Terra Firma Capital Corporation (TSX-V: TII) ("
Terra
Firma" or the "
Company"), a real estate
finance company, today announced its financial results for the
three and six-month periods ended June 30, 2022.
Q2 2022 Financial Highlights:
- Total Assets of $146.2 million
- Total Investments (a supplementary
financial measure)(4) of $123.7 million
- Total Assets under management
("AUM," a non-IFRS financial measure) (3) of $129.9 million as
compared to $122.3 million as at December 31, 2021
- Book Value per share increased by
0.6% to $7.88 (CA$10.14, translated to CA$ using the exchange rate
of $1.2873) per share
- CA$0.06 per share paid in
dividends
- Total Revenue decreased by 6.8%, as
compared to Q2 2021, to $3.8 million
- Net income and comprehensive income
was $0.3 million, a decrease of 58.3% as compared to Q2 2021
- Adjusted net income and
comprehensive income (a non-IFRS financial measure)(1) remained
consistent as Q2 2021, at $0.7 million
- Basic and diluted earnings per
share decreased by 54.5%, as compared to Q2 2021, to $0.05
(CA$0.06, translated to CA$ using the exchange rate of
$1.2765)
- Adjusted basic and diluted earnings
per share (a non-IFRS financial measure)(2) has remained consistent
at $0.12 (CA$0.15, translated to CA$ using the exchange rate of
$1.2765)
“Terra Firma increased its earnings per share
from the first quarter by 71% (Q1 2022 - $0.07 to Q2 2022 - $0.12)
on an adjusted basis and also experienced a robust quarter in terms
of originations having closed $58MM of new commitments. However,
the housing market has been in flux given the macro-economic shifts
related to inflation and interest rates. As such, homebuilders and
land developers have been slowing their acquisitions and the
Company has been proceeding more cautiously. Nevertheless, with our
strong relationships we are well positioned to benefit from them
once the market improves. Fortunately, at the end of the quarter
the Company had secured both its highest level of future funding
commitments to date at $131MM and also the required capital in
place to finance these future funding obligations. This should aid
Terra Firma in its ability to more fully deploy its balance sheet
and increase AUM even though new originations are expected to slow
down during Q3 2022,” commented Glenn Watchorn, President and Chief
Executive Officer of Terra Firma Capital. “TFCC’s current
institutional fund-raising efforts in combination with the success
of its second private investor fund (now with total committed
capital amounting to $77MM) and a more fully deployed balance sheet
over time will be key factors to the Company’s overall growth in
the future,” he later said.
Net income and comprehensive income attributable
to common shareholders for the three months ended June 30, 2022,
was $0.3 million or $0.05 per basic and diluted share compared to
$0.6 million or $0.11 per basic and diluted share for the same
period in the prior year. Net income and comprehensive income
attributable to common shareholders for the six months ended June
30, 2022, was $0.8 million or $0.15 per basic and diluted share
compared to $1.4 million or $0.26 per basic share and $0.25 per
diluted share for the same period in the prior year. The decrease
in net income and comprehensive income was primarily due to a
one-time severance allowance, income tax expense related to
unrealized foreign exchange gains and lower interest and fees
earned. During the three months ended June 30, 2022, the Company
recorded a one-time severance allowance of CA $0.7 million related
to the departure of its former Chief Financial Officer &
Corporate Secretary due to health reasons. In addition, higher
income tax expense was due to unrealized foreign exchange gain
resulting from the Company’s functional currency related to certain
subsidiaries. Further, net income and comprehensive income was
impacted by a decrease in total revenue due to lower interest and
fees earned from the loan and mortgage investments related to
repayments as the Company continued to shift its focus to land
banking arrangements. This decrease was primarily offset by various
other factors including: a lower share-based compensation expense
as a result of fluctuation in the share price, increase in share of
income from investment in associates from the Company’s investment
in its first debt fund (“Debt Fund I”) and its second debt fund
(“Debt Fund II”) and a fair value gain on the Company’s portfolio
investments.
For the three months ended June 30, 2022, the
Company reported total revenue of $3.8 million compared to $4.1
million the same period in the prior year, representing a decrease
of $0.3 million or 6.8%. Revenue for the six months ended June 30,
2022, was $7.6 million as compared to $7.7 million in the same
period in the prior year, representing a decrease of $0.07 million
or 0.9%. The decrease in total revenue was due to certain loan and
mortgage investments being partially or fully repaid in the prior
year resulting in a decrease in interest and fees for the current
period. As at June 30, 2022, the loans and mortgage investment
balance was $47.0 million compared with a balance of $89.0 million
as at June 30, 2021. This decrease in the loan and mortgage
investment balance was in line with expectations as the Company
continued to shift its focus to land banking arrangements.
