Terra Firma Capital Corporation
TSX VENTURE : TII

Terra Firma Capital Corporation

August 15, 2017 08:00 ET

Terra Firma Capital Corporation Reports Results for the Second Quarter Ended June 30, 2017

TORONTO, ONTARIO--(Marketwired - Aug. 15, 2017) -

All amounts are stated in Canadian dollars.

Terra Firma Capital Corporation (TSX VENTURE:TII) ("Terra Firma" or the "Company"), a real estate finance company, today released its financial results for the three and six months ended June 30, 2017.

HIGHLIGHTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017:

  • Total loan and mortgage syndications increased by 29% to $70.7 million at June 30, 2017 from $54.8 million at June 30, 2016.

  • Total revenue for the second quarter ended June 30, 2017 amounted to $4.1 million, an increase of $500,000 or 14%, from the same period in the prior year. Total revenue for the six months ended June 30, 2016 amounted to $8.1 million, an increase of $300,000 or 2%, from the same period in the prior year.

  • Net income for the quarter ended June 30, 2017 of $114,000, ($0.00 on a basic and diluted per share basis) after recognizing a tax adjusted foreign exchange loss of $611,000, decreased by $281,000 compared to $395,000 ($0.01 on a basic and diluted per share basis), including tax adjusted foreign exchange loss of $220,000 for the quarter ended June 30, 2016.

  • Net income for the six months ended June 30, 2017 of $598,000, ($0.01 on a basic and diluted per share basis) after recognizing a tax adjusted foreign exchange loss of $466,000, increased by $88,000 compared to $510,000, ($0.01 on a basic and $0.01 on a diluted per share basis) including tax adjusted foreign exchange loss of $1,124,000, in the same period ended June 30, 2016.

  • Adjusted net income (a non-IFRS measurement) for the quarter ended June 30, 2017 of $724,000 ($0.01 on a basic and diluted per share basis) before recognizing a tax adjusted foreign exchange loss of $611,000, increased by $108,000 compared to adjusted net income of $616,000 ($0.01 on a basic and diluted per share basis) for the quarter ended June 30, 2016.

  • Adjusted net income (a non-IFRS measurement) for the six months ended June 30, 2017 of $1,064,000 ($0.02 on a basic and diluted per share basis), before recognizing a tax adjusted foreign exchange loss of $466,000, decreased by $570,000 compared to adjusted net income of $1,634,000 ($0.03 on a basic and diluted per share basis) in six months ended June 30, 2016.

"Though our second quarter results were largely in line with our expectations, the results were mainly impacted by the volatility in the US$ which amount to over $0.01 per share. We have been evaluating various hedging strategies; however at the current time, as our U.S. book is consistently growing and we have not yet determined a cost effective way to offset the fluctuations in the currency. As anticipated, $14 million of loan investments were repaid and we continue to work our way to recover the loans that are in arrears. To that end we are pleased that we have resolved the largest of the loans of $7.1 million through a negotiated restructuring of the loan with the senior lender and home buyers. Pursuant with the agreement with all the parties involved, the development is moving forward, purchasers that have elected to close on their homes will pay an additional amount and the balance of the homes will be completed and sold on the open market", commented Glenn Watchorn, Chief Executive Officer of Terra Firma Capital Corporation. "Furthermore, we have a very strong pipeline going into the third quarter and beyond with signed letters of intent totaling over $50 million, subject to borrowers satisfying pre-funding conditions, a growing base of syndicated investors and doubling the credit limit from $10 million to $20 million on our revolving credit facility, we remain confident that we are well positioned for a stronger second half of 2017", he further said.

Results of operations - three and six months ended June 30, 2017

Net income in the second quarter ended June 30, 2017 was $114,000 or $0.00 per basic and diluted share compared to $395,000 or $0.01 per basic and diluted share, in the second quarter ended June 30, 2016. The decrease in net income was primarily due to an increase in interest expense from the Company's loan and mortgage syndications, an increase in general and administrative expenses, an increase in unrealized foreign exchange loss, which aggregate amount was offset by an increase in interest and fees income.

Net income for the six months ended June 30, 2017 was $598,000 or $0.01 per basic and diluted share compared to $510,000 or $0.01 per basic and diluted share, for the six months ended June 30, 2016. The increase in net income was primarily due to by an increase in interest and fees income and decrease in realized and unrealized foreign exchange loss, which aggregate amount was offset by an increase in interest expense from the Company's revolving operating facility and loan and mortgage syndications and an increase in general and administrative expenses.

Interest and fee income for the second quarter ended June 30, 2017 aggregated $4.0 million, an increase of 14% from the $3.5 million in the same period in the previous year and no change from $4.0 million in the first quarter ended March 31, 2017. Interest and fee income for the six months ended June 30, 2017 aggregated $8.0 million, an increase of 3.0% from the $7.8 million in the same period in the previous year. The average interest rate on the loan and mortgage investments at June 30, 2017 was 15.0%, compared to 15.3% at December 31, 2016 and 16.3% at June 30, 2016.

Interest and financing costs for the second quarter ended June 30, 2017 were $2.4 million, compared to $2.0 million for the comparative period last year. Interest and financing costs for the six months ended June 30, 2017 were $4.8 million, compared to $3.8 million for the comparative period last year. The increase in interest and financing costs was primarily due to an increase in loan syndications and the Company's revolving operating facility used to fund loan and mortgage investments.

The Company's Management's Discussion & Analysis and Financial Statements as at and for the three and six months ended June 30, 2017 have been filed and are available under the Company's profile on SEDAR (www.sedar.com).

