Timbercreek Financial Corp.

Ladies and gentlemen, and welcome to Timber Creek Financial's second 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 the 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 second quarter financial results. I'm joined as usual by Scott Rowland, CIO, Tracy Johnson, CFO, and Jeff McDate, head of Canadian Originations and Global Syndications. The overall portfolio performed well in the second quarter. We reported improved sequential results and demonstrated our ability to generate consistent, healthy cash flows and dividends with a conservative payout ratio. But we navigate a transition period in the commercial real estate markets. Building on strong Q1 origination activity, we continue to have success redeploying capital into high-quality loans as we expand the portfolio back to historical levels. We entered the quarter over a billion, and as you will hear from the team today, recent Bank of Canada rate cuts create improved market conditions for Timber Creek. As we look out to the second half of 2024, we are well-positioned to shift back to growth mode and deploy capital to expand the portfolio. With this backdrop, we reported healthy financial results in Q2, including net investment income of 26.4 million, net income of 15.4 million, and we generated distributable income of 20 cents per share with a healthy payout ratio of 88%. Our book value per share was modestly higher year over year, even after we issued a special dividend in Q1. At $8.42 per share, our current book value is roughly 15% above the weighted average trading price in Q2. Lastly, our team continues to focus on resolving the remaining stage loans through highly active asset management efforts. We're making good progress on these select situations and remain confident both in the underlying value of the assets and our ability to navigate these situations to ensure the best outcomes for our shareholders. Scott will walk through these situations in his portfolio review. Scott? Thanks, Blair, and good afternoon.

I'll comment on the portfolio metrics and the progress with Stage 2 and Stage 3 loans, and then I'll ask Jeff to comment on the originations, activity, and overall lending environment. Looking at the portfolio KPIs, most were stable relative to recent periods and consistent with historical averages. At quarter end, 83.4% of our investments were in cash-flowing properties. Multi-residential real estate assets, apartment buildings, continue to comprise the largest portion of the portfolio at roughly 52%. The portfolio remains conservatively invested. First mortgages represented 85.6% of the portfolio. This is typically above 90%, and we expect this percentage to trend upward in the coming quarters. Our weighted average LTV for Q2 is down to 62.3%. as new loans were funded at lower LTVs while loans with higher LTV were repaid. The portfolio's weighted average interest rate, or WARE, was 9.8%, down slightly from 9.9% in Q1 and flat with Q2 last year. Our Q2 exit WARE was 9.5%, down from 9.9% exiting Q1, and reflects the June interest rate cut. Lastly, floating rate loans represented 87% of the portfolio at quarter end. In terms of the asset allocation, the mix between provinces was largely unchanged from Q1. Recall, we had a more significant shift from year end due to the Quebec City repayment in Q1 and strong deployment in Ontario. We're comfortable with the current Ontario and Quebec diversification and continue to look for new opportunities to deploy capital in Quebec. As Blair mentioned, we continue to pursue resolution and recovery on the Stage 2 and Stage 3 loans through our asset management efforts. Asset management is a bespoke process, and we spend considerable time developing plans and weighing our options to ensure the best results for Timber Creek shareholders. There is fulsome disclosure in our MD&A, so I will comment on the main developments in the period. In stage two, the previously reported Calgary and Vancouver loans are stable, with no material updates at this time. In Calgary, we have seen some positive leasing activity on the assets. Three new exposures have entered Stage 2 this quarter, and I will provide some color here. We have $40 million on two loans related to a GTA industrial construction project. The borrower and their general contractor are looking to end their relationship due to cost overruns on a development that is actually unrelated to the Timber Creek loans. However, these issues have overflowed to affect our loan as the borrower stopped making interest payments beginning June 1st. We are actively engaged with the borrower, and resolution here may come as their contractor issues are figured out, or alternatively, we understand that potential sale may be a near-term outcome. The strategy on this exposure is evolving, so we will provide more details in our next update, but we are hopeful this will be resolved relatively quickly. The other main addition to Stage 2 is a $12 million loan on a residential development site in downtown Toronto. This is a very well located site that the borrower has listed for sale and requested to accrue interest until the sale is finalized. The loan is in stage two given we have accrued June and July payments, but we have signed a forbearance agreement with the borrower to allow an existing sales process to proceed as we believe it is the most efficient path to repayment. We are expecting firm bids in late Q3 and full repayment of this loan thereafter. On the Stage 3 front, we are pleased to report that the Quebec Multifamily Development Loan has been fully resolved and has returned to Stage 1. The asset is nearing completion and a CMHC takeout is expected before the end of the year. This brought total Stage 3 assets down to just over $24 million at quarter end. In summary, while there is more work to be done, we are happy with the progress of the Stage loans and remain confident these files will be resolved in due course. The team is focused on successful outcomes and is very experienced in handling the situations as they come along. At this point, I'll ask Jeff to comment on the transaction activity in the portfolio. Jeff?