
(5,226)
(12,093)
4(d)
Mortgage investments at amortized cost
1,539,555
(601,624)
937,931
Mortgage investments at FVTPL
Interest receivable
Mortgage investments at FVTPL
Mortgage investments, including mortgage syndications
Unadvanced mortgage commitments
As at December 31, 2022
5,500
57
5,557
—
—
—
5,500
57
5,557
1,545,112 $
(601,624) $
943,488
383,884 $
240,093 $
143,791
$
$
Mortgages,
including
mortgage
syndications
Mortgage
syndication
liabilities
Net Mortgage
Investments
Mortgage investments, including mortgage syndications -
at amortized cost
$
1,799,321 $
(609,012) $
1,190,309
Interest receivable
Unamortized lender fees
Allowance for ECL
14,694
(3,934)
10,760
1,814,015
(612,946)
1,201,069
(8,456)
(10,605)
1,655
—
(6,801)
(10,605)
Mortgage investments at amortized cost
1,794,954
(611,291)
1,183,663
Mortgage investments at FVTPL
Interest receivable
Mortgage investments at FVTPL
Mortgage investments, including mortgage syndications
Unadvanced mortgage commitments
5,500
52
5,552
—
—
—
5,500
52
5,552
1,800,506 $
(611,291) $
1,189,215
293,386 $
144,627 $
148,759
$
$
72
TIMBERCREEK FINANCIAL 20
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
Mortgages classified at FVTPL
The Company holds a vendor-take-back mortgage classified at FVTPL with a contractual value of $6,500 and an
estimated fair value of $5,500. For the year ended December 31, 2023, the Company generated net interest
income and other income on net mortgage investments measured at FVTPL of $666 (2022 – $2,400).
The Company continues to measure its FVTPL assets using the direct comparison method, comparing the assets
to directly comparable properties and has not recorded any fair value adjustments during the year (2022 – fair
value loss of $1,402).
The changes on net mortgage investments measured at FVTPL are as follows:
Mortgage investments, measured at FVTPL
Balance, beginning of year
Funding
Discharges
Transfer to real estate inventory
Fair value loss
Balance, end of year
(b) Net mortgage investments
As at
Interest in first mortgages
Interest in second and third mortgages
Year Ended
December 31, 2023
Year Ended
December 31, 2022
$
$
5,500 $
—
—
—
—
5,500 $
51,474
5,734
(20,331)
(29,975)
(1,402)
5,500
December 31, 2023
December 31, 2022
88.9 % $
11.1 %
100.0 % $
841,264
104,958
946,222
92.4 % $
1,105,431
7.6 %
90,378
100.0 % $
1,195,809
The mortgage investments are secured by real property and will mature between the remainder of 2024 and 2027
(December 31, 2022 – 2023 and 2026). During the year ended December 31, 2023, the Company earned interest
income on mortgage investments at amortized cost of $110,246 (2022 – $95,271). During 2023, the Company
recognized other income of $657 (2022 – $487), attributable to bank interest income and miscellaneous income.
A majority of the mortgage investments contain a prepayment option, whereby the borrower may repay the
principal prior to maturity, after six months of interest payments and with a 30 days' written notice without penalty
or yield maintenance. The unamortized lender fees are recognized over the term of the mortgage investment.
For the year ended December 31, 2023, the Company recognized income from amortization of lender fees on net
mortgage investments, net of fees relating to mortgage syndication liabilities of $7,872 (2022 – $8,459). For the
year ended December 31, 2023, the Company recorded non-refundable upfront lender fees on net mortgage
investments, net of fees relating to mortgage syndication liabilities of $6,297 (2022 – $7,913), which are amortized
to income over the term of the related mortgage investments using the effective interest rate method.
Principal repayments, net of mortgage syndication, by contractual maturity dates are as follows:
As at
2024
2025
2026
2027
Total
$
$
December 31, 2023
679,801
198,624
67,672
125
946,222
TIMBERCREEK FINANCIAL 21
73
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
(c) 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. In one participation agreement, an
option is provided to the third-party lender to sell their senior position back to the Company, at a purchase price
equal to the outstanding principal amount of $35,101, the lenders' proportionate share together with all accrued
interest. As a result, the lenders' portion of these mortgages 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 are recognized in profit and loss. The
Company’s portion of the mortgage is recorded as mortgage investments. The fair value of the transferred assets
and mortgage syndication liabilities approximate their carrying values (see note 18).
74
TIMBERCREEK FINANCIAL 22
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
(d) Expected Credit Loss (“ECL”)
The expected credit loss is maintained at a level that management considers adequate to absorb credit-related
losses on mortgage and other loan investments classified at amortized cost. The expected credit loss amounted
to $12,430 as at December 31, 2023 (December 31, 2022 – $11,350), of which $12,093 (December 31, 2022 –
$10,605) was recorded against mortgage investments and $337 (December 31, 2022 – $745) was recorded
against other loan investments. Multi-residential mortgage investments are categorized by asset type that
includes apartments, condominium construction and retirement housing. Other mortgage investments are
categorized by asset type that includes retail, unimproved land, improved land, office, industrial, self-storage,
condominium inventory and single-residential housing, etc.
Multi-Residential
Mortgage Investments
Mortgages, including mortgage
syndications1
Mortgage syndication liabilities1
Net mortgage investments
Expected credit loss2
Other Mortgage Investments
Mortgages, including mortgage
syndications1
Mortgage syndication liabilities1
Net mortgage investments
Expected credit loss2
Other Loan Investments
Other loans, including other loans
syndications1
Other loans syndication liabilities1
Net other loan investments
Expected credit loss2
As at December 31, 2023
As at December 31, 2022
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
$ 943,841 $ 58,235 $ 51,293 $ 1,053,369 $ 1,020,893 $
417,639
38,862 496,781 382,077
40,280
526,202
17,955
12,431 556,588 638,816
780
525,422
Stage 1
280
17,675
Stage 2
395
1,424
1,455
12,036 555,133 637,392
Total
Stage 1
Stage 3
425,157
15,357
107,493
—
65,641 506,155 628,128
— 107,493 170,508
317,664
15,357
65,641 398,662 457,620
560
317,104
Stage 1
732
14,625
Stage 2
47,399
—
47,399
337
$ 47,062 $
—
—
—
—
— $
9,346
414
10,638
56,295 388,024 457,206
Total
Stage 1
Stage 3
—
—
—
47,399
60,742
—
—
47,399
60,742
—
— $ 47,062 $ 59,997 $
337
745
— $ 132,767 $ 1,153,660
—
—
—
—
60,361 442,438
72,406 711,222
1,409
2,833
70,997 708,389
Stage 2
Stage 3
Total
—
—
—
—
—
32,227 660,355
— 170,508
32,227 489,847
7,358
7,772
24,869 482,075
Stage 2
Stage 3
Total
—
—
—
—
— $
—
—
—
60,742
—
60,742
—
745
— $ 59,997
1Including interest receivable.
