Timbercreek Financial Corp.

Good day, ladies and gentlemen. Welcome to Timber Creek Financial's third 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 third quarter financial results. I'm joined, as usual, by Scott Rowland, CIO, Tracy Johnson, CFO, and Jeff McTate, Head of Canadian Originations and Global Syndications. Our Q3 results were highlighted by stable cash flows and dividends in spite of reduced transaction volume due to volatility in the commercial real estate markets. However, the latter part of Q3 and the first part of Q4 have seen stabilization in the commercial real estate environment generally. with a number of sectors showing signs of price stability and improvement. We're very pleased to report that in spite of overall market activity remaining muted, we have been increasing the overall portfolio of loan investments in each of the first three quarters of 2024. We remain optimistic that additional rate cuts will strengthen market conditions and drive increased financing opportunities, which our business supports. Looking forward, our expectation is that commercial real estate transaction volumes will continue to revert towards historical trends in 2025. With this backdrop, we reported solid financial results in Q3. Net investment income was $25.4 million. Q3 net income was $14.1 million. And we generated a distributable income of $0.18 per share and a payout ratio of 95%. At $8.42 per share, our current book value is well above the weighted average trading price in Q3. At the same time, our team is effectively managing the remaining exposure to stage loans. The improved environment will add a tailwind as we work to resolve these situations and redeploy this capital. Lastly, I will highlight that we continue to deliver on our core objective of generating attractive risk-adjusted yield. As rates decrease further, we expect to see a widening spread between our dividend yield and other fixed income alternatives, such as GICs, magnifying the appeal of TF relative to these options. Of note, the spread between the TF dividend and the tiered GOC yield, the benchmark we have historically used, is now approximately 5.3%. I'll ask Scott to take over for the portfolio review. Scott?

Thanks, Larry. Good afternoon. I'll comment on the portfolio metrics and the progress with Stage 2 and Stage 3 loans, and I'll ask Jeff to comment on the Originations activity and lending environments. Looking at the portfolio KPIs, most were stable relative to recent periods and consistent with historical averages. At quarter end, 83.2% 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 60%. I will note this is up from 52% in Q2 as new advances in Q3 were all in multi-residential real estate assets. The portfolio remains conservatively invested. First, mortgages represented 87.1% of the portfolio. As expected, we have seen this percentage trend upward towards 90%. Our weighted average LTV for Q3 is up slightly from Q2 to 63.8%. As the market stabilizes, we anticipate value growth. We expect LTVs on new originations to increase back to historical levels, which will bring this average higher in the coming quarters. The portfolio's weighted average interest rate, or WARE, was 9.3%, down from 9.8% in Q2 and 9.9% in Q3 last year. The decrease is reflective of higher interest rate loans have been repaying in this period, as well as the Bank of Canada's 75% policy rate decrease from June through to September of this year. Lastly, filling rate loans represented 86% of the portfolio at quarter end, the vast majority of which have rate floors. Half of these mortgages are now at their interest rate floors. In terms of the asset allocation by region, there were no other major shifts to highlight, with approximately 94% of the capital invested in Ontario, BC, Quebec, and Alberta, and focused on urban markets. From an asset management perspective, we continue to pursue resolution of our Stage 2 and Stage 3 loans. There's more detailed disclosure in our MD&A, so I will comment on the main developments in the period. There were no new stage loans added since Q2. However, there were movements within the stages. In Stage 2, the previously reported Calgary and Vancouver loans are stable, with no real material updates to discuss at this time. In terms of key developments on other assets, we have roughly $43 million of exposure on two loans related to industrial development sites in the GTA. As we disclosed in Q2, there was a dispute between the borrower and their general contractor due to cost overruns on a development that was unrelated to the Timber Creek loans. The issue has since been settled, and a new GC will be brought in to commence construction of an industrial building on our primary site. We expect to be repaid in full on both loans post the sale of the completed project. On this exposure, the first loan remains in Stage 2 as interest will be brought current by construction advances, while our second loan is moving to Stage 3 as interest will accrue and not be brought current until sales proceeds become available. During the quarter, we also had some smaller loans advance from Stage 2 to Stage 3. These include a $12 million loan on a residential development site in downtown Toronto. As we discussed in Q2, this is a very well-located site that the borrower has listed for sale. We signed a forbearance agreement with the borrower to allow the existing sales process to proceed as we believe it is the most efficient path to repayment. We are confident in the value of the underlying collateral and expect to see the asset under contract to sell by the end of Q4. We also moved the small $3 million loan to Stage 3. In this case, the borrower is working toward a purchase offer in the near term, which is also expected to close in Q4. Finally, I will highlight that $4.2 million of remaining exposure on condo inventory in Edmonton was transferred from Stage 3 to real estate inventory. This project is now nearly resolved, with full recovery of our remaining capital expected through sales of the final 13 units. As a final update, our retirement facility in Montreal that is in real estate held for sale is currently in active discussions to be sold. We are negotiating a PSA that would see full recovery of our exposure potentially before year end. We are fairly confident of this moving forward, but we do not have a firm deal at this time. In summary, we continue to make good headway on these loans and remain confident that they will be resolved in due course. We look forward to redeploying this capital into new loans in our core asset types, such as multi-residential and industrial, where we see positive long-term market drivers. On that note, I'll ask Jeff to comment on the transaction activity in the portfolio. Jeff.