Partially offsetting the decrease in total revenue was an increase
in finance income related to the Company’s shift to land banking
transactions (investment in finance leases). As at June 30, 2022,
the Company significantly increased its investment in finance
leases to $63.9 million compared with $37.5 million as at June 30,
2021.
General and administrative expenses for the
three months ended June 30, 2022, was $1.0 million compared to $1.1
million for the same period in the prior year. The decrease in
general and administrative expenses was primarily due to a decrease
in salary and benefits and professional fees as a result of the
reversal of certain provisions that were no longer required.
Partially offsetting the decrease was an increase in other expenses
which was due to an increase in insurance expense in addition to
the Company incurring costs related to short-term contract hires
compared with no such expenses in the same period in the prior
year. General and administrative expenses for the six months ended
June 30, 2022, was $2.1 million compared to $1.9 million for the
same period in the prior year. The increase in general and
administrative expenses was due to above noted increase in
insurance expense and short-term contract hires. The increase in
salary and benefits was due to annual salary increases and new
hires and the increase in professional fees was due to recruitment
costs incurred related to the hiring of new personnel. Partially
offsetting the above noted increase in salary and benefits and
professional fees was the reversal of provisions that were no
longer required.
To date, the Company has continued to implement
its strategic plan which has included expansion into the U.S.
market and its shift in focus to land banking transactions
(investment in finance leases). As at June 30, 2022, 89.0% of the
Company’s investments are located in various U.S. markets which
include high growth markets such as: Atlanta, Phoenix, Dallas,
Jacksonville and Charlotte. Over the course of the past 18 months,
the Company has committed to approximately $209.0 million in new
transactions that are still in the process of being funded. With
this significant increase in transactions, which have been
primarily land banking transactions, the Company’s balance sheet is
now fully committed to provide, in combination with Debt Fund I and
Debt Fund II (together the “Funds”), for the future funding
commitments of $130.7 million as at June 30, 2022. The Company
manages future funding commitments through forecasting cash flow
from operations and considering available capital from its own
balance sheet as well as outside managed capital. The Company
expects to meet these future funding commitments using cash on
hand, capital available on its line of credit, proceeds from
repayments of investments as well as capital available within Debt
Fund I and Debt Fund II. While the Company’s cash balance was $15.3
million and the Company has not drawn on its line of credit, this
available capital will be required to fund its portion of the
future funding commitments. Over time, with the deployment of the
capital to meet the future funding commitments, the Company and the
Funds will become fully invested.
The Company's Management's Discussion &
Analysis and Financial Statements as at and for the three and six
months ended June 30, 2022 have been filed and are available on
SEDAR (www.sedar.com).
About Terra Firma
Terra Firma is a full service, publicly traded
real estate finance company that provides real estate financings
secured by investment properties and real estate developments in
Canada and throughout the United States. The Company focuses on
arranging and providing financing with flexible terms to real
estate developers and owners who require shorter-term loans to
bridge a transitional period of one to five years where they
require capital at various stages of development or redevelopment
of a property. These loans are typically repaid with lower cost,
longer-term debt obtained from other Canadian financial
institutions once the applicable transitional period is over or the
redevelopment is complete or from proceeds generated from the sale
of the real estate assets. Terra Firma offers a full spectrum of
real estate financing under the guidance of strict corporate
governance, clarity and transparency. For further information,
please visit Terra Firma's website at www.tfcc.ca.
Non-IFRS And Other Supplementary
Financial Measures
In this press release, as a complement to
results provided in accordance with IFRS, the Company discloses
certain financial measures not recognized under International
Financial Reporting Standards (“IFRS”) as prescribed by the
International Accounting Standards Board, which do not have
standard meanings prescribed by IFRS (collectively the “non‐IFRS
financial measures”). These non‐IFRS and other supplementary
financial measures are further described below.