2Expected credit loss in finance lease receivable (note 4(e)) and unadvanced commitments (note 4) are all considered to be in Stage 1 with
minimal ECL.
TIMBERCREEK FINANCIAL 23
75
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
The changes in the expected credit loss year to date are shown in the following tables:
Multi-Residential
Mortgage Investments
Balance, beginning of year
Expected credit loss:
Remeasurement
Transfer to/(from)
Stage 1
Stage 2
Stage 3
Total expected credit loss
Fundings
Gross Write-Offs
Recoveries
Discharges
Derecognition against inventory
Balance, end of year
Other Mortgage Investments
Balance, beginning of year
Expected credit loss:
Remeasurement
Transfer to/(from)
Stage 1
Stage 2
Stage 3
Total expected credit loss
Fundings
Gross Write-Offs
Recoveries
Discharges
Balance, end of year
Other Loan Investments
Balance, beginning of year
Expected credit loss:
Remeasurement
Transfer to/(from)
Stage 1
Stage 2
Stage 3
Total expected credit loss
Fundings
Gross Write-Offs
Recoveries
Discharges
Balance, end of year
Year Ended December 31, 2023
Year Ended December 31, 2022
Stage 1 Stage 2 Stage 3
$
1,424 $
— $
1,409 $
Total
2,833 $
Stage 1
Stage 2
Stage 3
882 $
— $
— $
Total
882
(623)
239
1,556
1,172
352
—
1,277
1,629
(41)
—
—
760
218
—
—
(198)
—
780
—
41
—
—
—
—
280
2,965
—
—
—
—
—
—
—
—
—
(2,570)
280
395
Stage 1 Stage 2 Stage 3
414
—
7,358
(41)
41
—
4,005
218
—
—
(198)
(2,570)
1,455
Total
7,772
(132)
—
—
1,102
698
—
—
(376)
—
1,424
—
—
—
—
—
—
—
—
—
—
—
—
132
1,409
—
—
—
—
—
(132)
—
132
2,511
698
—
—
(376)
—
1,409
2,833
Stage 1
Stage 2
Stage 3
283
52
1,753
Total
2,088
269
727
1,925
2,921
119
—
5,553
5,672
(68)
—
—
615
25
—
—
(80)
560
—
5
—
732
—
—
—
—
—
—
63
9,346
—
—
—
—
732
9,346
(68)
5
63
10,693
25
—
—
(80)
10,638
—
—
—
402
58
—
—
(46)
414
—
(52)
—
—
—
—
—
—
—
—
—
52
—
(52)
52
7,358
7,760
—
—
—
—
58
—
—
(46)
7,358
7,772
Stage 1 Stage 2 Stage 3
Total
Stage 1
Stage 2
Stage 3
745
—
—
745
898
—
—
Total
898
(364)
—
—
(364)
(111)
—
—
(111)
—
—
—
381
—
—
—
(44)
—
—
—
—
—
—
—
—
$
337 $
— $
—
—
—
—
—
—
—
—
—
—
—
—
381
—
—
—
(44)
337 $
—
—
—
787
22
—
—
(64)
745 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $
— $
—
—
—
787
22
—
—
(64)
745
76
TIMBERCREEK FINANCIAL 24
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
The following table presents the gross carrying amounts of mortgage and other loan investments, net of
syndication liabilities, subject to IFRS 9 impairment requirements by internal risk ratings used by the Company for
credit risk management purposes.
In assessing credit risk, the Company utilizes a risk rating framework that considers the following factors:
collateral type, property rank that is applicable to the Company's security and/or priority positions, loan-to-value,
population of location of the collateral and an assessment of possible loan deterioration factors. These factors
include consideration of the guarantor's ability to make interest payments, the condition of the asset and cash
flows, economic and market factors as well as any changes to business plans that could affect the execution risk
of the loan.
The internal risk ratings presented in the table below are defined as follows:
Low Risk: Mortgage and loan investments that exceed the credit risk profile standard of the Company with a
below average probability of default. Yields on these investments are expected to trend lower than the Company’s
average portfolio.
Medium-Low: Mortgage and loan investments that are typical for the Company’s risk appetite, credit standards
and retain a below average probability of default. These mortgage and loan investments are expected to have
average yields and would represent a significant percentage of the overall portfolio.
Medium-High: Mortgage and loan investments within the Company’s risk appetite and credit standards with an
average probability of default. These investments typically carry attractive risk-return yield premiums.
High Risk: Mortgage and loan investments within the Company’s risk appetite and credit standards that have an
additional element of credit risk that could result in an above average probability of default. These mortgage and
loan investments carry a yield premium in return for their incremental credit risk. These mortgage and loan
investments are expected to represent a small percentage of the overall portfolio.
Default: Mortgage and loan investments that are more than 90 days past due on interest payment, or that are
more than 90 days past due maturity date and/or the Company assesses that there has been a deterioration of
credit quality to the extent the Company no longer has reasonable assurance as to the timely collection of the full
amount of principal and interest and/or when the Company has commenced enforcement remedies available to it
under its contractual agreements.
