TSX Symbol FC.UN
TORONTO, March 10 /CNW/ - Firm Capital Mortgage Investment Trust (the
"Trust") (TSX FC.UN), today released its financial statements for the fiscal
year ended December 31, 2008.
EARNINGS
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Net earnings for the year ended December 31, 2008 totaled $14,700,534
compared to $12,885,048 for the year ended December 31, 2007. For the fourth
quarter ended December 31, 2008, net earnings amounted to $3,724,484 compared
to $3,149,386 for the same period ended in 2007. 2008 basic weighted average
net earnings per unit of $1.115 compared to $1.021 per unit for 2007. The 2008
net earnings represent an annualized return on average Unitholders' equity of
11.58% per annum. This return on Unitholders' equity equates to 897 basis
points per annum over the average One Year Government of Canada Treasury Bill
yield for the year and is well in excess of the Trust's target yield objective
of 400 basis points per annum over the One Year Treasury Bill yield.
DISTRIBUTION OVERVIEW 2008:
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Monthly distributions for 2008 equaled $.078 per month, for a total $0.936
per unit, which, together with the year end Special Distribution of $0.17,
represents total distributions for 2008 of $1.106 per unit, an increase from
2007 distributions of $1.021 per unit.
INVESTMENT PORTFOLIO TURNS:
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In 2008 annual mortgage discharges equated to $146 million. This
represents a significant turn of the portfolio enabling management to
re-invest the funds in evolving market conditions. As the portfolio revolves,
the Trust is able to manage the portfolio size and return on equity based on
the pricing of new investments.
MORTGAGE PORTFOLIO HIGHLIGHTS:
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Details on the Trust's mortgage portfolio as at December 31, 2008 are as
follows:
- Total Gross Mortgage Portfolio equals $225,795,801
- Conventional first mortgages, being those mortgages with loan to
values less than 75%, comprise 79% of our total portfolio, and total
Conventional mortgages with loan to values under 75% comprise 92% of
our total portfolio.
- Special Profit Mortgage Investments total 8% of the portfolio.
- Approximately 85% of the portfolio matures within 12 months. This
results in a continuously revolving portfolio, allowing management to
assess market conditions.
- The Average Face Interest Rate on the portfolio is 9.79% per annum.
- Regionally, the portfolio is diversified approximately as follows:
Ontario 78.7%, Alberta 13.0%, British Columbia 3.0%, with the balance
(5.3%) being in other provinces.
- Mortgage portfolio breakdown by loan size is as follows:
Amount Number of Mortgages Total Amount
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$0-$1,000,000 102 $ 50,312,656
$1,000,001-$2,000,000 41 58,862,432
$2,000,001-$3,000,000 19 47,901,321
$3,000,001-$4,000,000 9 30,752,871
$4,000,001-$5,000,000 5 22,092,160
$5,000,001-$6,000,000 3 15,874,361
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179 $225,795,801
LOAN LOSS PROVISION UPDATE:
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Management has always taken a proactive approach to allowance provision
reserves. This is a prudent approach to protecting our Unitholders' equity.
Loan loss provisions at the start of the fiscal year amounted to $1,725,000.
During 2008 a further $675,000 was added to the provision for a total of
$2,400,000, representing 1.06% of the gross loan portfolio.
FINANCING UPDATE:
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The Trust is pleased to announce that at the end of September 2008 its
principal banker renewed its warehousing credit facility for a further year to
mature September 31, 2009 with a right at maturity to lock in any balance
outstanding for a second year term, should a renewal not be concluded at the
end of the first year renewal.
UNRECOGNIZED INCOME COLLECTED:
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As at December 31, 2008, the Trust has banked non-refundable fee income of
$400,792, which will be recognized as income over the term of the
corresponding investments and, in one circumstance, as a specific investment
is repaid.
DISTRIBUTION AND UNIT PURCHASE PLAN:
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The Trust has in place a Distribution Reinvestment Plan (DRIP) and Unit
Purchase Plan that is available to its Unitholders. The plans allows
participants to have their monthly cash distributions reinvested in additional
Trust units and grants participants the right to purchase, without commission,
additional units, up to a maximum of $12,000 per annum.