Non-IFRS Financial Measures
1. Adjusted net income and comprehensive income
as well as adjusted net income and comprehensive income
attributable to common shareholders, for the stated period, are
calculated by adjusting the net income and comprehensive income for
the following (as applicable and collectively called other
non-operating items), irrespective of materiality:
- foreign exchange gains/losses
related to the Company’s non-functional currency denominated net
assets;
- impairment losses/reversals;
- net gains/losses on the disposal of
equity-accounted investments;
- share-based compensation;
- non-recurring items;
- severance cost; and
- the income tax impact of the items
listed above.
|
|
Three months ended |
|
Six months ended |
|
|
June 30,2022 |
June 30,2021 |
ChangeIncrease /(decrease) |
|
June 30,2022 |
June 30,2021 |
ChangeIncrease /(decrease) |
Net income and comprehensive income |
|
$ |
258,103 |
|
$ |
619,281 |
|
$ |
(361,178 |
) |
|
$ |
835,679 |
|
$ |
1,438,037 |
|
$ |
(602,358 |
) |
Provision for loan and mortgage investment, investment in |
|
|
|
|
|
|
|
|
finance leases and uncollectible receivable losses (tax
adjusted) |
|
|
(12,524 |
) |
|
40,364 |
|
|
(52,888 |
) |
|
|
(44,211 |
) |
|
82,735 |
|
|
(126,946 |
) |
Fair value adjustment - portfolio investment |
|
|
(136,758 |
) |
|
- |
|
|
(136,758 |
) |
|
|
(136,758 |
) |
|
- |
|
|
(136,758 |
) |
Share based compensation (tax adjusted) |
|
|
104,873 |
|
|
222,457 |
|
|
(117,584 |
) |
|
|
6,246 |
|
|
266,609 |
|
|
(260,363 |
) |
Foreign exchange gain (tax adjusted) |
|
|
56,398 |
|
|
(203,631 |
) |
|
260,029 |
|
|
|
93,070 |
|
|
(411,607 |
) |
|
504,677 |
|
Severance accrual (tax adjusted) |
|
|
381,128 |
|
|
- |
|
|
381,128 |
|
|
|
381,128 |
|
|
- |
|
|
381,128 |
|
Adjusted net income and comprehensive income (1) |
|
$ |
651,220 |
|
$ |
678,471 |
|
$ |
(27,251 |
) |
|
$ |
1,135,154 |
|
$ |
1,375,774 |
|
$ |
(240,620 |
) |
(1) Adjusted net income and comprehensive income is a Non-IFRS
Financial Measure. See "Non-IFRS Financial Measures". |
2. Adjusted earnings per share is adjusted net
income and comprehensive income divided by the weighted average
number of outstanding shares and adjusted net income and
comprehensive income divided by the weighted average number of
diluted shares outstanding.
3. AUM are the assets managed by the Company on
behalf of the Company’s syndicate investors, as well as the
Company’s assets, and do not include capital commitments that have
not yet been funded.
|
|
June 30,2022 |
December 31,2021 |
Loan and mortgage investments |
|
$ |
47,061,725 |
|
$ |
47,089,194 |
|
Investment in finance
leases |
|
|
63,965,157 |
|
|
55,849,312 |
|
Portfolio investments |
|
|
304,528 |
|
|
676,421 |
|
Investment in
associates (1) |
|
|
2,022,414 |
|
|
2,174,527 |
|
Investment property held in
Joint Operations |
|
|
1,733,941 |
|
|
1,747,799 |
|
Convertible note
receivable |
|
|
1,605,598 |
|
|
1,572,510 |
|
Syndicates investors' share of
investment |
|
|
13,164,904 |
|
|
13,224,860 |
|
Total AUM |
|
$ |
129,858,267 |
|
$ |
122,334,623 |
|
(1) Investment in
associates includes investment in Lan Partnership and TFCC Royal
Palm Beach Inc. |
|
These non-IFRS financial measures are not
defined by IFRS, do not have a standardized meaning, and may not be
comparable with similar measures presented by other issuers. The
Company has presented such non‐IFRS financial measures which have
been derived from the Company’s financial statements and applied on
a consistent basis because the Company believes they are of
assistance in evaluating the underlying operational and financial
performance of the Company. Non-IFRS financial measures are also
commonly used by the financial community to analyze and compare the
performance of companies engaged in the same industries. These
non‐IFRS financial measures should not be construed as alternatives
to financial measures determined in accordance with IFRS as
indicators of the Company’s performance.
Supplementary Financial
Measures
4. Total Investments (excluding cash) consists
of the loan and mortgage investments, investment in finance leases,
portfolio investments, investments in associates, convertible note
receivables and an investment property held in joint
operations.