TIMBERCREEK FINANCIAL 25
77
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
As at December 31, 2023
As at December 31, 2022
Multi-Residential
Mortgage Investments
Low risk
Medium-Low risk
Medium-High risk
High risk
Default
Net Mortgage Investments1
Expected credit loss
Other Mortgage Investments
Low risk
Medium-Low risk
Medium-High risk
High risk
Default
Net Mortgage Investments1
Expected credit loss
Stage 2
Stage 3
Stage 1
— $
— $
$ 184,985 $
—
248,215
—
—
93,002 17,955
—
—
— 12,431
526,202 17,955 12,431
395
525,422 17,675 12,036
—
—
280
780
Stage 2
Stage 3
Stage 1
—
—
39,213
—
—
178,835
—
99,616 15,357
—
—
— 65,641
317,664 15,357 65,641
9,346
317,104 14,625 56,295
—
—
732
560
Total
Stage 1
184,985 $ 117,051 $
248,215 324,592
110,957 194,748
2,425
—
556,588 638,816
1,424
555,133 637,392
—
12,431
1,455
Total
Stage 1
39,213 107,417
178,835 233,874
114,973 116,329
—
—
398,662 457,620
414
388,024 457,206
—
65,641
10,638
Stage 2
Stage 3
Total
— $ 117,051
— $
— 324,592
—
— 194,748
—
—
2,425
—
— 72,406 72,406
— 72,406 711,222
—
2,833
1,409
— 70,997 708,389
Stage 2
Stage 3
Total
— 107,417
—
— 233,874
—
— 116,329
—
—
—
—
— 32,227 32,227
— 32,227 489,847
—
7,772
7,358
— 24,869 482,075
Other Loan Investments
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Low risk
Medium-Low risk
Medium-High risk
High risk
Default
Net other loan investments
Expected credit loss
1. Net of mortgage syndications.
—
—
—
47,399
—
47,399
337
$ 47,062 $
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
— $
—
—
—
—
—
—
47,399 60,742
—
47,399 60,742
745
337
—
47,062 $ 59,997 $
—
—
—
—
—
—
—
— $
Stage 3
Total
—
—
—
—
—
—
— 60,742
—
—
— 60,742
—
745
— $ 59,997
78
TIMBERCREEK FINANCIAL 26
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
(e) Other investments
As at
Other loan investments, net of expected credit loss
Finance lease receivable, measured at amortized cost
Investment in participating debentures, measured at FVTPL
Investment in equity instrument (see note 14(d))
Joint venture investment in indirect real estate development
Total Other Investments
December 31, 2023
December 31, 2022
$
$
47,033 $
6,020
4,380
3,000
2,225
62,658 $
59,956
6,020
4,744
—
2,225
72,945
Other loan investments will mature between the remainder of 2024 and 2038 (December 31, 2022 – 2023 and
2038). During 2023, other loan investments generated interest income of $5,023 (2022 – $5,257) and income
from amortization of lender fees of $407 (2022 – $267). For the year ended 2023, the Company recorded non-
refundable upfront cash lender fees on other loan investments of $300 (2022 – $296), which are amortized over
the term of the related other loan investments using the effective interest rate method.
Principal repayments of other loan investments by contractual maturity dates are as follows:
As at
2024
2025
2026
2027 and thereafter
Total
December 31, 2023
43,667
—
—
2,840
46,507
$
$
For the year ended 2023, Investment in participating debentures measured at FVTPL received total cash
distribution of $981 (2022 – $616), represented by a return of capital distribution of $707 (2022 – $164), and
income distribution of $274 (2022 – $452).
In October 2017, the Company entered into a 20-year emphyteutic lease under which the lessee has the
obligation to purchase the property at $9,934 at the end of the lease term on September 2038 and the option to
purchase the property earlier based on a prescribed purchase price schedule. The Company has classified the
lease as a finance lease and the lease receivable balance of $6,020 (December 31, 2022 – $6,020) is included in
other investments. The lease payment began in the third quarter of 2018. Concurrently, the Company entered into
a 20-year $3,300 construction loan on the leased property with the lessee which is included in other loan
investments. The loan amortization payment began in the fourth quarter of 2019.
The lease receivable payments are due as follows:
Less than one year
Between one and five years
More than five years
Future minimum
lease payments
Present value of
minimum lease payments
$
172
809
12,163
$
13,144
$
$
119
628
5,273
6,020
TIMBERCREEK FINANCIAL 27
79
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
5. REAL ESTATE INVENTORY
Land Inventory
As at December 31, 2023, the Company has land inventory of $30,577 (December 31, 2022 – $30,245), which is
recorded at the lower of cost and net realizable value.
Land inventory operations which were acquired in May 2022, incurred net rental loss of $1,485 in 2023 (2022 –
loss of $654).
Real Estate Properties Inventory
On August 31, 2023, the Company, along with its syndication partners, elected to credit bid three properties which
were subject to CCAA proceedings. The properties were previously the collateral for a mortgage investment at
amortized cost. Effective August 31, 2023, the Company obtained the beneficial interest in the three properties in
exchange for the discharge of the associated mortgage investments, on a non-cash basis. The Company intends
to sell the properties, it has accordingly recorded them as inventory at the lower of cost and net realizable value
less costs to sell. At the time of the exchange, the mortgage investment, net of syndication liability, had a carrying
value of $63,855 comprised of net mortgage investment of $64,363, net interest receivable of $2,062 and an ECL
provision of $2,569. The Company recognized the three properties as real estate inventory and accordingly
recorded them along with associated working capital of $1,888 at a cost of $132,875 inclusive of the syndication
partner's 50% share and recognized a corresponding real estate inventory collateral liability of $69,025 to the
remaining participants in the discharged mortgage investment.
As at December 31, 2023, the Company has real estate properties inventory of $130,987 (December 31, 2022 –
nil), which is recorded as the lower of cost and net realizable value.
As at
Real Estate Inventory
Real Estate Inventory Collateral Liability
Real Estate Inventory, net of collateral liability
December 31, 2023
December 31, 2022
$
$
130,987 $
(69,008)
61,979 $
—
—
—
Real estate properties inventory generated net rental income of $889 in 2023 (2022 – nil).
80
TIMBERCREEK FINANCIAL 28
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
6. CREDIT FACILITY
As at
Credit facility
Unamortized financing costs
Credit facility, end of period
December 31, 2023
$
$
260,000 $
(296)
259,704 $
December 31, 2022
451,000
(653)
450,347
As of December 31, 2023, the Company has an aggregate credit limit of $600,000 under its credit facility. The
facility is secured by a general security agreement over the Company’s assets and its subsidiaries. The credit
facility agreement has a maturity date of February 10, 2024.
The interest rates and fees on the existing credit agreement are either at the prime rate of interest plus 1.00% per
annum (December 31, 2022 – prime rate of interest plus 1.00% per annum) or bankers’ acceptances with a
stamping fee of 2.00% (December 31, 2022 – 2.00%) and standby fee of 0.40% per annum (December 31, 2022
– 0.40%) on the unutilized credit facility balance. As at December 31, 2023, the Company’s qualified credit facility
limit, which is subject to a borrowing base as defined in the existing credit agreement is $369,537.
Subsequent to year end, the credit facility was renewed on February 8, 2024, the Company entered into an
amendment and restatement to its existing credit facility agreement ("Third Amended and Restated Credit
Agreement") in order to, among other things, extend the maturity date to February 8, 2026, decrease the
aggregate credit limit to $510,000 and reinstate accordion feature to $100,000. The interest rates of the Third
Amended and Restated Credit Agreement are either at the prime rate of interest plus 1.25% per annum or term
CORRA at 2.25% per annum. All other general terms of the credit facility remain unchanged.
During the year ended December 31, 2023, the Company incurred deferred financing costs of $596 (2022 –
$801). The financing costs are netted against the outstanding balance of the credit facility and are amortized over
the term of the credit facility agreement.