ABOUT THE TRUST
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The Trust, through its Mortgage Banker, Firm Capital Corporation, is a
non-bank lender providing residential and commercial short-term bridge and
conventional real estate financing, including construction, mezzanine and
equity investments. The Trust's investment objective is the preservation of
Unitholders' equity, while providing Unitholders with a stable stream of
monthly distributions from investments. The Trust achieves its investment
objectives by pursuing a strategy of growth through investments in selected
niche markets that are under-serviced by large lending institutions. Lending
activities to date continue to develop a diversified mortgage portfolio,
producing a stable return to Unitholders. Full reports of the financial
results of the Trust for the year are outlined in the audited financial
statements and the related management discussion and analysis of Firm Capital,
available on the SEDAR website at www.sedar.com. In addition, supplemental
information is available on Firm Capital's website at www.firmcapital.com.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning
of applicable securities laws including, among others, statements concerning
our objectives, our strategies to achieve those objectives, our performance,
our mortgage portfolio and our distributions, as well as statements with
respect to management's beliefs, estimates, and intentions, and similar
statements concerning anticipated future events, results, circumstances,
performance or expectations that are not historical facts. Forward-looking
statements generally can be identified by the use of forward-looking
terminology such as "outlook", "objective", "may", "will", "expect", "intent",
"estimate", "anticipate", "believe", "should", "plans" or "continue" or
similar expressions suggesting future outcomes or events. Such forward-looking
statements reflect management's current beliefs and are based on information
currently available to management.
These statements are not guarantees of future performance and are based
on our estimates and assumptions that are subject to risks and uncertainties,
including those described in our Annual Information Form under "Risk Factors"
(a copy of which can be obtained at www.sedar.com), which could cause our
actual results and performance to differ materially from the forward-looking
statements contained in this circular. Those risks and uncertainties include,
among others, risks associated with mortgage lending, dependence on the
Trust's trust manager and mortgage banker, competition for mortgage lending,
real estate values, interest rate fluctuations, environmental matters,
Unitholder liability and the introduction of new tax rules. Material factors
or assumptions that were applied in drawing a conclusion or making an estimate
set out in the forward-looking information include, among others, that the
Trust is able to invest in mortgages at rates consistent with rates
historically achieved; adequate mortgage investment opportunities are
presented to the Trust; and adequate bank indebtedness and bank loans are
available to the Trust. Although the forward-looking information continued in
this new release is based upon what management believes are reasonable
assumptions, there can be no assurance that actual results and performance
will be consistent with these forward-looking statements.
All forward-looking statements in this news release are qualified by
these cautionary statements. Except as required by applicable law, the Trust
undertakes no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
Audited Financial Statements of
FIRM CAPITAL MORTGAGE
INVESTMENT TRUST
Years Ended December 31, 2008 and 2007
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Balance Sheets
December 31, 2008 and 2007
2008 2007
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Assets
Amounts receivable and prepaid expenses
(note 5) $ 1,986,112 $ 2,093,026
Mortgage investments (note 6) 223,395,801 233,731,967
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$ 225,381,913 $ 235,824,993
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Liabilities and Unitholders' Equity
Liabilities:
Bank indebtedness (note 7) $ 27,337,813 $ 52,593,158
Accounts payable and accrued liabilities 618,541 820,000
Unearned income 275,856 335,721
Unitholder distribution payable 3,430,390 2,186,413
Loans payable (note 8) 37,729,228 36,002,060
Convertible debenture (note 9) 23,973,019 23,753,430
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93,364,847 115,690,782
Unitholders' equity (note 10): 132,017,066 120,134,211
Issued and outstanding:
13,832,219 units (2007 - 12,638,227)
Commitments (note 6)
Contingent liabilities (note 16)
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$ 225,381,913 $ 235,824,993
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Statement of Earnings
Years ended December 31, 2008 and 2007
2008 2007
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Interest and fees earned, net of Trust
Manager interest allocation (note 14) $ 22,194,452 $ 19,683,209
Less interest expense (note 15) 6,037,747 5,709,529
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Net interest and fee income 16,156,705 13,973,680
Expenses:
General and administrative 781,171 788,632
Unrealized loss in value of mortgages
(note 6) 675,000 300,000
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1,456,171 1,088,632
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Net earnings for the year $ 14,700,534 $ 12,885,048
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Net earnings per unit (note 11)
Basic $ 1.115 $ 1.021
Diluted $ 1.072 $ 0.989
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Statement of Unitholders' Equity
Years ended December 31, 2008 and 2007
2008 2007
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Trust units (note 10):
Balance, beginning of year $ 119,753,729 $ 119,297,099
Proceeds from issuance of units 12,174,931 456,630