Note that further information concerning such
non-IFRS and supplementary financial measures can be found in the
Company’s Management's Discussion & Analysis for the three and
six months ended June 30, 2022.
The TSX-V has neither approved nor disapproved
the contents of this press release. The TSX-V does not accept
responsibility for the adequacy or accuracy of this press
release.
Forward-Looking Information
This Press Release contains forward‐looking
statements with respect matters concerning the business,
operations, strategy and financial performance of Terra Firma, and
include statements concerning Terra Firma's loan originations
expected in Q3 2022 and their impact on AUM, as well as unfunded
commitments and their deployment. These statements generally can be
identified by use of forward-looking word such as "may", "will",
"expects", "estimates", "indicates" "anticipates", "intends",
"believe", “should” or "could" or the negative thereof or similar
variations. The future business, operations and performance of
Terra Firma could differ materially from those expressed or implied
by such statements. Such forward‐looking statements are qualified
in their entirety by the inherent risks and uncertainties
surrounding future expectations, including the matters covered by
any non-binding letters of intent that are not completed, as well
as risks relating to market factors, competition, and dependence on
tenants' financial conditions, environmental and tax related
matters, and reliance on key personnel, as well as the risks
discussed in Terra Firma’s most recently filed annual Management’s
Discussion and Analysis, any subsequently filed interim
Management’s Discussion and Analysis or Terra Firma’s most recently
filed Annual Information Form. Forward‐looking statements are based
on a number of assumptions which may prove to be incorrect,
including that the general economy, local real estate conditions
and interest rates are stable, the absence of significant changes
in government regulation, and the continued availability of equity
and debt financing. There can be no assurances that forward‐looking
statements will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue reliance on
forward‐looking statements. The cautionary statements qualify all
forward‐looking statements attributable to Terra Firma and persons
acting on its behalf. Unless otherwise stated, all forward looking
statements speak only as of the date of this Press Release and
Terra Firma does not assume any obligation to update such
statements, whether as a result of new information, future events
or otherwise, except as required by applicable Canadian securities
laws.
For further information, please contact:
Terra Firma Capital CorporationGlenn
WatchornChief Executive OfficerPhone:
416.792.4702gwatchorn@tfcc.ca
or
Terra Firma Capital CorporationY. Dov
MeyerExecutive ChairmanPhone: 416.792.4709ydmeyer@tfcc.ca
or
Ali MahdaviManaging DirectorSpinnaker Capital
Markets Inc.Phone: 416.962.3300am@spinnakercmi.com
Terra
Firma Capital CorporationInterim Condensed
Consolidated Statements of Income and Comprehensive
IncomeFor the three and six months ended June 30, 2022 and
2021(Unaudited) |
|
|
Three months ended |
|
Six months ended |
|
|
June 30,2022 |
June 30,2021 |
|
June 30,2022 |
June 30,2021 |
Revenue |
|
|
|
|
|
|
Interest and fees |
|
$ |
1,900,132 |
|
$ |
2,849,254 |
|
|
$ |
3,660,538 |
|
$ |
5,645,978 |
|
Finance income |
|
|
1,863,375 |
|
|
1,192,719 |
|
|
|
3,889,913 |
|
|
1,978,682 |
|
Rental |
|
|
42,618 |
|
|
43,347 |
|
|
|
86,031 |
|
|
83,906 |
|
|
|
|
3,806,125 |
|
|
4,085,320 |
|
|
|
7,636,482 |