Interest on the credit facility is recorded in financing costs and calculated using the effective interest rate method.
For the year ended December 31, 2023, included in financing costs is interest on the credit facility of $29,443
(2022 – $21,996) and financing costs amortization of $953 (2022 – $968).
During 2022, included in financing costs is interest on the credit facility - investment properties of $253 and
financing costs amortization of $17. In April 2022, in connection with the disposition of the investment properties,
the Company's share of the outstanding principal was assumed by the purchaser.
TIMBERCREEK FINANCIAL 29
81
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
7. CONVERTIBLE DEBENTURES
As at December 31, 2023, and December 31, 2022, the Company's obligations under the convertible unsecured
debentures are as follows:
Series
June 2017
Debentures
July 2021
Debentures
December 2021
Debentures
Ticker
Interest
Rate
Date of
Maturity
Interest
Payment Date
Conversion
Price per
share
Equity
Component
December
31, 2023
December
31, 2022
TF.DB.C
TF.DB.D
TF.DB.E
5.30 % June 30,
2024
5.25 % July 31,
2028
5.00 % December
31, 2028
June 30 and
December 31
January 31 and
11.10 $
560 $
45,000 $
45,000
July 31
11.40
1,107
55,000
55,000
June 30 and
December 31
11.40
1,405
Unsecured Debentures, principal
Unamortized financing cost and amount allocated to equity component
46,000
146,000
46,000
146,000
(5,155)
(6,580)
Debentures, end of period
$ 140,845 $ 139,420
Interest costs related to the convertible 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
Amortization of issue costs and accretion of the convertible debentures
Total
June 2017 Debentures
Year ended December
31,
2023
$
7,572 $
1,426
2022
7,562
1,460
$
8,998 $
9,022
On June 13, 2017, the Company completed a public offering of $40,000, plus an over-allotment option of $5,000
on June 27, 2017, of 5.30% convertible unsecured subordinated debentures for net proceeds of $42,774 (the
“June 2017 Debentures”).
The June 2017 Debentures are 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 up to, but excluding, the date of
redemption, on not more than 60 days’ and not less than 30 days’ prior written notice. The Company may also
elect to redeem debentures by issuing common shares at a 5% premium to the prevailing market price at the date
of redemption.
The issue costs of $2,226 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.
82
TIMBERCREEK FINANCIAL 30
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
July 2021 Debentures
On July 8, 2021 the Company completed a public offering of $50,000, plus an over-allotment option of $5,000 on
July 15, 2021, of 5.25% convertible unsecured subordinated debentures for net proceeds of $52,140 (the “July
2021 Debentures”).
The July 2021 Debentures are redeemable on or after July 31, 2024 and prior to July 31, 2026 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 volume weighted average trading price of the common shares on the TSX
during the 20 consecutive trading days ending on the fifth trading day preceding the date on which the notice of
the redemption is given is not less than 125% of the conversion price. The Company may also elect to redeem
debentures by issuing common shares at a 5% premium to the prevailing market price at the date of redemption.
On and after July 31, 2026 and prior to the maturity date, the July 2021 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 up to, but excluding, the date of redemption, on not more than 60 days’ and not less
than 30 days’ prior written notice.
The issue costs of $2,860 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.
December 2021 Debentures
On December 3, 2021 the Company completed a public offering of $40,000 plus an over-allotment option of
$6,000 on December 10, 2021, of 5.00% convertible unsecured subordinated debentures for net proceeds of
$43,765 (the “December 2021 Debentures”).
The December 2021 Debentures are redeemable on or after December 31, 2024 and prior to December 31, 2026
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 volume weighted average trading price of the common
shares on the TSX during the 20 consecutive trading days ending on the fifth trading day preceding the date on
which the notice of the redemption is given is not less than 125% of the conversion price. The Company may also
elect to redeem debentures by issuing common shares at a 5% premium to the prevailing market price at the date
of redemption.
On and after December 31, 2026 and prior to the maturity date, the December 2021 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 up to, but excluding, the date of redemption, on not more than
60 days’ and not less than 30 days’ prior written notice.
The issue costs of $2,235 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.
TIMBERCREEK FINANCIAL 31
83
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
8. COMMON SHARES
The Company is authorized to issue an unlimited number of common shares. Holders of common shares are
entitled to receive notice to attend and vote at all shareholder meetings as well as to receive dividends as
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.
On June 10, 2021, the Company filed a 25-month period base shelf prospectus in all provinces and territories of
Canada which allows the Company to offer and issue common shares, debt securities, subscription receipts,
warrants, and units (collectively, the “Securities”) from time to time up to an aggregate offering price of $500,000.
The base shelf prospectus expired on July 10, 2023.
The changes in the number of common shares were as follows:
Balance, beginning of year
Issuance of common shares
Common shares issued under dividend reinvestment plan
Common shares repurchased for dividend reinvestment plan
Common shares repurchased under normal course issuer bid
Balance, end of year
(a) At-the-market equity program (the "ATM Program")
Year ended December 31,
2022
2023
82,219,602
1,504,300
641,944
(360,830)
(117,500)
83,887,516
83,887,516
—
801,704
(801,704)
(878,000)
83,009,516
The Company announced on June 18, 2021 that it has established an ATM Program which allows the Company
to issue common shares from treasury having an aggregate gross sales amount of up to $90,000 to the public
from time to time, at the Company’s discretion. Sales of the common shares under the equity distribution
agreement are made through “at-the-market distributions” as defined in National Instrument 44-102 - Shelf
Distributions, including sales made directly on the Toronto Stock Exchange (the "TSX"). The common shares
distributed under the ATM Program are at the market prices prevailing at the time of sale, and therefore prices
vary between purchasers and over time. The ATM Program was active between June 2021 and August 2022 and
expired on July 10, 2023.
For the year ended December 31, 2023, the Company did not issue any common shares under the ATM program.
For the year ended December 31, 2022, the Company issued 1,504,300 of common shares for gross proceeds of
$14,323 at an average price of $9.52 per common share and paid $246 in commissions to the agent, pursuant to
the equity distribution agreement.
(b) Dividend reinvestment plan ("DRIP")
The DRIP provided eligible beneficial and registered holders of common shares with a means to reinvest
dividends declared and payable on such common shares into additional common shares. Under the DRIP,
shareholders could enroll to have their cash dividends reinvested to purchase additional common shares.
The common shares can be purchased from the open market based upon the prevailing market rates or from
treasury at a price of 98% of the average of the daily volume weighted average closing price on the TSX for the 5
trading days preceding payment, the price of which will not be less than the book value per common share.
