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Terra Firma Capital Corporation Reports Fourth Quarter & Full Year 2020 Financial Results

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Terra Firma Capital Corporation
·14 min read
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All amounts are stated in United States dollars unless otherwise indicated.

TORONTO, April 15, 2021 (GLOBE NEWSWIRE) -- 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 months and year ended December 31, 2020.

Full Year 2020 Financial Highlights:

  • Total Assets of $133.1 million

  • Total Investments (a non-IFRS financial measure)(1) of $122.6 million

  • Total Assets under management ("AUM," a non-IFRS financial measure) (4) of $145.1 million

  • Book Value per share increased by 3.9% to $7.40 (CA$9.41(3)) per share

  • CA$0.20 per share paid in dividends

  • Revenues decreased by 7.2% to $15.5 million

  • Net income and comprehensive income decreased by 29.5% to $2.2 million

  • Adjusted net income and comprehensive income (a non-IFRS financial measure)(2) decreased by 13.9% to $2.9 million

  • Basic and diluted earnings per share decreased by 27.8% to $0.39 (CA$0.52(3))

  • Adjusted basic and diluted earnings per share (a non-IFRS financial measure)(2) decreased by 13.6% to $0.51 (CA$0.68(3))

Q4 2020 Financial Highlights:

  • Revenues decreased by 22.5% to $3.6 million

  • CA$0.05 per share paid in quarterly dividends

  • Net income and comprehensive income decreased by 4.3% to $846,000

  • Adjusted net income and comprehensive income(2) decreased by 48.1% to $532,000

  • Basic and diluted earnings per share decreased by 6.3% to $0.15 (CA$0.20(3))

  • Adjusted basic and diluted earnings per share(2) decreased by 44.4% to $0.10 (CA$0.13(3))

"Despite the challenges that faced Terra Firma over 2020 from the COVID-19 crisis, the Company made great strides in implementing systems and protocols to manage and safeguard its operations and capital effectively. The Company remained profitable throughout the pandemic. However, there was an overall decrease in net income for the fiscal year 2020. Two factors contributed to this decline. First, the tremendous strength of the U.S. housing market resulted in faster repayments of loan investments. Second, we deliberately decreased our loan originations in the second and third quarters due to the uncertainties related to the pandemic. Nevertheless, we generated loan originations totaling over $39 million in the fourth quarter of 2020, which along with the loan originations expected in 2021, should have a delayed effect on the overall increase in AUM in 2021 as unfunded commitments are deployed over time," commented Glenn Watchorn, Chief Executive Officer of Terra Firma Capital Corporation.

"The good news is that Terra Firma is emerging from the pandemic as a stronger company. Terra Firma has not only successfully kept its key management personnel but has also put in place significant groundwork to excel once the pandemic is over. Since the beginning of the pandemic, the Company started planning the creation of several new investment funds. In January this year, it closed its first fund totaling $37.5 million, which offers the Company the flexibility to originate land banking transactions without having to deal with the sourcing of capital for these investments. Terra Firma also managed to strengthen the relationship with some of its builders and developers, including two large homebuilders, which combined have already provided the Company with over $50 million of loan originations since August 2020. With the expected increase in loan and investment originations in 2021, Terra Firma is poised for significant growth both in AUM and net income in 2021 and beyond."

For the year ended December 31, 2020, revenues decreased 7.2% to $15.5 million, compared to $16.7 million during the same period in 2019. The decrease in revenues is primarily due to interest and fee income decreasing by 15.6% to $12.7 million compared to $15.0 million in 2019. The repayments of loans and mortgage investments after December 31, 2019, resulted in a decrease in interest fees earned by $6.7 million. The decrease is partially offset by interest and fees earned of $1.5 million on loan and mortgage investments funded after December 31, 2019, and an increase in interest and fees of $2.9 million earned on loan and mortgage investments and convertible note receivable existed December 31, 2019. Finance income in 2020 was $2.6 million, compared to $1.5 million in the previous year, due to an increase in investment in finance leases.

