Opportunities Continue to Build as Mortgage Portfolio Strengthens
Calgary, Alberta--(Newsfile Corp. - November 29, 2019) - Builders Capital Mortgage Corp. (TSXV: BCF) ("Builders Capital" or "the Company") today released third quarter financial results for the period ending September 30, 2019.
- Consistent with our targeted distribution, dividends paid to Class A public shareholders in the first quarter were $0.2016 per share, representing an 8% annual return on the original $10.00 issue price.
- At quarter-end, our debt-to-equity ratio was an extremely conservative 2.3%.
- Assets held for sale were reduced by $527K during the third quarter, and a further $287k subsequent to the quarter-end.
Sandy Loutitt, President of Builders Capital, commented: "When real estate markets enter periods of weakness, our loan-to-value ratios and potential default rates go up. In response to the decline experienced in some of our primary housing markets, we have, in recent periods, pursued a program in which we have been very conservative in our lending practices. The effect of this program has been the recovery of our loan-to-value ratios to sustainable and positive levels. We are now witnessing an improvement in those markets and look forward to and are redeploying our capital into more profitable loans. Of course, we are very pleased that our share structure has operated as intended in consistently providing 8% per year dividends to our Class A shareholders through some difficult times. We believe our unique structure will continue to set Builders Capital apart from and above most other industry competitors."
Real estate markets in our operating regions have suffered a sustained downturn in recent years, with substantial declines in home selling prices and sales volumes, as well as increased marketing times. While our core markets are now beginning to stabilize, the lengthy downturn has impacted the short-term construction lending market in which we specialize, with lingering effects on our business and results.
Through this challenging market environment, our first priority has been to preserve the investment capital with which we have been entrusted. We have focused on effectively managing problem loans and foreclosures to reduce our risk. We have also underwritten new loans more conservatively than we would in healthier markets and this in turn has helped to reduce risk and improve the strength of our portfolio. We have also continued to reduce our portfolio of foreclosed properties, having sold four properties for $3.2 million over the past three quarters.
While Canadian housing starts and average house prices are expected to register a second consecutive year of decline in 2019, the Canada Mortgage and Housing Corporation's (CMHC) most recent Housing Market Outlook (published October 24, 2019) anticipates improvement in sales and prices over the next two years, supported by income and population growth. In our primary Calgary market, CHMC forecasts that strong population growth and a decrease in unsold homes inventory will result in new home construction improving in 2020 and 2021, following a slight decline in activity in 2019. In British Columbia, CMCH predicts sales and prices will begin to stabilize in 2020 and accelerate in 2021. While the recovery in price growth is expected to be modest in 2020, CMCH expects the BC market to achieve the second- highest rate of price growth after Ontario in 2021. Accordingly, we anticipate that opportunities to source quality projects with good builders in our core Alberta and BC markets will improve.
Q3 2019 FINANCIAL OVERVIEW
Three months ended September 30, 2019
Three months ended September 30,
|Total comprehensive income||261,441||563,880|
|Basic and diluted earnings per share||0.09||0.20|
|Cash dividends declared||491,261||542,343|
|Cash dividends declared per Class A share||0.2016||0.2016|
|Cash dividends declared per Class B share||0.0997||0.189|
A more detailed discussion of the Company's financial results can be found in Builders Capital's Third Quarter 2019 Management's Discussion and Analysis, which has been posted along with unaudited interim condensed financial statements for the quarter on the Company's website (www.builderscapital.ca) and filed on SEDAR (www.sedar.com).
About Builders Capital
Builders Capital is a mortgage lender providing short-term course-of-construction financing to builders of residential, wood-frame properties in Western Canada. The Company commenced active operations on December 12, 2013 on the closing of its initial public offering, whereupon it acquired a portfolio of mortgages from two predecessor companies.
Builders Capital's investment objective is to generate attractive returns, relative to risk, in order to provide stable and consistent distributions to shareholders while remaining focused on capital preservation and satisfying the criteria mandated for mortgage investment corporations ("MIC") as defined in the Income Tax Act.
As an MIC, Builders Capital is not subject to income tax provided that it distributes all of its taxable income as dividends to shareholders within 90 days of its December 31st year-end. Such dividends are generally treated by shareholders as interest income, so that each shareholder is in the same tax position as if their proportionate share of mortgage investments made by the company had been made directly by the shareholder.
This news release contains forward-looking statements within the meaning of applicable securities legislation, including statements with respect to management's beliefs, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "expect", "intent", "estimate", "anticipate", "believe", "should", "plans" or "continue" or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. These statements are not guarantees of future performance and are based on estimates and assumptions that are subject to risks and uncertainties which could cause actual results to differ materially from the forward-looking statements contained in this news release. These include, among other things, risks associated with mortgage lending, competition for mortgage lending, real estate values, interest rate fluctuations, environmental matters and the general economic environment. The company cautions that the foregoing list is not exhaustive, as other factors could adversely affect its results, performance or achievements. Readers are cautioned against undue reliance on any forward-looking statements. Although the forward-looking information contained in this news release is based upon what management believes are reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Except as required by applicable law, Builders Capital undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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