84
TIMBERCREEK FINANCIAL 32
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
For the year ended December 31, 2023, the Company purchased from the open market and issued under DRIP
801,704 common shares (2022 – 360,830) for total amount of $5,959 (2022 – $2,847) at an average price of
$7.43 per common share (2022 –$7.89).
For the year ended December 31, 2023, the Company did not issue any common shares from treasury under
DRIP. (2022 – issued 281,114 common shares and retained $2,553 in dividends at an average price of $9.08 per
common share).
(c) Dividends to holders of common shares
The Company intends to pay dividends to holders of common shares monthly within 15 days following the end of
each month. For the year ended December 31, 2023, the Company declared dividends of $57,603 or $0.69 per
common share (2022 – $57,721, $0.69 per common share).
As at December 31, 2023, $4,742 in aggregate dividends (December 31, 2022 – $4,824) were payable to the
holders of common shares by the Company. Subsequent to December 31, 2023, the Board of Directors of the
Company declared dividends of $0.0575 per common share to be paid on January 15, 2024 to the common
shareholders of record on December 31, 2023.
(d) Normal course issuer bid ("NCIB")
On May 24, 2022, the Company announced that the TSX approved the Company's normal course issuer bid (the
"NCIB") to repurchase for cancellation up to 8,330,591 common shares over a 12-month period. Repurchases
under the NCIB were permitted to commence on May 26, 2022 and expired on May 25, 2023.
On May 24, 2023, the Company announced that the TSX approved renewal of the NCIB to repurchase for
cancellation up to 8,305,467 common shares over a 12-month period. Repurchases under the NCIB were
permitted to commence on May 26, 2023 and continue until May 25, 2024 upon expiry.
The Company may repurchase for cancellation under the NCIB by means of open market transactions or
otherwise as permitted by the TSX. All repurchases for cancellation under the NCIB will be repurchased on the
open market through the facilities of the TSX and alternative Canadian trading platforms at the prevailing market
price at the time of such transaction.
During year ended December 31, 2023, the Company repurchased 878,000 common shares (2022 – 117,500) for
a total amount of $6,222 (2022 – $846). The average price per common share repurchased in 2023 was $7.09.
TIMBERCREEK FINANCIAL 33
85
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
9. NON-EXECUTIVE DIRECTOR DEFERRED SHARE UNIT PLAN ("DSU PLAN")
Commencing June 30, 2016, the Company instituted a non-executive director deferred share unit plan, whereby a
director can elect up to 100% of the compensation be paid in the form of DSUs, credited quarterly in arrears. 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 of the DSU 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”).
The directors are entitled to also accumulate additional DSUs equal to the monthly cash dividends, on the DSUs
already held by that director determined based on the Fair Market Value of the common shares on the dividend
payment date.
Following each calendar quarter, the director DSU accounts are credited with the number of DSUs calculated by
multiplying the total compensation payable in DSUs divided by the Fair Market Value.
The DSU 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 as of the 24th business day after publication of the Company’s financial statements
following a director’s departure from the Board of Directors.
For the year ended December 31, 2023, 39,022 units were issued (2022 – 36,704 units) and as at December 31,
2023, 138,059 units were outstanding (December 31, 2022 – 99,037 units). For the year ended December 31,
2023, no DSUs were exercised (2022 – 82,807).
For the year ended 2023, the compensation expense of the members of the Board of Directors amounts to $397
(2022 – $377), which is paid in a combination of DSUs and cash.
10. MANAGEMENT, SERVICING AND ARRANGEMENT FEES
The management agreement has a term of 10 years that commenced on April 1, 2020 and is automatically
renewed for successive five year terms at the expiration of the initial term and pays (i) management fee equal to
0.85% per annum of the gross assets of the Company, calculated and paid monthly in arrears, plus applicable
taxes, and (ii) servicing fee equal to 0.10% of the amount of any senior tranche of a mortgage that is syndicated
by the Manager to a third party investor on behalf of the Company, where the Company retains the corresponding
subordinated portion. Gross assets are defined as the total assets of the Company less unearned revenue before
deducting any liabilities, less any amounts that are reflected as mortgage syndication liabilities.
As compensation for the Manager’s work on syndicating any mortgage investments, the Management Agreement
permits the Manager to collect a portion of the lender fee paid by borrowers of mortgage investments. The
Management Agreement provides that, in respect of each mortgage investment made on or after April 1, 2020
involving syndication to another party of a senior tranche with the Company retaining a subordinated component,
the Manager shall be entitled to retain, from any lender fee generated in respect of such loan, an amount equal to
0.20% of the whole loan amount ("Arrangement Fee") if such syndication occurs within 90 days of closing of the
mortgage. The Arrangement Fee will not apply to any renewal of existing mortgage investments which already
include syndicated senior and subordinated components. The Manager may make an annual election, subject to
approval of the independent Directors of the Board, to receive the Arrangement Fee in common shares of the
Company instead of cash.
For the year ended December 31, 2023, the Company incurred management fees plus applicable taxes of
$11,842 (2022 – $12,230) and servicing fees including applicable taxes of $735 (2022 – $771). For the year
ended December 31, 2023, Arrangement Fees of $782 paid by borrower were retained by the Manager (2022 –
$755).
86
TIMBERCREEK FINANCIAL 34
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
11. EARNINGS PER SHARE
Basic earnings per share are calculated by dividing total net income and comprehensive income by the weighted
average number of common shares during the year.
In accordance with IFRS Accounting Standards, convertible debentures are considered for potential dilution in the
calculation of the diluted earnings per share. Each series of convertible debentures is considered individually and
only those with dilutive effect on earnings are included in the diluted earnings per share calculation. Convertible
debentures that are considered dilutive are required by IFRS Accounting Standards to be included in the diluted
earnings per share calculation notwithstanding that the conversion price of such convertible debentures may
exceed the market price and book value of the Company’s common shares.
Diluted earnings per share are calculated by adding back the interest expense relating to the dilutive convertible
debentures to total net income and comprehensive income and increasing the weighted average number of
common shares by treating the dilutive convertible debentures as if they had been converted on the later of the
beginning of the reporting period or issuance date.