Subsequent event

As previously announced, subsequent to June 30, 2017, the Company entered into a strategic alliance and has accepted a subscription agreement on August 11, 2017 for a non-brokered private placement to a member of the Great Gulf Group of companies ("Great Gulf"), whereby Great Gulf will invest $3,250,000 by acquiring 5,000,000 units (the "Units"). Pursuant to the strategic relationship between Terra Firma and Great Gulf, Terra Firma will work with Great Gulf and its subsidiaries and affiliated companies (including Great Gulf Homes, First Gulf and Ashton Woods) to help finance its development activities throughout Canada and the United States. Terra Firma will also have the opportunity to utilize Great Gulf's extensive network to help expand its platform to provide financing for other developers throughout the United States and Canada.

Great Gulf is acquiring the Units at a purchase price of $0.65 per Unit. Each Unit is comprised of one share in the capital of the Company and one share purchase warrant. Each warrant is exercisable for one share at a price of $0.85 per share for a period of 36 months from the date of issue. All shares being issued as part of the offering are subject to a lock-up, so long as the warrants are outstanding and other specified conditions are maintained. The offering is expected to close no later than August 22, 2017.

Non-IFRS Measures

This press release refers to certain financial measures, such as adjusted net income and adjusted net income per share, 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 net income or other measures of financial performance 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 and financial performance of the Company. Adjusted net income is calculated as net income plus tax adjusted foreign exchange losses, while adjusted net income per share and adjusted diluted net income per share are calculated as adjusted net income divided by the weighted average number of outstanding common shares of the Company and weighted average diluted number of outstanding common shares of the Company, respectively. For further details of these non-IFRS measures, including a reconciliation to the most directly comparable IFRS financial measures, refer to the Company's Management's Discussion & Analysis and Financial Statements as at and for the three and six months ended June 30, 2017, "Non-IFRS Measures".

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 throughout Canada and 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.

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.

This Press Release contains forwardlooking statements with respect matters concerning the business, operations, strategy and financial performance of Terra Firma, successful implementation of effective currency exchange hedging strategies, the repayment in full of a restructured loan, realization of matters covered by current letters of intent, completion of the Unit offering and timing thereof, and the strategic relationship between Terra Firma and Great Gulf. These statements generally can be identified by use of forward looking word such as "may", "will", "expects", "estimates", "anticipates", "intends", "believe" 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 the non-binding letter of intent 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. 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.

Terra Firma Capital Corporation

Consolidated Statements of Income and Comprehensive Income

For the three and six months ended June 30, 2017 and 2016

(Unaudited)

Three months ended Six months ended
June 30, June 30, June 30, June 30,
2017 2016 2017 2016
Revenue
Interest and fees $ 4,016,705 $ 3,527,298 $ 7,982,949 $ 7,748,454
Rental 50,444 50,444 100,888 98,822
4,067,149 3,577,742 8,083,837 7,847,276
Expenses
Property operating costs 17,157 17,307 34,488 33,399
General and administrative 667,038 608,484 1,563,774 1,266,629
Share based compensation (72,833) 58,818 207,888 269,204
Interest and financing costs 2,447,873 2,008,734 4,774,934 3,835,975
Provision for loan and investment loss - - - 112,726
Realized and unrealized foreign exchange loss 830,787 299,680 633,496 1,529,642
3,890,022 2,993,023 7,214,580 7,047,575
Income from operations before income taxes 177,127 584,719 869,257 799,701
Income taxes 63,443 189,278 270,761 289,436
Net income and comprehensive income $ 113,684 $ 395,441 $ 598,496 $ 510,265
Earnings per share
Basic $ 0.00 $ 0.01 $ 0.01 $ 0.01
Diluted $ 0.00 0.01 0.01 $ 0.01

Terra Firma Capital Corporation

Consolidated Statements of Financial Position

As at June 30, 2017 and December 31, 2016

June 30, December 31,
2017 2016
Assets
Cash and cash equivalents $ 10,501,028 $ 12,315,242
Funds held in trust 956,852 982,353
Deposits - 3,256,074
Amounts receivable and prepaid expenses 4,836,579 4,865,280
Loan and mortgage investments 105,818,522 93,408,444
Investment property held in joint operations 2,208,694 2,208,694
Land under development held in joint operations 25,032,469 23,808,574
Portfolio investments 3,212,084 3,212,084
Investment in associates 2,315,414 2,315,414
Income taxes recoverable 79,238 -
Deferred income tax asset 375,383 328,324
Total assets $ 155,336,263 $ 146,700,483
Liabilities
Accounts payable and accrued liabilities $ 12,506,996 $ 10,647,966
Unearned income 496,531 329,340
Income taxes payable - 22,942
Revolving operating facility - 7,467,586
Loan and mortgage syndications 70,713,975 56,180,448
Due to joint operations partner 5,180,759 11,163,640
Construction loan payable 5,220,000 -
Mortgages payable 1,490,117 1,509,503
Convertible debentures 10,819,395 10,754,259
Total liabilities 106,427,773 98,075,684
Equity
Share capital $ 31,327,496 $ 31,789,819
Equity component of convertible debentures 284,490 284,490
Contributed surplus 2,661,591 2,514,073
Retained earnings 14,380,272 13,781,776
Shareholders' equity 48,653,849 48,370,158
Non-controlling interest 254,641 254,641
Total equity 48,908,490 48,624,799
Total liabilities and Equity $ 155,336,263 $ 146,700,483

Contact Information

  • Terra Firma Capital Corporation
    Glenn Watchorn
    Chief Executive Officer
    416.792.4702
    gwatchorn@tfcc.ca

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

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