|
|
7,708,566 |
|
Expenses |
|
|
|
|
|
|
Property operating costs |
|
|
14,553 |
|
|
15,049 |
|
|
|
29,624 |
|
|
29,886 |
|
General and administrative |
|
|
958,192 |
|
|
1,132,855 |
|
|
|
2,061,728 |
|
|
1,870,539 |
|
Severance |
|
|
524,577 |
|
|
- |
|
|
|
524,577 |
|
|
- |
|
Share based compensation |
|
|
142,685 |
|
|
302,662 |
|
|
|
8,498 |
|
|
362,733 |
|
Interest and financing costs |
|
|
2,010,601 |
|
|
2,112,967 |
|
|
|
4,526,310 |
|
|
4,098,745 |
|
Recovery of loan and mortgage investment loss |
|
|
(12,292 |
) |
|
(109,187 |
) |
|
|
(38,058 |
) |
|
(155,322 |
) |
Provision for (recovery of) investment in finance lease loss |
|
|
(4,747 |
) |
|
154,327 |
|
|
|
(22,093 |
) |
|
258,110 |
|
Provision for uncollectible receivables |
|
|
- |
|
|
9,776 |
|
|
|
- |
|
|
9,776 |
|
Realized and unrealized foreign exchange gain |
|
|
(179,697 |
) |
|
(126,171 |
) |
|
|
(202,460 |
) |
|
(203,869 |
) |
Fair value adjustment - portfolio investments |
|
|
(186,065 |
) |
|
- |
|
|
|
(186,065 |
) |
|
- |
|
Share of income from investment in associates |
|
|
(183,066 |
) |
|
(87,428 |
) |
|
|
(418,136 |
) |
|
(167,055 |
) |
|
|
|
3,084,741 |
|
|
3,404,850 |
|
|
|
6,283,925 |
|
|
6,103,543 |
|
Income from operations
before income taxes |
|
|
721,384 |
|
|
680,470 |
|
|
|
1,352,557 |
|
|
1,605,023 |
|
Income taxes |
|
|
463,281 |
|
|
61,189 |
|
|
|
516,878 |
|
|
166,986 |
|
Net income and comprehensive income |
|
$ |
258,103 |
|
$ |
619,281 |
|
|
$ |
835,679 |
|
$ |
1,438,037 |
|
Earnings per
share |
|
|
|
|
|
|
Basic |
|
$ |
0.05 |
|
$ |
0.11 |
|
|
$ |
0.15 |
|
$ |
0.26 |
|
Diluted |
|
|
0.05 |
|
|
0.11 |
|
|
|
0.15 |
|
|
0.25 |
|
Terra Firma Capital CorporationConsolidated
Statements of Financial PositionAs at June 30, 2022 and December
31, 2021(Unaudited) |
|
|
June 30,2022 |
December 31,2021 |
Assets |
|
|
|
Cash and cash equivalents |
|
$ |
15,318,098 |
|
$ |
18,107,159 |
|
Funds held in trust |
|
|
5,562,152 |
|
|
3,971,799 |
|
Amounts receivable and prepaid expenses |
|
|
972,226 |
|
|
817,558 |
|
Loan and mortgage investments |
|
|
47,018,423 |
|
|
47,007,834 |
|
Investment in finance lease |
|
|
63,866,807 |
|
|
55,728,869 |
|
Portfolio investments |
|
|
304,528 |
|
|
676,421 |
|
Investment in associates |
|
|
9,035,070 |
|
|
8,364,711 |
|
Investment property held in joint operations |
|
|
1,733,941 |
|
|
1,747,799 |
|
Convertible note receivable |
|
|
1,605,598 |
|
|
1,572,510 |
|
Right of use asset |
|
|
738,365 |
|
|
851,833 |
|
Income taxes recoverable |
|
|
52,939 |
|
|
459,474 |
|
Total assets |
|
$ |
146,208,147 |
|
$ |
139,305,967 |
|
Liabilities |
|
|
|
Unearned income |
|
|
710,559 |
|
|
373,622 |
|
Loan and mortgage syndications |
|
|
20,368,710 |
|
|
22,043,144 |
|
Loans payable |
|
|
70,284,284 |
|
|
63,053,210 |
|
Mortgages payable |
|
|
981,492 |
|
|
1,018,183 |
|
Accounts payable and accrued liabilities |
|
|
9,208,599 |
|
|
7,793,961 |
|
Credit facilities |
|
|
(83,330 |
) |
|
(115,321 |
) |
Unsecured note payable |
|
|
- |
|
|
289,744 |
|
Lease obligations |
|
|
772,748 |
|
|
881,314 |
|
Deferred income tax liabilities |
|
|
77,005 |
|
|
388,890 |
|
Total liabilities |
|
|
102,320,067 |
|
|
95,726,747 |
|
Equity |
|
|
|
Share capital |
|
$ |
25,293,007 |
|
$ |
25,293,007 |
|
Contributed surplus |
|
|
3,617,372 |
|
|
3,617,372 |
|
Foreigncurrency translation reserve |
|
|
(6,885,398 |
) |
|
(6,885,398 |
) |
Retained earnings |
|
|
21,863,099 |
|
|
21,554,239 |
|
Total equity |
|
|
43,888,080 |
|
|
43,579,220 |
|
Total liabilities and equity |
|
$ |
146,208,147 |
|
$ |
139,305,967 |
|
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