The following table shows the computation of per share amounts:
Total net income and comprehensive income (basic)
Interest expense on convertible debentures
Total net income and comprehensive income (diluted)
Weighted average number of common shares (basic)
Effect of conversion of convertible debentures
Weighted average number of common shares (diluted)
Earnings per share – basic
Earnings per share – diluted
12. CHANGE IN NON-CASH OPERATING ITEMS
Change in non-cash operating items:
Other assets
Accounts payable and accrued expenses
Due to Manager
Mortgage and other loans funding holdbacks
Prepaid mortgage and other loans interest
$
$
$
$
$
$
2023
66,421 $
8,998
75,419 $
Year ended December 31,
2022
55,896
—
55,896
83,622,130
—
83,622,130
0.67
0.67
0.80 $
0.78 $
83,508,758
12,913,703
96,422,461
Year ended December 31,
2022
2023
(2,113)
20
(279)
1,087
760
(525)
(35) $
240
(93)
684
(3,504)
(2,708) $
TIMBERCREEK FINANCIAL 35
87
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
13. CASH FLOWS ARISING FROM FINANCING ACTIVITIES
Convertible Debentures
Balance, beginning of year
Change in estimate of issuance cost
Total financing cash flow activities
Non-cash activity - amortization of issue costs and accretion expense
Year ended December 31,
$
2023
139,420 $
—
—
1,425
2022
137,736
224
224
1,460
Balance, end of year
$
140,845 $
139,420
Credit Facilities
Balance, beginning of year
Deferred financing cost1
Net advances (repayments)
Total financing cash flow activities
Non-cash activity - credit facility - investment properties transfer out
Non-cash activity - amortization of financing costs
Balance, end of year
Year ended December 31,
$
2023
450,347 $
(596)
(191,000)
(191,596)
—
953
$
259,704 $
2022
449,869
(814)
31,000
30,186
(30,692)
984
450,347
1 Deferred financing cost is included in interest paid section in the annual statement of cash flow.
88
TIMBERCREEK FINANCIAL 36
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
14. RELATED PARTY TRANSACTIONS
In addition to the related party transactions disclosed elsewhere, related party transactions include the following:
(a) As at December 31, 2023, Due to Manager consists of management and servicing fees payable of $1,005
(December 31, 2022 – $1,098).
(b) During 2023, Arrangement Fees of $782 paid by borrower were retained by the Manager (2022 – $755).
(c) As at December 31, 2023, included in other assets is $3,246 (December 31, 2022 – $6,066) of cash held in
trust by TMSI, the Company’s mortgage servicing and administration provider, a company controlled by the
Manager. The balance relates to mortgage and other loan funding holdbacks, repayments and prepaid
mortgage interest received from various borrowers.
(d) During 2023 the Company advanced $3,000 to TMSI in exchange for 300,000 non-voting shares in order to
fund TMSI's capital requirements necessary to service the Company's mortgage portfolio.
(e) As at December 31, 2023, the Company has a first mortgage investment which a director of the Manager is
also an officer and part-owner of an entity which holds a subordinate loan position.
•
A first mortgage investment with a total gross commitment of $48,750 (December 31, 2022 – $48,750).
The Company’s share of the commitment is $4,375 (December 31, 2022 – $4,375). For the year ended
December 31, 2023, the Company has recognized net interest income of $776 (2022 – $501).
(f) As at December 31, 2023, the Company and Timbercreek Real Estate Finance U.S. Holding LP are related
parties as they are managed by the Manager, and they have co-invested in 2 other loan investments
(December 31, 2022 – 2) totaling $34,646 (December 31, 2022 – $35,479). The Company’s share in these
mortgage investments is $10,262 (December 31, 2022 – $10,508).
(g) As at December 31, 2023, the Company is invested in junior debentures of Timbercreek Real Estate Finance
Ireland Fund 1 ("TREF Ireland 1") Private Debt Designated Activity Company totaling $4,380 or €2,994
(December 31, 2022 – $4,744 or €3,281), which is included in loan investments within other investments.
TREF Ireland 1 is managed by a wholly-owned subsidiary of the Manager.
(h) As at December 31, 2023, the Company and Timbercreek North American Mortgage Fund are related parties
as they are managed by the Manager, and they have co-invested in 1 mortgage (December 31, 2022 – 1)
totaling $22,759 (December 31, 2022 – $19,957). The Company’s share in this mortgage investment is
$11,379 (December 31, 2022 – $9,979).
15. INCOME TAXES
As of December 31, 2023, the Company has non-capital losses carried forward for income tax purposes of
$41,180 (December 31, 2022 - $48,550), which will expire between 2031 and 2042 if not used. The Company
also has future deductible temporary differences resulting from allowance for impairment, prepaid mortgage
interest, and unearned income for income tax purposes of $20,714 (December 31, 2022 - $22,124). These
temporary differences vary from year to year depending on the current year business activity and lender fee
income amounts.
TIMBERCREEK FINANCIAL 37
89
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
16. CAPITAL RISK MANAGEMENT
The Company manages its capital structure in order to support ongoing operations while focusing on its primary
objectives of preserving shareholder capital and generating a stable monthly cash dividend to shareholders. The
Company defines its capital structure to include common shares, convertible 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. As at December 31, 2023, the Company was in compliance with its investment
restrictions.
Pursuant to the terms of the credit facility renewal (note 21), the Company is required to meet certain financial
covenants, including a minimum interest coverage ratio, minimum adjusted shareholders’ equity, maximum non-
debenture indebtedness to adjusted shareholders’ equity and maximum consolidated debt to total assets. As at
September 30, 2023, the Company did not meet the minimum adjusted shareholder's equity covenant under its
existing credit facility due to increased exposure in non-performing mortgages and on October 6, 2023 obtained a
waiver of such default. There is a risk that further increases in exposure to non-performing mortgages could
require repayment of advances under the credit facility as a result of reductions to the borrowing base or the
minimum adjusted shareholders’ equity covenant no longer being achieved. As at December 31, 2023, the
Company was in compliance with its financial covenants.
17. RISK MANAGEMENT
The Company is exposed to the symptoms and effects of global economic conditions and other factors that could
adversely affect its business, financial condition and operating results. Many of these risk factors are beyond the
Company's direct control. The Manager and Board of Directors play an active role in monitoring the Company's
key risks and in determining the policies that are best suited to manage these risks. There has been no change in
the process since the previous year.
The Company's business activities, including its use of financial instruments, exposes the Company to various
risks, the most significant of which are market rate risk (interest rate risk and currency 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, 2023, $921,917 of net mortgage
investments and $5,000 of other investments bear interest at variable rates (December 31, 2022 – $1,173,733
and $5,000, respectively). Net mortgage investments totaling $855,617 have a floor rate (December 31, 2022 –
$1,105,708).
If there were a decrease or increase of 0.50% in interest rates, with all other variables constant, the impact from
variable rate mortgage investments and other investments to net income and comprehensive income for the next
12 months would be a decrease in net income of $3,326 (December 31, 2022 – 0.50% and $5,709) or an increase
in net income of $4,535 (December 31, 2022 – 0.50% and $5,894, respectively). The Company manages its
sensitivity to interest rate fluctuations by managing the fixed/floating ratio and its use of floor rates in its
investment portfolio.
