Romspen Mortgage Investment Fund Annual General Meeting June 6, - PowerPoint PPT Presentation

Romspen Mortgage Investment Fund Annual General Meeting June 6, 2014

Agenda Introductory Remarks Sheldon Esbin Formal Business Managing General Partner Mandate, Strategy & Direction Mark Hilson 2013 Review Managing General Partner Outlook & 2014 Q1 Issues/Opportunities Wesley Roitman Managing General Partner 2

Safe Harbour This presentation contains forward-looking statements related to our future growth, and our financial and operational results and performance that are based on current expectations, forecasts and assumptions involving risks and uncertainties that could cause actual outcomes and results to differ materially. These risks and uncertainties include, but are not limited to: variability of operating results among periods, which include: the pace, size and nature of mortgage investments, repayments and other realization events, the volatility of interest rates; changes in the market value of commercial real estate in Canada & the US; and other activities and events within our business. These and other risks and uncertainties and factors are discussed in the Fund’s various filings available on the Fund website, www.romspen.com. 3

Formal Business Sheldon Esbin Managing General Partner 4

Strategy, 2013 Review, Outlook & 2014 Q1 Mark Hilson Managing General Partner 5

Mandate/Strategy/Direction Mandate/Strategy/Direction 6

Mandate & Strategy  capital preservation Mandate:  strong absolute returns  consistent performance  source attractive opportunities in defined niche Strategy:  underwrite mortgages conservatively  identify & reduce risk  thorough execution/”high - touch” lending 7

Transactions Jane/Bloor Retail Development, Toronto Social Housing Project, Montreal Paper Factory Hostel, Brooklyn Royal Park Hotel, Michigan Fortius Sport & Health Facility, Burnaby Bayer Industrial/Commercial Complex, Toronto 8

Direction • RMIF remains the principal focus • Leverage experience, relationships, infrastructure • Apply same mandate to build real estate equity platform • Offer alternative yield driven tax-advantaged, real estate opportunities Real Estate Segments Mortgage Lending Real Estate Equity Canada M RMIF a r k e t s US 9

2013 Results 2013 Results 10

2013 Highlights Another solid year • Distributions $0.72/unit to yield net 7.4% compounded return • Performance solid absolute & comparative results • Mortgage portfolio up 16% to $1.15 billion • Portfolio interest rate virtually unchanged from 10.6% to 10.5% • Investor capital up 11% to $1.1 billion • Losses on disposed properties minimal, reserves increased 11

Key Financial Metrics Strong net earnings $77 $63 $51 Net income ($M) 2011 2012 2013 12 Source: Romspen Audited Financial Statements

Key Financial Metrics Strong portfolio growth $1,154 $995 $749 Mortgage portfolio ($M) 2011 2012 2013 13 Source: Romspen Audited Financial Statements

Key Financial Metrics Low financial leverage Mortgage portfolio 6% (%) 4% 3% 2011 2012 2013 14 Source: Romspen Audited Financial Statements

Key Financial Metrics Modestly higher unit value $9.92 $9.92 $9.94 $/unit 2011 2012 2013 15 Source: Romspen Audited Financial Statements

Key Financial Metrics Solid distributions $0.79 $0.74 $0.72 $/unit 2011 2012 2013 16 Source: Romspen Audited Financial Statements

Key Financial Metrics Solid returns 8.2% 7.7% 7.4% Annual compounded net % return 2011 2012 2013 17 Source: Romspen Audited Financial Statements

Portfolio Remains Well Diversified By Type By Geography Other 9% term 49% US Ontario 14% 46% construction British Columbia 23% 15% pre-development 28% Alberta 16% By Amount By Maturity $5-$10 million 21% under $5 million under 1 year 16% 72% >2 years 2% $10-$20 million 35% 1-2 years over $20 million 26% 28% 18 Source: Romspen Audited Financial Statements

2013 Performance Romspen outperforms fixed-income benchmarks 13.0% 7.4% 1.7% 1.0% S&P/TSX T-Bills DEX-STBI Romspen Source: Bank of Canada, Romspen Audited Financial Statements Note: Romspen returns are net, comparative returns are gross. 19

3-Year Performance Romspen outperforms major benchmarks 25% 11% 9% 3% S&P/TSX T-Bills DEX-STBI Romspen Source: Bank of Canada, Romspen Audited Financial Statements Note: Romspen returns are net, comparative returns are gross. 20

10-Year Performance Romspen outperforms major benchmarks 139% 115% 49% 21% S&P/TSX T-Bills DEX-STBI Romspen Source: Bank of Canada, Romspen Audited Financial Statements, PriceWaterhouse Coopers Report Note: Romspen returns are net, comparative returns are gross. 21

