RMIF Unitholder Update – May 2024

Since its inception, Romspen has focused on preserving investor capital and generating consistent monthly distributions. Our core strategy is to fund first mortgage loans secured by a diversified portfolio of real estate assets, and, for over five decades, through different market conditions, we have delivered steady returns uncorrelated to other asset classes. Driving this record of success has been our deep expertise in mortgage lending, our trusted reputation with commercial real estate borrowers, and our commitment to prudent risk management.

As many of you know, economic conditions over the past few years have impacted real estate markets in North America. Lingering post-pandemic effects in certain real estate sectors combined with the rapid rise in interest rates in late 2022 continue to constrain market liquidity, financings, and transaction activity. These challenges have affected most real estate market participants, including our flagship fund, the Romspen Mortgage Investment Fund (RMIF).

To facilitate the Fund’s ability to further progress development of several high-value assets and thereby generate liquidity, Romspen has extended its primary credit facility, and closed on $225 million in additional debt financing. This remains in line with the Fund’s historical credit facility levels of approximately 10% of total assets, while remaining well within the Fund’s 35% of total assets lending facility guidelines.

While continuing to look at strategies to enhance liquidity and long-term value, we remain focused on the current portfolio, and monetizing certain high-priority assets, which we have discussed in previous communications. The appraisals of certain underlying properties conducted as part of our 2023 audit resulted in a deficit between the Fund’s accounting under International Financial Reporting Standards and the third-party appraisers’ recent value determinations. Based on this updated valuation information and consistent with our policy of transparency with unitholders, the Fund has increased its loan loss reserves to reflect this difference. As a result, the Fund’s net asset value (“NAV”) will decrease by $0.31 per unit, or 3.23%, retroactive to December 31, 2023. This will represent an unrealized accounting loss on the Fund’s balance sheet until the corresponding underlying properties are sold. We also note that NAV has risen by 1.04% between year end and April 30, 2024.

The adjusted NAV as of year-end will necessitate some administrative corrections, including an adjustment for those unitholders on the distribution reinvestment plan. Over the next few weeks, transactions that have been impacted by the NAV adjustment will be revised, and unitholders will be fully informed as to the nature of these changes.

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