Romspen Mortgage Investment Fund, a leading non-bank mortgage lender specializing in commercial and industrial real estate, today released its financial statements for the year ended December 31, 2017.
For 2017, the Fund had a 7.9% net yield, reflecting both a strong absolute return and continued significant comparative outperformance against the major fixed income benchmarks.
While slightly below last year, it was achieved in a year with significant geopolitical events, a competitive lending environment and continuing low interest rates.
The net investment portfolio increased by 19% in 2017 to $2.0 billion.
Net earnings for 2017 increased by 14% to $115 million.
Distributions to investors totalled $0.76 per unit to yield a compounded net return of 7.9%.
Net yield of 7.9% for Romspen significantly outperformed T-bills (0.7%) and FTSE-TMX Short-Term Bond Index (“FTSE/TMX‑STBI”) (0.1%), but trailed the S&P/TSX Composite Total Return Index (9.1%).
Romspen’s past three, ten and twenty year performance has outperformed T‑bills, S&P/TSX and FTSE/TMX‑STBI.
US mortgages in the portfolio decreased to 39%.
The Fund’s unitholder equity for all units outstanding grew to $2.1 billion at the end of 2017 compared to $1.6 billion for 2016.
Romspen has delivered positive net investor returns each and every month for the past 20 consecutive years.
“Completing its 51st year in business in 2017, the firm has a strong history of growth, broad diversification across North America and a solid and consistent investment track record,” says Mark Hilson, Managing General Partner of Romspen. “We have a long established track record of delivering steady and predictable returns. Romspen has generated positive returns each and every month over the past 20 years typically outperforming the major benchmarks across a broad spectrum of economic conditions and cycles”.
2017 Results of Operations
Revenues for the year were $161 million, compared to $138 million for 2016. Current year revenues are higher due to growth in size of the mortgage portfolio. For 2017, Romspen recorded net income of $115 million, or $0.61 per unit, compared to $100 million, or $0.66 per unit, in 2016. Investors held units totalling $2.1 billion, compared to $1.6 billion last year. Net debt (debt less cash) was $10 million, compared to last year’s level of $116 million.
During 2017, Romspen’s net compounded yield of 7.9% significantly outperformed T-bills (0.7%) and FTSE/TMX‑STBI (0.1%), but trailed the S&P/TSX (9.1%). The following table presents a comparative performance history reflecting Romspen’s consistent outperformance against the benchmarks.
At December 31, 2017, the net investment portfolio was $2.0 billion, compared to $1.7 billion in 2016, representing an increase of 19%. The Fund realized losses of only $2.0 million on mortgages that were previously reserved for, ensuring that there was no negative impact on net earnings from these losses. Total provisions for credit losses increased to $63.2 million as the Fund seeks to maintain a comfortable margin of safety.
The Fund continues to focus on short-term mortgages, with 84% of mortgages maturing within one year, and 98% maturing in less than two years. Geographic diversification continued, with 26% of mortgages invested in Ontario, 26% in Western Canada, 9% in other provinces, and 39% in the US. The weighted average interest rate of the mortgage portfolio was 10.6% in 2016, compared to 11.2% to last year.