For the three months ended December 31, 2020, revenues decreased 22.5% to $3.6 million, compared to $4.6 million during the same period in 2019, primarily due to a decrease of interest and fee income by 28.2% to $2.9 million compared to $4.0 million in 2019. The decrease in interest fees earned of $2.2 million is attributable to loan repayments and mortgage investments in 2020. This was partially offset by interest and fees earned of $989,000 on loan and mortgage investments funded after December 31, 2019, and an increase in interest and fees earned of $35,000 on loan and mortgage investments and convertible note receivable existed December 31, 2019. Finance income in 2020 was $643,000, compared to $541,000 in the previous year, due to an increase in investment in finance leases.

Interest and financing expense for the year ended December 31, 2020, decreased by 10.8% to $8.2 million, compared to $9.2 million in the same period last year.

Interest and financing expense for the three months ended December 31, 2020, decreased by 24.8% to $1.8 million, compared to $2.4 million in the same period last year.

General and administrative expenses for the year ended December 31, 2020, was $3.3 million compared to $3.4 million for the same period last year. General and administrative expenses for the three months ended December 31, 2020, was $1.2 million compared to $1.1 million for the same period last year. The decrease in general and administrative expenses was primarily due to the Company not incurring legal fees relating to a loan in arrears.

The net income and comprehensive income attributable to common shareholders for the year ended December 31, 2020, was $2.2 million or $0.39 per basic and diluted share compared to $3.1 million or $0.54 per basic share and diluted share for the year ended December 31, 2019. The net income and comprehensive income attributable to common shareholders for the three months ended December 31, 2020, was $846,000 or $0.15 per basic and diluted share compared to $884,000 million or $0.16 per basic and diluted share for the same period last year.

The Company's Total Investments(1) at December 31, 2020, was $122.6 million, compared to $142.4 million at December 31, 2020, a decrease of 13.9% or $19.9 million, primarily due to net repayments in loan and mortgage investments, which was partially offset by net fundings in investment in finance leases. The Company ceased all origination activities during the first half of the year due to the COVID-19 pandemic. The Company commenced origination activities beginning of Q3 2020.

The principal balance of the Company's loan and mortgage syndications decreased to $71.4 million at December 31, 2020, as compared to $88.2 million at December 31, 2019, representing a decrease of 19.1%.

The Company's Management's Discussion & Analysis and Financial Statements as at and for the year ended December 31, 2020 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 Financial Measures

This press release refers to certain financial measures, including adjusted net income and comprehensive income and Total Investments, each as described below, which are not measures defined under International Financial Reporting Standards ("IFRS") as prescribed by the International Accounting Standards Board, do not have standardized meanings prescribed by IFRS and should not be construed as alternatives to profit/loss or other measures of financial performance or financial position calculated in accordance with IFRS. These measures may differ from those made by other companies and accordingly may not be comparable to such measures as reported by other companies. These measures have been derived from the Company's financial statements and disclosed herein because the Company believes they are of assistance in the understanding of the operational performance of the Company. Non-IFRS financial measures are commonly used by the financial community to analyze and compare the performance of companies engaged in the same industries and to help evaluate the trends more readily.

(1)

Total Investments (excluding cash) consists of the principal balance of loan and mortgage investments, investment in finance leases, portfolio investments, investments in associates, convertible note receivables and an investment property held in joint operations.

(2)

Adjusted net income and comprehensive income (as well as adjusted net income and comprehensive income attributable to common shareholders, adjusted diluted net income and comprehensive income attributable to common shareholders, which in the current periods are equal to adjusted net income and comprehensive income and adjusted earnings per share are calculated by adjusting the following (as applicable), irrespective of materiality:

(4)

Adjusted basic and diluted earnings per share for full-year 2020 and Q4 2020 were translated to CA$ using the exchange rate of $1.3415 and $1.3030, respectively. Book Value per share was translated to CA$ using the exchange rate $1.2725.

(5)

Assets under management (“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.

Note that further information concerning such non-IFRS financial measures, including reconciliations of such non-IFRS financial measures to the most directly comparable measure specified, defined or determined under IFRS for the periods indicated, can be found in the Company’s Management's Discussion & Analysis for the year ended December 31, 2020.

