C.A. Bancorp Canadian Realty Finance Corporation
TSX : RF.PR.A
TSX : RF.A

March 10, 2010 17:10 ET

C.A. Bancorp Canadian Realty Finance Corporation Announces 2009 Financial Results, Provides Market Update, Review of the Mortgage Portfolio and NAV Update

TORONTO, ONTARIO--(Marketwire - March 10, 2010) - C.A. Bancorp Canadian Realty Finance Corporation ("CRFC" or the "Corporation") (TSX:RF.PR.A)(TSX:RF.A) is pleased to announce a net asset value ("NAV") per Class A Share of $9.35 as at December 31, 2009. The NAV is calculated in accordance with the requirements of National Instrument 81-106. The Corporation has filed its annual financial statements and management report on fund performance today.

The Corporation has approximately $65 million of tangible capital which is managed on behalf of investors to obtain exposure to the investment performance of mortgages and other secured loans in the Canadian commercial real estate sector (the "Mortgage Portfolio"). The Corporation is managed by C.A. Bancorp Ltd. (the "Manager"), a wholly-owned subsidiary of C.A. Bancorp Inc. (TSX:BKP) ("C.A. Bancorp").

Market Update

As reported previously, during the first half of 2009, the Corporation temporarily saw a substantial drop in the percentage of mortgage transactions that met the risk parameters of the Manager, resulting in a large number of mortgage applications being declined. In such circumstances, the Manager believed it was prudent for the Corporation to focus on the preservation of capital given the scarcity of quality lending opportunities.

Commencing in the second half of 2009, the Manager began to again see good quality high yielding commercial mortgage opportunities. From July 1, 2009 until year end, the Corporation advanced new loans totaling an aggregate of $10.5 million and during the same period received repayments on mortgages of approximately $10.4 million.

Deal flow through early 2010 is strong and, provided that new commercial mortgages and loans close as projected, the Manager anticipates the balance of its cash holdings will be re-invested in higher yielding mortgages.

The Mortgage Portfolio

As at December 31, 2009, principal outstanding (less unamortized fees) in the Mortgage Portfolio was approximately $55.0 million (December 31, 2008 – $53.0 million) with an additional $5.7 million (December 31, 2008 – $5.0 million) in committed but unfunded mortgage principal. As at December 31, 2009, the average yield on the Mortgage Portfolio was approximately 11.3% (December 31, 2008 – 11.4%), calculated as the effective yield divided by the overall fair value.

The Mortgage Portfolio consisted of the following investments as at December 31, 2009:

By Mortgage Type # Value Weighting  
  1st Mortgages 13 $ 34,289,095 62.6 %
  2nd Mortgages 10 16,422,609 29.6 %
  Other Secured Loans 1 4,304,508 7.8 %
  Total 24 $ 55,016,212 100.0 %
         
By Geography # Value Weighting  
  Ontario 19 $ 45,993,553 83.6 %
  Eastern Canada 2 7,372,172 13.4 %
  Alberta 3 1,650,487 3.0 %
  Total 24 $ 55,016,212 100.0 %

Fair Value Adjustment on the Mortgage Portfolio

The Corporation has taken a negative fair value adjustment on the Mortgage Portfolio to account for differences in fair value between the time the mortgages and loans were made and December 31, 2009. The fair value adjustment on the Mortgage Portfolio of $1.4 million or $0.42 per Class A Share is non-cash in nature and was arrived at by discounting the expected cash flows from the Mortgage Portfolio at an average discount rate of 15.7%, which resulted in an estimated fair value on the Mortgage Portfolio of $53.6 million, compared to the pre-adjusted carrying value of the Mortgage Portfolio of $55.0 million ($55.3 million less $0.3 million in unamortized loan fees).

The Manager believes that a 15.7% discount rate is satisfactory. It is based on a blend of higher discount rates used on certain Non-Performing Mortgages and a lower discount used on the remainder of the Mortgage Portfolio. The discount rate is a fair indication of where market rates are on mortgages of similar quality and duration as at December 31, 2009. The Manager believes the aggregate non-cash adjustment of $1.4 million (consisting of $0.86 million made in 2008 and $0.53 million made in 2009) to the carrying value of the Mortgage Portfolio is prudent.

The estimated fair value of the Mortgage Portfolio is based on assumptions relating to the Corporation's underlying mortgages and overall market conditions and only the passage of time will determine the actual performance of the Mortgage Portfolio. The estimated fair value of the Mortgage Portfolio will continue to be reviewed by the Manager and, if appropriate, will be adjusted accordingly.

Non-Performing Mortgages

Although the Mortgage Portfolio has not sustained any realized mortgage losses as at December 31, 2009, the Corporation had exposure to three mortgages in arrears (the "Non-Performing Mortgages").  The Non-Performing Mortgages totalled an aggregate principal amount of $10.9 million. Of the Non-Performing Mortgages, the Corporation expects to realize a material loss on only one mortgage. The risk profile of the existing Mortgage Portfolio is diversified by the number of mortgages, asset class, geography and shared pari passu mortgages. The Manager remains generally satisfied with both the assets in the Mortgage Portfolio and covenants securing the Mortgage Portfolio.

