Romspen Delivers Solid Performance in 2020, Despite Pandemic
TORONTO, June 11, 2021 /CNW/ - 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, 2020. For 2020, the Fund achieved a 5.8% net yield, reflecting both a strong absolute yield and outperformance against the returns of both the major fixed-income benchmarks and the major Canadian equity index, despite the significant disruptions to the economy posed by the COVID-19 global pandemic.
2020 Highlights
- The net investment portfolio decreased modestly by 2% in 2020 to $2.9 billion.
- Net earnings for 2020 decreased by 29% due to the negative impacts of COVID-19 on interest collection and a significant increase in the loss provision.
- Distributions to investors totalled $0.56 per unit to provide a compounded net yield of 5.8%.
- Net yield of 5.8% for the Fund outperformed the returns of Treasury Bills ("T-bills") (0.5%) and the FTSE Canada Short-Term Bond Index ("FTSE Canada–STBI") (5.3%) and the S&P/TSX Composite Total Return Index ("S&P/TSX") (5.6%).
- Romspen's three-, ten- and twenty-five- year performance has outperformed the returns of T–bills, the FTSE Canada–STBI and the S&P/TSX.
- US mortgages in the portfolio increased to 47% from 45% in 2019.
- The Fund's unitholder equity for all units outstanding grew to $3.1 billion at the end of 2020 compared to $3.0 billion for 2019.
- Romspen has delivered positive net investor yield each and every month for the past 25 consecutive years.
"Completing its 54th year in 2020, Romspen Investment Corporation, the Fund's mortgage manager, 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 track record of delivering steady and predictable returns even during challenging economic times. Romspen has generated positive performance each and every month over the past 25 years and has typically outperformed the major fixed income and equity indices across a broad spectrum of economic conditions and cycles, including during the GFC during 2008-2010 as well as the COVID–19 global pandemic in 2020."
2020 Results of Operations
Revenues for the year were $240 million, compared to $232 million for 2019. For 2020, the Fund recorded net income of $133 million, or $0.42 per unit, compared to $187 million, or $0.68 per unit, in 2019. These net earnings reflect Romspen's conservative approach to the COVID-19 pandemic through bolstering loss reserves by $62 million. Investors held units totalling $3.1 billion, compared to $3.0 billion last year. Net debt (debt less cash) was $43 million, compared to last year's level of $106 million.
Comparative Performance
During 2020, the Fund's net compounded yield of 5.8% outperformed the total return of T-bills (0.5%), the FTSE Canada–STBI (5.3%) and the S&P/TSX (5.6%). The following table presents a comparative performance history reflecting Romspen's performance against the total return of the benchmarks.
Comparative Cumulative Compounded Performance/Yields |
||||||
1 year |
3 years |
5 years |
10 years |
25 years |
||
Romspen |
5.8% |
23% |
43% |
108% |
766% |
|
T-bills |
0.5% |
4% |
5% |
9% |
78% |
|
FTSE Canada-STBI |
5.3% |
11% |
12% |
28% |
138%* |
|
S&P/TSX |
5.6% |
18% |
56% |
75% |
580% |
|
Romspen yield is calculated on a cash-on-cash basis, net of fees, and assumes a monthly reinvestment of distributions. It does not take into account income taxes, changes in unit values, third-party expenses or redemption charges. |
|
* |
FTSE Canada-STBI returns are based on 22 years of data due to data restrictions |
Investment Portfolio
At December 31, 2020, the net investment portfolio decreased modestly by 2% to $2.9 billion compared to 2019. The Fund realized losses of $4.3 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 83% to $136.6 million to maintain a solid margin of safety given the economic uncertainties of the COVID-19 pandemic.
The Fund continues to focus on short-term mortgages, with 91% of mortgages maturing within one year and the remainder maturing in less than two years. The portfolio remains well diversified with 21% of mortgages invested in Ontario, 26% in Western Canada, 6% in other provinces, and 47% in the US across 18 states. The weighted average interest rate of the mortgage portfolio was 10.2% compared to 10.4% in 2019.
2020 Distributions
Unitholder distributions for 2020 were $0.56 per unit, compared to $0.73 per unit in 2019. This equates to a compounded net yield to investors of 5.8% compared with 7.6% in 2019. While the Fund's yield is below historical performance, it is in line with expectations given the continuing impact of COVID-19 disruptions.
About the Fund
The Fund has a long-term track record of successful mortgage investing. With its origins in the mid-60's, Romspen manages one of the largest non-bank commercial/industrial mortgage lenders in Canada with a portfolio of $3 billion. Our investors are high net worth individuals, family offices, foundations, endowments and pension plans.
The Fund's investment mandate is focused on capital preservation, strong absolute returns and performance consistency. Romspen has had 25 consecutive years of positive net investor yields (ranging between 5.8% – 10.8%) with positive yields each and every month.
The Fund's 2020 Annual Report, including the Trustees' Report, Management's Discussion & Analysis and audited Financial Statements, are available at: www.romspen.com.
This press release is for informational purposes only. It is not investment or financial product advice, and is not intended to be used as the basis for making an investment decision. This press release is not and does not constitute, an offer to sell or the solicitation, invitation or recommendation to purchase any securities in any jurisdiction. An offering memorandum containing important information relating to the Fund has been prepared and the Fund is available only to investors who are "accredited investors" or otherwise qualify under certain other exemptions from prospectus requirements under applicable securities laws. Copies of the offering memorandum may be obtained from Romspen. Past performance does not guarantee future results.
The FTSE Canada-STBI is intended to represent the Canadian short-term bond market. It contains both government and corporate bonds with remaining effective terms greater than or equal to one year and less than or equal to five years. While the constituent assets in this index have terms similar to the Fund's mortgage investments, the Fund is not managed to track the FTSE Canada–STBI as a benchmark. Similarly, the Fund is not managed to track the performance of either T-bills, as measured by the average monthly yield of 3-month Bank of Canada treasuries, which is a proxy for the risk-free rate of return available to investors, or the performance of the S&P/TSX, which is the broad headline index for the Canadian equity market. Rather, the comparisons to these indices is intended to illustrate the Fund's yield performance in comparison to other asset classes from which many investors build an investment portfolio.
SOURCE Romspen Investment Corporation
Mark L. Hilson, Managing General Partner, [email protected], 416-966-1100
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