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 forwardlooking 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 2021 and their impact on AUM, the potential for two large homebuilders to provide the Company with deployments, and potential significant growth both in AUM and net income in 2021 and beyond . 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 forwardlooking 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. Forwardlooking 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 forwardlooking 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 forwardlooking statements. The cautionary statements qualify all forwardlooking 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 Corporation
Glenn Watchorn
Chief Executive Officer
Phone: 416.792.4702
gwatchorn@tfcc.ca

or

Terra Firma Capital Corporation
Y. Dov Meyer
Executive Chairman
Phone: 416.792.4709
ydmeyer@tfcc.ca

or

Ali Mahdavi
Managing Director
Spinnaker Capital Markets Inc.
Phone: 416.962.3300
am@spinnakercmi.com

Terra Firma Capital Corporation
Consolidated Statements of Income and Comprehensive Income
For the three months and years ended December 31, 2020 and 2019
(Unaudited)

Three months ended

Years ended

December 31,
2020

December 31,
2019

December 31,
2020

December 31,
2019

Revenue

Interest and fees

$

2,904,000

$

4,046,909

$

12,662,997

$

15,003,292

Finance income

642,524

540,835

2,646,216

1,497,294

Rental

40,893

41,844

152,571

155,720

3,587,417

4,629,588

15,461,784

16,656,306

Expenses

Property operating costs

13,882

14,235

53,896

53,427

General and administrative

1,216,807

1,129,828

3,305,565

3,375,989

Share based compensation

305,272

120,594

279,224

474,168

Interest and financing costs

1,821,066

2,422,611

8,176,246

9,161,259

Provision for loan and mortgage investment loss

-

226,108

899,204

74,208

Provision for investment in finance lease loss

41,061

-

41,061

-

Provision for uncollectible receivables

-

-

161,428

-

Realized and unrealized foreign exchange gain

(364,687

)

(114,885

)

(118,268

)

(156,901

)

Fair value adjustment - portfolio investments

(149,120

)

(56,124

)

(149,120

)

(56,124

)

Share of income from investment in associates

(57,098

)

(356,435

)

115,494

(356,435

)

2,827,183

3,385,932

12,764,730

12,569,591

Income from operations before income taxes

760,234

1,243,656

2,697,054

4,086,715

Income taxes

(85,809

)

359,377

527,816

1,008,958

Net income and comprehensive income

$

846,043

$

884,279

$

2,169,238

$

3,077,757

Earnings per share

Basic

$

0.15

$

0.16

$

0.39

$

0.54

Diluted

0.15

0.16

0.39

0.54

Terra Firma Capital Corporation
Consolidated Statements of Financial Position
As at December 31, 2020 and 2019

December 31,
2020

December 31,
2019

Assets

Cash and cash equivalents

$

3,780,824

$

1,931,451

Funds held in trust

5,862,799

1,805,229

Amounts receivable and prepaid expenses

596,864

1,520,698

Loan and mortgage investments

93,043,813

116,212,642

Investment in finance lease

20,489,655

17,959,374

Portfolio investments

2,292,991

2,042,937

Investment in associates

3,112,395

3,097,947

Investment property held in joint operations

1,735,712

1,700,303

Convertible note receivable

1,080,536

800,531

Right of use asset

1,056,879

912,436

Income taxes recoverable

-

247,719

Total assets

$

133,052,468

$

148,231,267

Liabilities

Accounts payable and accrued liabilities

$

8,670,756

$

5,344,792

Lease obligations

1,074,518

913,129

Unearned income

391,112

692,264

Income taxes payable

609,499

-

Deferred income tax liabilities

219,337

450,017

Unsecured note payable

1,794,150

3,000,000

Credit facilities

6,700,964

8,878,839

Loan and mortgage syndications

71,374,100

88,249,414

Mortgages payable

1,055,379

1,067,440

Total liabilities

91,889,815

108,595,895

Equity

Share capital

$

25,283,343

$

25,283,343

Contributed surplus

3,618,440

3,440,695

Foreign currency translation reserve

(6,885,398

)

(6,885,398

)

Retained earnings

19,146,268

17,796,732

Total equity

41,162,653

39,635,372

Total liabilities and equity

$

133,052,468

$

148,231,267