The Trustees of the Romspen Mortgage Investment Fund (RMIF) have announced a distribution of $0.04 per unit and a net asset value of $9.767 per unit for the month of August 2022, payable September 15, 2022.
We wish to update you on how the Fund’s operations have been impacted by current economic conditions, most notably the recent significant increases in interest rates spurred by central banks’ reactions to inflationary pressures.
The Fund’s liquidity is largely dependent on active and efficient commercial real estate markets, and on borrowers’ ability to refinance loans by accessing more permanent institutional debt. The rapid and substantial rise in interest rates, along with the lingering effects of the pandemic, has considerably dampened real estate transaction and refinancing activity, as participants are increasingly taking a wait-and-see approach and postponing purchases, and banks and other institutional lenders seek to pass on rate increases to borrowers. While the real estate values underpinning the Fund’s portfolio remain strong, these market circumstances have disrupted the Fund’s anticipated timetable for borrower loan repayments and collateral realizations.
We do not expect the Fund to incur any losses, as it is well-insulated to these transitory market conditions. Rather, the impact will be on attaining the Trustees’ established goal for the year of generating liquidity and income in order to further the Fund’s objectives. The immediate impacts on the Fund are a reduction in the level of unitholder distributions and increases to loan loss provisions. There was a lower-than-average distribution to investors last month, as there will be for September. In fact, we anticipate that Fund distributions will likely be under historical norms until we are able to work through these temporary market-driven constraints.
We are keenly aware that these short-term results fall short of your expectations. They fall short of ours, as well. Please be assured that managing through the challenges caused by these economic dislocations is our highest priority. Having successfully managed through similar disruptions in the past, we know that patience is a crucial virtue when overseeing mortgage and real estate assets during tough market conditions. Our experience and size enable us to play the “long game” — staying resolute in the face of adversity, avoiding being a forced seller, and recognizing that given time, real estate is a forgiving asset class. Indeed, over the long term, the Fund remains a steady performer.
The economy has changed dramatically. Our approach to mortgage investing has not. The Fund’s portfolio is carefully underwritten to ensure a margin of safety, and is well diversified across regions, markets, and asset classes. We believe the Fund is positioned to weather the current turbulence and remain steadfast in our commitment to preserving your capital.
We want to thank you for your patience and understanding as we continue to work diligently in our stewardship of the Fund. As always, we welcome your questions and comments. You can reach us at 416-966-1100 or InvestorRelations@romspen.com.
. The Trustees of the Romspen Mortgage Investment Fund