90
TIMBERCREEK FINANCIAL 38
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
The Company is also exposed to interest rate risk on the credit facility. As at December 31, 2023, net exposure to
interest rate risk was $260,000 (December 31, 2022 – $451,000), and assuming it was outstanding for the entire
period, a 0.50% decrease or increase in interest rates, with all other variables constant, will increase or decrease
net income and comprehensive income for the next 12 months by $1,300 (December 31, 2022 – 0.50% and
$2,255).
The Company's other assets, interest receivable, accounts payable and accrued expenses, prepaid mortgage
interest, mortgage and other loan funding holdbacks, dividends payable and due to Manager have no significant
exposure to interest rate risk due to their short-term nature. Convertible debentures carry a fixed rate of interest
and are not subject to interest rate risk. Cash and cash equivalents carry a variable rate of interest and are
subject to minimal interest rate risk.
(b) Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to
changes in foreign exchange rates. The Company is exposed to currency risk primarily from other investments
that are denominated in a currency other than the Canadian dollar. The Company uses foreign currency forwards
and swaps to approximately economically hedge the principal balance of future earnings and cash flows caused
by movements in foreign exchange rates. Under the terms of the foreign currency forward and swap contracts, the
Company buys or sells a currency against another currency at a set price on a future date.
As at December 31, 2023, the Company has US$7,520 and €2,994 in other investments denominated in
foreign currencies (December 31, 2022 – US$7,102 and €3,241 in other investments). The Company has
entered into a series of foreign currency contracts to reduce its exposure to foreign currency risk. As at
December 31, 2023, the Company has one U.S. dollar currency forward contract with an aggregate
notional value of US$7,000, at a forward contract rate of 1.3222, that matured in January 2024. The
Company also has one Euro currency contract with an aggregate notional value of €3,000 at a contract
rate of 1.4674, that matures in March 2024.
The fair value of the foreign currency forward contracts as at December 31, 2023 is an asset of $21 which is
included in other assets. The valuation of the foreign currency forward contracts was computed using Level 2
inputs which include spot and forward foreign exchange rates.
(c) 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 new mortgage and other investments are approved by the Investment Committee before
funding; and
iii. actively monitoring the mortgage and other investments and initiating recovery procedures, in a timely
manner, where required.
The exposure to credit risk at December 31, 2023 relating to net mortgages and other investments amount to
$1,024,846 (December 31, 2022 – $1,276,737).
TIMBERCREEK FINANCIAL 39
91
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
The Company has recourse under these mortgages and the majority of other investments in the event of default
by the borrowers; in which case, the Company would have a claim against the underlying collateral. Management
believes that the potential loss from credit risk with respect to cash that is held in trust at a Schedule I bank by the
Company’s transfer agent and operating cash held also at a Schedule I bank, to be minimal.
The Company is exposed to credit risk from the collection of accounts receivable from tenants relating to real
estate inventory.
(d) 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.
The following are the contractual maturities of financial liabilities, excluding mortgage syndication liabilities as at
December 31, 2023, including expected interest payments:
December 31, 2023
Carrying
value
Contractual
cash flow
Within
a year
Following
year
3 – 5
years
5 +
Years
Accounts payable and accrued expenses
$
4,644 $
4,644 $
4,644 $
— $
— $
Dividends payable
Due to Manager
Mortgage and other loans funding holdbacks
Prepaid mortgage and other loans interest
Credit facility1
Real estate inventory collateral liability
Convertible debentures2
Unadvanced mortgage commitments3
Total contractual liabilities, excluding mortgage
syndication liabilities4
4,742
1,005
2,029
1,217
259,704
69,008
140,845
4,742
1,005
2,029
1,217
4,742
1,005
2,029
1,217
262,168
262,168
69,008
69,008
—
—
—
—
—
—
—
—
—
—
—
—
171,927
51,380
5,188 115,359
$ 483,194 $
516,740 $ 396,193 $
5,188 $ 115,359 $
—
383,884 383,884
—
—
$ 483,194 $
900,624 $ 780,077 $
5,188 $ 115,359 $
—
—
—
—
—
—
—
—
—
—
—
1
2
3
4
Credit facility includes interest based upon December 31, 2023 interest rate on the credit facility assuming the outstanding balance is
not repaid until its maturity on February 10, 2024. Subsequent to year end, the Company has extended its credit facility agreement by
two years maturing on February 8, 2026.
The convertible debentures include interest based on coupon rate on the convertible debentures assuming the outstanding balance is
not repaid until its contractual maturity on June 30, 2024, July 31, 2028 and December 31, 2028.
Unadvanced mortgage commitments include syndication commitments of which $240,093 belongs to the Company’s syndicated
partners.
The principal repayments of $599,956 mortgage syndication liabilities by contractual maturity date are shown net with mortgage
investments in note 4(b).
As at December 31, 2023, the Company had a cash position of $4,802 (December 31, 2022 – $2,832), an
unutilized credit facility balance of $109,537 (December 31, 2022 – $103,528). Management believes it will be
able to finance its operations using the cash flow generated from operations, investing activities, including
proceeds from mortgage repayments and syndications, and the use of the credit facility.
92
TIMBERCREEK FINANCIAL 40
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
18. FAIR VALUE MEASUREMENTS
The following table shows the classification carrying amounts and fair values of financial assets and financial
liabilities:
As at December 31, 2023
Financial assets
Carrying value
Note
Amortized cost
Fair value through
profit or loss
Fair value
Cash
Other assets
Mortgage investments, including mortgage syndications
Other investments
$
4,802 $
11,383
1,539,555
53,053
4(e)
— $
21
5,557
7,380
4,802
11,404
1,545,112
60,433
3,684
4,742
1,005
2,029
1,217
259,704
69,008
140,845
601,624
960
—
—
—
—
—
—
—
—
4,644
4,742
1,005
2,029
1,217
260,000
69,008
130,059
601,624
Financial liabilities
Accounts payable and accrued expenses
Dividends payable
Due to Manager
Mortgage funding holdbacks
Prepaid mortgage interest
Credit facility
Real estate inventory collateral liability
Convertible debentures
Mortgage syndication liabilities
As at December 31, 2022
Financial assets
Cash
Other assets
Mortgage investments, including mortgage syndications
Other investments
4(e)
Financial liabilities
Accounts payable and accrued expenses
Dividends payable
Due to Manager
Mortgage funding holdbacks
Prepaid mortgage interest
Credit facility
Convertible debentures
Mortgage syndication liabilities
Carrying value
Note
Amortized
cost
Fair value through
profit or loss
$
2,832 $
8,319
1,794,954
65,976
3,006
4,824
1,098
1,345
4,721
450,347
139,420
611,291
— $
—
5,552
4,744
1,444
—
—
—
—
—
—
—
Fair value
2,832
8,319
1,800,506
70,720
4,450
4,824
1,098
1,345
4,721
451,000
131,078
611,291
TIMBERCREEK FINANCIAL 41
93
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars
TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
The valuation techniques and the inputs used for the Company’s financial instruments are as follows:
(a) Mortgage investments, other loan investments, and mortgage syndication liabilities
There is no quoted price in an active market for the mortgage investments, other loan investments and mortgage
syndication liabilities. The Manager makes its determination of fair value based on its assessment of the current
lending market for mortgage and other loan investments. Typically, the fair value of these mortgage investments,
other loan 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 and other loan investments is based on level 3 inputs.