Offering costs (rights offering and private
placement) (292,076) -
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Balance, end of year $ 131,636,584 $ 119,753,729
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Equity component of convertible debentures
(note 9):
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Balance, beginning and end of year $ 380,482 $ 380,482
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Cumulative earnings:
Balance, beginning of year $ 66,174,234 $ 53,289,186
Net earnings for the year 14,700,534 12,885,048
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Balance, end of year $ 80,874,768 $ 66,174,234
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Cumulative distributions to unitholders:
Balance, beginning of year $ 66,174,234 $ 53,289,186
Distributions to unitholders (note 12) 14,700,534 12,885,048
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Balance, end of year $ 80,874,768 $ 66,174,234
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Total unitholders' equity $ 132,017,066 $ 120,134,211
Units issued and outstanding (note 10) 13,832,219 12,638,227
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Statement of Cash Flows
Years ended December 31, 2008 and 2007
2008 2007
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Cash provided by (used in):
Operating activities
Net earnings $ 14,700,534 $ 12,885,048
Net changes in non-cash items
Fair value adjustment - mortgages 675,000 300,000
Implicit interest rate in excess of
coupon rate - convertible debentures 219,589 216,219
Decrease (increase) in amounts
receivable and prepaid expenses 106,914 (18,336)
Increase (decrease) in accounts payable
and accrued liabilities (201,459) 248,009
Increase (decrease) in unearned income (59,865) 30,114
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15,440,713 13,661,054
Financing activities:
Proceeds from issuance of units 12,174,931 456,630
Increase (decrease) in bank indebtedness (25,255,344) 12,491,474
Increase (decrease) in loans payable (net) 1,727,168 10,018,887
Equity offering costs (292,076) -
Distributions to unitholders paid during
year (13,456,557) (10,698,635)
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(25,101,878) 12,268,356
Investing activities:
Funding of mortgage investments (136,173,898) (173,281,137)
Discharge of mortgage investments 145,835,063 147,351,727
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9,661,165 (25,929,410)
Increase in cash, being cash, beginning and
end of year $ - $ -
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Supplemental cash flow information
Interest paid (note 15) $ 6,082,982 $ 5,206,353
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See accompanying notes to financial statements.
FIRM CAPITAL MORTGAGE INVESTMENT TRUST
Notes to Financial Statements
Years ended December 31, 2008 and 2007
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1. Organization of Trust:
Firm Capital Mortgage Investment Trust (the "Trust") is a closed-end
trust created for the benefit of the unitholders, pursuant to the
Declaration of Trust dated July 13, 1999, as amended and restated.
Pursuant to the Declaration of Trust, the Trust's mortgage banker is
Firm Capital Corporation and the trust manager is FC Treasury
Management Inc.
2. Summary of significant accounting policies:
The Trust's accounting policies and its standards of financial
disclosure are in accordance with Canadian generally accepted
accounting principles ("GAAP").
(a) Use of estimates:
The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the year.
The most significant estimates that the Trust is required to
make relate to the fair value of the mortgage investments (Note
2b). These estimates may include assumptions regarding local
real estate market conditions, interest rates and the
availability of credit, cost and terms of financing, the impact
of present or future legislation or regulation, prior
encumbrances and other factors affecting the mortgage and
underlying security of the mortgage investments.
These assumptions are limited by the availability of reliable
comparable data, economic uncertainty, ongoing geopolitical
concerns and the uncertainty of predictions concerning future
events. Illiquid credit markets, volatile equity markets and
declines in consumer spending have combined to increase the
uncertainty inherent in such estimates and assumptions.
Accordingly, by their nature, estimates of fair value are
subjective and do not necessarily result in precise
determinations. Should the underlying assumptions change, the
estimated fair value could by a material amount.
(b) Mortgage investments:
Mortgage investments are stated at estimated fair value in
accordance with Canadian Institute of Chartered Accountants
("CICA") Accounting Guideline 18. Fair value is the amount of
consideration that would be agreed upon in an arm's length
transaction between knowledgeable, willing parties who are
under no compulsion to act. The fair value of Mortgage
investments approximate their carrying values due to the fact
that the majority of the mortgages are (i) are short-term in
nature with terms of 12 months or less, (ii) repayable in full,
at any time at the option of the borrower prior to maturity
without penalty, and (iii) have minimum specified interest
rates for mortgages with floating rates linked to bank prime.
When, in management's opinion, collection of principal on a
particular mortgage investment is no longer reasonably assured,
the fair value of the mortgage investment is reduced to reflect
the estimated net realizable recovery from the collateral
securing the mortgage loan.
(c) Convertible debentures:
The Trust's convertible debentures are classified into debt and
equity components. The equity component represents the
estimated value of the conversion rights of the holders.
(d) Revenue recognition:
(i) Interest and fee income:
Interest income is accounted for on the accrual basis,
and is recorded net of the Trust Manager interest spread
described in note 14.