Since year end, one of the Non-Performing Mortgages had the underlying property sold and the mortgage principal fully recovered. The property underlying the second Non-Performing Mortgage has been conditionally sold and although this transaction has not yet closed, the Manager expects a full recovery of amounts owing. The third Non-Performing Mortgage, in the principal amount of $6.1 million, resulted in the Corporation taking possession of the mortgaged properties and the business conducted thereon as part of the realization of its collateral security. In the summer of 2009, the Corporation placed this business into receivership. The Manager remains active in the management of the business and its financial results have been improving each month. Until further recovery in the real estate sector is achieved, it is the Manager's current intention to hold the property and continue to operate the asset to maximize value.

Class A Share Net Asset Value and Distributions

The following table summarizes the NAV per Class A Share and declared distribution per Class A Share as at the dates set out below.  The NAV of the Class A Shares has remained relatively constant when taking into the consideration the distributions. The NAV of the Class A Shares is net of any fair value adjustments taken on the Mortgage Portfolio.

Date NAV per Share Distribution
December 31, 2008 $ 9.51 $ 0.19
March 31, 2009 $ 9.48 $ 0.19
June 30, 2009 $ 9.47 $ 0.19
September 30, 2009 $ 9.23 $ 0.19
December 31, 2009 $ 9.35 $ 0.19
March 9, 2010 $ 9.43 n/a

The Corporation

CRFC is a mutual fund corporation incorporated under the laws of the Province of Ontario. It was created to obtain exposure to the investment performance of an actively managed portfolio of mortgages and secured loans in the Canadian commercial real estate sector on a tax-efficient basis.

The Class A Shares

The Corporation's investment objectives with respect to the Class A Shares are to:

  1. Pay quarterly cash distributions, initially expected to be $0.19 per quarter or 7.6% per annum, based on the original issue price of $10.00; and

  2. Preserve the NAV.

The Class A Shares closed at a price of $7.61 on December 31, 2009 representing a 19% discount to the NAV of $9.35 as at December 31, 2009 and most recently traded at a closing price of $6.10 on March 9, 2010 which represents a 35% discount to the NAV of $9.43 as at March 9, 2010.

The Series 1 Preferred Shares

The Corporation's investment objectives with respect to the Series 1 Preferred Shares are to:

  1. Pay fixed cumulative preferential quarterly cash distributions in the amount of $0.4219 representing a yield of 6.75% per annum on the original issue price of $25.00; and

  2. Return the original issue price of $25.00 on March 31, 2018.

The Series 1 Preferred Shares closed at a price of $19.36 per Share on December 31, 2009 representing a 23% discount to the maturity replacement value of $25.00 per Share. On March 9, 2010 the Preferred Shares closed as a price of $20.25 which represents a 19% discount to the maturity replacement value of $25.00 per Share.

The Warrants to purchase Series 1 Preferred Shares

Each Warrant will entitle the holder to purchase one Series 1 Preferred Share at a subscription price of $23.75 at any time on or before 4:00 p.m. (Toronto time) on September 30, 2011.

C.A. Bancorp Inc.

C.A. Bancorp is a publicly traded Canadian merchant bank and alternative asset manager that provides investors with access to a range of private equity and other alternative asset class investment opportunities. C.A. Bancorp is focused on investments in small- and middle-capitalization public and private companies, with emphasis on the industrials, real estate, infrastructure and financial services sectors.

All dollar figures in the news release are references to Canadian dollars. This news release contains forward-looking statements. These statements relate to anticipated future events, results, circumstances, performance or expectations that are not historical facts but instead represent the Corporation or the Manager's beliefs regarding future events. Often, but not always, forward-looking statements can be identified by the use of forward-looking words such as "will", "expect", "intend", "plan", "estimate", "anticipate", "believe" or "continue", similar words or the negative thereof, or variations of such words and phrases that certain actions, events or anticipated outcomes "may", "would" or "might" be taken, occur or be achieved. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. The future business, operations and performance of the Corporation discussed herein 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. Forward-looking statements are based on a number of assumptions which may prove to be incorrect. Additional, important factors that could cause actual results to differ materially from expectations include, among other things, general economic and market factors, the currency of the Mortgage Portfolio, the quality of assets available as security for mortgage loans, the number of deal opportunities presented for investment, cash flow of the Corporation being sufficient to enable it to pay its distributions, risk of impairment of loans, competition, interest rates and tax related matters. The Corporation cautions that risk factors discussed in applicable continuous disclosure filings required by law that the Corporation has made and filed on SEDAR should also be considered carefully and that undue reliance not be placed on forward-looking statements as events and results could differ materially from those expressed or implied by forward-looking statements made by the Corporation. The cautionary statements qualify all forward-looking statements attributable to the Corporation and persons acting on its behalf. Unless otherwise stated, all forward-looking statements speak only as of the date of this press release. The Corporation does not undertake, and specifically disclaims, any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by applicable law.

C.A. Bancorp
The Exchange Tower
130 King Street West
Suite 2810, P.O. Box 104
Toronto, Ontario M5X 1A4
Telephone: (416) 214-5985
Fax: (416) 861-8166

Contact Information

  • C.A. Bancorp Canadian Realty Finance Corporation
    Michael Lovett
    Managing Director-Real Estate Capital
    1-866-388-5985
    416-861-8166 (FAX)
    or
    C.A. Bancorp Canadian Realty Finance Corporation
    Paolo De Luca
    Chief Financial Officer
    1-866-388-5985
    416-861-8166 (FAX)
    info@cabancorp.com
    www.cabancorp.com