Timbercreek Financial Corp.

Good day, ladies and gentlemen. Welcome to Timber Creek Financial's first quarter earnings call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question and answer session for analysts. Analysts are asked to raise their hand to register for a question. As a reminder, today's call is being recorded. I would now like to turn the meeting over to Blair Tamblyn. Please go ahead.

Thank you, operator. Good afternoon, everyone. Thanks for joining us to discuss the first quarter financial results. As usual, I'm joined today by Scott Rowland, CIO, Gracie Johnston, CFO, and Jeff McDate, head of Canadian Originations and Global Syndications. During the first quarter, we were able to generate solid income levels and deliver on our monthly distribution while navigating a near-term reduction in the average mortgage portfolio. As we discussed in our last earnings call, we were intentionally cautious through much of 2023, and the lower portfolio balance also reflects two quarters of significant repayments, including the repayment of the large Quebec City portfolio in early January 2024. As you are evaluating the year-over-year financial results, this lower average balance was the primary factor in the reduced top-line income versus last year's first quarter, which represented a high watermark over the previous two years. Conversely, interest expense on our credit facility was much lower, allowing us to largely maintain net income margins. In terms of the specific highlights, net investment income was $24 million versus $32.7 million last year. Q1 net income was $14.4 million versus $18.1 million last year. And we generated a distributable income of $15.8 million, or 19 cents per share. Within our typical range, the healthy payout ratio of basically 90%. We also paid a special dividend for the first time in the quarter. And after paying this out, our book value per share was still modestly higher year over year, $8.39 versus $8.37 in Q1 23. We'd also highlight that our current book value is roughly 15% above the weighted average trading price in Q1. At Scoggle Outline, it was a strong first quarter for originations, which allowed us to grow the portfolio from year-end levels. Importantly, we remain optimistic that a stable interest rate environment in 2024 will promote increased commercial real estate activity and present attractive risk-adjusted return opportunities for us to expand the portfolio back to historical levels over the course of the year. Lastly, our team continues to make good headway on Stage 2 and Stage 3 loans in the portfolio. As we have shown, we're adept at actively managing these situations to ensure the best outcomes for our shareholders. That remains a key focus in the coming quarters. With that, I'll turn it over to Scott to discuss the portfolio trends and market conditions.

Thanks, Blair, and good afternoon. I'll comment on the portfolio metrics, the progress with Stage 2 and Stage 3 loans, and the improving lending environment in 2024. Looking at the portfolio KPIs, At quarter end, 85.7% of our investments were in cash-flowing properties, compared with 86% at the end of 2023. Multiple residential real estate assets, apartment buildings, continue to comprise the largest portion of the portfolio at 54.6%, compared to 56.5% at the end of 2023. The portfolio remains conservatively invested. First mortgages represented 85.7% of the portfolio, compared to 88.9% in Q4. The lower percentage here is primarily due to the denominator effect of the recent first mortgage payoffs, as well as the second mortgage advance. Our weighted average loan-to-value for Q1 was 64.4%, down from 65.6% at year-end, as new loans were funded with lower LTVs, while loans with higher LTV were discharged. The portfolio's weighted average interest rate, or WARE, was 9.9%, down slightly from 10% in Q4 and up from 9.7% in Q1 last year. Our Q1 exit wear was 9.9%, down slightly from 10% exiting Q4. Overall, we are pleased to see the average loans of value declining in the portfolio as we reinvest in more conservative loans while maintaining high margins in the current market environment. It was a busy quarter for transaction activity Total mortgage portfolio repayments were high at $167.1 million, three-quarters of which reflected the desired repayment of the Quebec City portfolio in early January 2024. This led to high turnover in the quarter of 19.4%, similar to Q4 levels. The portfolio typically turns over 50% per year, so these are higher than normal rates. For the most recent quarter, turnover was only 4.7% outside of the Quebec City portfolio. At the same time, repayments create capacity for new investments. To that end, Q1 was a strong originations quarter with nearly $200 million in new mortgage investments and additional advances on existing mortgages. Q1 is typically a more competitive quarter as other institutional investors put that capital to work in real estate, so we're especially pleased with this level of activity early in the year. As stability returns to the market, commercial real estate transaction volumes should broadly rise, and this is an attractive environment for Tipper Creek to grow the portfolio back to normalized levels. Our pipeline has been growing with attractive risk-return investment opportunities, and we believe 2024-2025 will be excellent investing vintages as the market has reset from previous valuation highs. In terms of the asset allocation, the mix between provinces changed significantly in Q1 due to the Quebec City repayment, which reduced the Quebec weighting to 16% from 29% at year end. And we had strong deployment in Ontario during the quarter, bringing Ontario exposure to 45%, up from 32% at year end. We're very comfortable with a higher Ontario weighting at present and pleased to have the capacity to redeploy into Quebec. Generally speaking, the portfolio is divided into thirds between Western, Central, and Eastern Canada. As Blair mentioned, we continue to make meaningful progress on the Stage 2 and Stage 3 loans in the portfolio. We have expanded disclosure on these loans in our MD&A, so I will focus my comments on the key developments and larger loans. On the Stage 3 loans, we completed the sale of the largest of the Stage loans, and we were fully repaid all principal and all accrued interest in January. This materially reduced the Stage 3 balance. We've also made progress on the multifamily asset under construction that was part of an earlier CCAA process. The property is nearing completion with expected occupancy this summer. The owners have injected fresh cash equity into the project to restart construction, and liens are close to being fully cleared. We anticipate the loan returning to Stage 1 this quarter, at which point we will begin funding the balance of the construction advances. In terms of the Stage 2 assets, these include three office properties and one retail property with the same sponsor in Calgary, representing $54.7 million. During the quarter, we moved two of these loans from Stage 3 to Stage 2, so all three are now in Stage 2. And all these three loans now have collateral enhancement via equity pledges on proceeds from the sales of other assets owned by the borrower. We have forbearance agreements in place with the borrower while the borrower focuses on leasing and optimizing the asset to realize full repayment. Maturity dates have been extended to the fall of 2025. In terms of other Stage 2 assets, the largest entry here relates to three loans comprised of eight primarily retail properties in downtown Vancouver, totaling $110.3 million in exposure. These loans are all current. However, they were moved to Stage 2 while the borrower works on plans to sell assets to increase their liquidity position, which has been hampered by higher rates in the current environment. The assets are well located in Vancouver retail buildings that also hold residential redevelopment potential. Preference agreements have been signed to provide enhanced security via cross-collateralization. Current business plans should result in individual asset sales over the next year and a resulting reduction in our exposure. In summary, while there is more work to be done, our team is making great progress and remains confident both in the quality of the underlying assets and our ability to recover our investments through active management. As we resolve more of these and see the total stage loan balance decline, we look forward to focusing more of our discussion on new investments and the portfolio expansion. I will now pass the call to Tracy to review the financial results. Tracy?