(b) Other financial assets and liabilities
The fair values of cash, other assets, lease receivable, accounts payable and accrued expenses, dividends
payable, due to Manager, mortgage funding holdbacks, prepaid mortgage interest, real estate inventory collateral
liability and credit facility approximate their carrying amounts due to their short-term maturities or bear interest at
variable rates. The fair value of investment in participating debentures is based on their latest available
redemption price. The fair value of investment in equity instrument is based on initial purchase price.
(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 three months ended December 31, 2023.
19. COMPENSATION OF KEY MANAGEMENT PERSONNEL
For the year ended 2023, the compensation expense of the members of the Board of Directors amounts to $397
(2022 – $377), 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).
20. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business activities, the Company may be contingently liable for litigation and claims
arising from investing in mortgage investments and other investments. Where required, management records
adequate provisions in the accounts. As of December 31, 2023 there are no provisions recognized.
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.
On April 28, 2022, the Company disposed of its interest in the investment properties in Saskatchewan Portfolio.
The investment properties were pledged as security for the credit facility where the Company remained a
guarantor for its share of the outstanding principal until September 26, 2023. The Company is no longer a
guarantor on the aforementioned credit facility as of December 31, 2023.
In one syndicated mortgage participation agreement, an option is provided to the third-party lender to sell their
senior position of $35,101 back to the Company at a purchase price equal to the outstanding principal amount of
the lenders' proportionate share together with all accrued interest.
94
TIMBERCREEK FINANCIAL 42
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars TIMBERCREEK FINANCIAL
Notes to the Consolidated Financial Statements
(In thousands of Canadian dollars)
21. SUBSEQUENT EVENTS
The following are events that occurred subsequent to December 31, 2023:
Credit Facility Renewal
On February 8, 2024, the Company entered into an amendment and restatement to its existing credit facility
agreement ("Third Amended and Restated Credit Agreement") in order to, among other things, extend the
maturity date to February 8, 2026, decrease the aggregate credit limit to $510,000 and reinstate accordion feature
to $100,000. The interest rates of the Third Amended and Restated Credit Agreement are either at the prime rate
of interest plus 1.25% per annum or term CORRA at 2.25% per annum. All other general terms of the credit facility
remain unchanged. As at December 31, 2023, the Company’s qualified credit facility limit calculated using the
terms of the Third Amended and Restated Credit Agreement is $365,804.
Sale of Groupe Huot Assets
On December 7, 2023, the Company announced the official sale of the portfolio of seven multi-family, Stage 3
loans in Quebec. These loans, representing a principal balance of $124,873, were fully repaid in January 2024
with Timbercreek recovering all principal and accrued interest. As a result the associated expected credit loss of
$1.600 was fully reversed in Q4 2023.
Special Dividend
In light of the strong full-year income results, and in addition to paying 69 cents per share in dividends through the
year, the Company has authorized a special dividend of 5.75 cents per share, for shareholders of record as at
March 5, 2024. The special dividend will be paid on March 11, 2024, The dividend equates to $4,773 of additional
payout to shareholders. The balance of undistributed income is reflected in the Company’s book value per share
(shareholders' equity divided by number of shares outstanding), ending at $8.45 for the year (before payment of
special dividend expected in March 2024) versus $8.33 at the end of 2022.
TIMBERCREEK FINANCIAL 43
95
TIMBERCREEK FINANCIALNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSIn thousands of Canadian dollars 96
TIMBERCREEK FINANCIAL BOARD OF DIRECTORS
The directors of Timbercreek Financial have deep experience, established reputations and extensive contacts in the commercial
real estate mortgage lending community, as well as in the capital markets and asset management sectors in Canada.
BLAIR TAMBLYN
DIRECTOR, CHIEF EXECUTIVE OFFICER,
TIMBERCREEK FINANCIAL
SCOTT ROWLAND
DIRECTOR, CHIEF INVESTMENT OFFICER,
TIMBERCREEK FINANCIAL
W. GLENN SHYBA
LEAD INDEPENDENT DIRECTOR, TIMBERCREEK FINANCIAL
FOUNDER & PRINCIPAL, ORIGIN MERCHANT PARTNERS
LEADERSHIP
BLAIR TAMBLYN
CHIEF EXECUTIVE OFFICER
SCOTT ROWLAND
CHIEF INVESTMENT OFFICER
TRACY JOHNSTON, CPA, CA
CHIEF FINANCIAL OFFICER
GEOFF MCTAIT
MANAGING DIRECTOR,
ORIGINATION – CANADA & HEAD OF GLOBAL SYNDICATION
HEAD OFFICE
25 Price Street
Toronto, ON M4W 1Z1
T 844.304.9967
E info@timbercreek.com
timbercreekfinancial.com
AMAR BHALLA
INDEPENDENT DIRECTOR,
TIMBERCREEK FINANCIAL
PRINCIPAL, AMDEV PROPERTY GROUP
DEBORAH ROBINSON
INDEPENDENT DIRECTOR, TIMBERCREEK FINANCIAL
PRESIDENT & FOUNDER, BAY STREET HR
PAMELA SPACKMAN
INDEPENDENT DIRECTOR, TIMBERCREEK FINANCIAL
BOARD MEMBER OF WPT INDUSTRIAL REIT
PATRICK SMITH
MANAGING DIRECTOR, HEAD OF GLOBAL CREDIT
JOHN WALSH
VICE PRESIDENT, CORPORATE SECRETARY
KARYNNA MA
VICE PRESIDENT, INVESTOR RELATIONS
STOCK EXCHANGE LISTINGS
TSX: TF, TF.DB.C, TF.DB.D and TF.DB.E
TRANSFER AGENT & REGISTRAR
TMX Trust
1 Toronto Street, Suite 1200
Toronto, ON M5C 2V6
AUDITORS
KPMG LLP
LEGAL COUNSEL
McCarthy Tétrault LLP
www.timbercreekfinancial.com