20 Year Historical Performance One negative monthly return in 240 months Annual January February March April May June July August September October November December Year Compound Net Return 1994 0.64 0.75 0.77 0.65 0.80 1.05 0.78 0.74 0.82 1.00 0.70 0.79 9.9 1995 0.79 -0.77 0.90 0.74 0.76 0.76 0.94 0.74 0.84 0.96 0.79 0.80 8.6 1996 0.80 0.85 0.87 0.83 0.91 0.77 0.88 0.96 0.75 1.03 0.83 0.78 10.8 1997 0.89 0.76 0.83 0.83 0.77 0.71 0.87 0.91 0.73 0.87 0.73 0.35 9.7 1998 0.92 0.89 0.92 0.77 0.69 0.76 1.02 0.75 0.80 0.93 0.77 0.87 10.6 1999 0.77 0.74 0.77 0.84 0.88 0.79 0.89 0.71 0.96 0.74 0.84 0.72 10.1 2000 0.87 0.78 0.93 0.74 0.88 0.75 0.81 0.75 0.73 0.79 0.82 0.80 10.1 2001 0.91 0.67 0.83 0.69 0.82 0.76 0.82 0.87 0.73 0.92 0.83 0.73 10.0 2002 0.88 0.71 0.86 0.86 1.01 0.67 0.94 0.81 0.77 0.76 0.77 1.06 10.6 2003 0.84 0.78 0.76 0.70 0.71 0.77 0.83 0.72 0.87 0.76 0.68 0.90 9.7 2004 0.67 1.08 0.83 0.88 0.71 1.02 0.76 0.83 0.63 0.62 0.74 0.68 9.8 2005 0.65 0.06 0.86 0.58 0.88 1.91 0.57 1.08 0.74 0.74 0.57 0.88 9.9 2006 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.90 0.80 0.80 0.80 0.95 10.3 2007 0.80 0.80 0.90 0.80 0.80 0.90 0.80 0.80 0.90 0.81 0.80 0.92 10.5 2008 0.80 0.80 0.90 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.70 0.70 9.9 2009 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 8.7 2010 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 0.70 8.7 2011 0.70 0.60 0.70 0.70 0.60 0.70 0.70 0.60 0.70 0.60 0.60 0.70 8.2 2012 0.70 0.60 0.60 0.60 0.70 0.60 0.60 0.60 0.60 0.60 0.60 0.60 7.7 2013 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 7.4 22 Source: PriceWaterhouseCoopers Report, Romspen Analysis

2014 Outlook & Q1 Performance 2014 Outlook & Q1 Performance 23

2014 Economic Environment • Soft, plodding recovery • subdued growth • global deleveraging cycle • elevated unemployment • low return environment • Artificially low rates looming reduction in monetary accommodation • Volatility ongoing economic theme • Credit demand remains buoyant low interest rates • Toronto/Vancouver cautious underwriting • US strengthening, Canada slowing/softening 24

The Rise and Fall of Canadian Interest Rates Interest rates have steadily declined since 1981 18 16 14 Secular Inflation & Secular Disinflation & 12 Rise in Yields Decline in Yields 10 Bond Yield 8 (% ) 6 4 2 0 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 Source: Statistics Canada: Government of Canada marketable bonds, average yield: over 10 years 25

Interest Rate Comparison Lower rates, consistent spread 12% 10% 8% Annual 6% return (%) 4% 2% 0% 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 BOC Overnight Rate Romspen Return Relative Spread Source: Bank of Canada, Romspen Audited Financial Statements Note: Romspen returns are net, comparative returns are gross. 26

2014 Q1 Performance Solid first quarter Modestly higher Stable Stable unit value distributions returns $9.94 $9.92 $0.18 $0.18 1.8% 1.8% Q1 Q1 Q1 Q1 Q1 Q1 2013 2014 2013 2014 2013 2014 27 Source: Romspen 2014 Q1 Financial Statements

Q1 2014 Performance Solid performance continues in Q1 6.1% 1.8% 1.1% 0.2% S&P/TSX T-Bills DEX-STBI Romspen Source: Bank of Canada, Romspen 2014 Q1 Financial Statements Note: Romspen returns are net, comparative returns are gross. 28

YTD 2014 – Comparative Performance Solid performance continues YTD as at April 30, 2014 6.1% 2.5% 1.3% 0.3% S&P/TSX T-Bills DEX-STBI Romspen Source: Bank of Canada, Romspen Analysis Note: Romspen returns are net, comparative returns are gross. 29

Issues/Opportunities Wesley Roitman Managing General Partner 30

Issues/Opportunities Issues/Opportunities 31

Non-performing Loans • Ongoing part of business • Loan pricing takes this into account • Non- performing loans ≠ losses Non-performing Loans 28% 23% 18% $M / % portfolio $233 $208 $207 2011 2012 2013 Source: Romspen Audited Financial Statements 32