TRUST ▪ INSIGHT ▪ VISION T ERRA F IRMA C APITAL C ORPORATION September 2019 Private & Confidential 0
F ORWARD -L OOKING S TATEMENTS • This presentation contains certain statements that may be “forward - looking statements.” All statements in this document, other than statements of historical fact, that address events or developments that Terra Firma Capital Corporation (“the Company” or “Terra Firma”) expects to occur, are forward-looking statements. Forward-looking statements are statements that are not historical facts and may be, identified by the words “expects,” “plans,” “anticipates,” “believes,” “intends,” “estimates,” “projects,” “potential” and similar expressions, or that events or conditions “will,” “would,” “may,” “could” or “should” occur. • Although the Company believes the expectations expressed in such forward-looking statements are based upon reasonable assumptions, such statements are not guarantees of future performance and actual results may differ materially from those in the forward- looking statements. Factors that could cause the actual results to differ materially from those in forward- looking statements include, failure to successfully negotiate or subsequently close transactions, adverse results from mortgage investments and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and actual results may differ materially from those projected in the forward-looking statements. Forward-looking statements are based on the beliefs, estimates and opinions of the Company's management on the date the statements are made. The Company undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates or opinions, or other factors, change. 1
C OMPANY B ACKGROUND Ticker Symbol TSXV:TII Terra Firma is a real estate finance company Share Price (August 27, 2019) C$0.55 that offers: Shares issued and 55.9 million • Borrowers - debt and equity solutions both in outstanding basic (Q2 2019) the U.S. and Canada; and 52-week Trading Range C$0.43-C$0.65 Total assets (Q2 2019) US$135 million • Investors - the opportunity to participate in these investments and earn fixed income in FY 2018 EPS US$0.03/C$0.05 a tax efficient manner typically on a monthly basis Q2 2019 EPS US$0.01/C$0.02 Book Value/Share C$0.90 Basic (Q2 2019) Dividend (Annual) C$0.02 Insider ownership ~30.3% 2
R EAL E STATE C APITAL P ROVIDER Core Focus • TFCC acts as principal lender (not broker) • Primarily senior debt positions • Targets high growth urban and suburban markets both in the U.S. and Canada • Quality commercial and residential assets with a focus on land and project finance • Repeat borrowers • Less focus on income producing properties 3
I NVESTMENT A CTIVITY TFCC has funded US$567mm of real estate loans and investments in 124 transactions TFCC has raised US$422mm from investors 4
C URRENT P ORTFOLIO B REAKDOWN – U PDATE US Investments Vs. Canadian 1st Mortgage Loans Vs. 2nd Investments Mortgage Loans Vs. Other 7% 11% 8% 82% 92% 1st Mortgage & Land Banking 2nd Mortgage United States Canada Other 5
G EOGRAPHICAL P ORTFOLIO B REAKDOWN Canadian Investments Vs. U.S. Investments 100.0% 90.0% 92% 86% 80.0% 70.0% 63.1% 60.0% 60.2% 55.6% 50.0% 44.4% 40.0% 39.8% 36.9% 30.0% 20.0% 14% 10.0% 8% 0.0% 2015 2016 2017 2018 Q2 2019 CAN % US % 6
I NVESTMENT P ORTFOLIO Total Investment Portfolio in US Dollars (excludes Senior A tranches held by financial institutions) $140,000,000 $130,708,000 $126,294,000 $120,000,000 $109,547,000 $96,157,000 $100,000,000 $73,998,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 2015 2016 2017 2018 Q2 2019 Investment portfolio includes all Loan & Mortgages Investments, Deposit, Investment Property, Land Under Development, Finance Leases, Investment in Associates and Portfolio Investments 7
N ET I NCOME Net Income ($US) $4.0M $3.5M $3.5M $3.0M $2.8M $2.5M $2.2M $2.0M $1.8M $1.6M $1.5M $1.5M $1.0M $500.0K $0.0K 2013 2014 2015 2016 2017 2018 8
U.S. First Mortgage Lending Platform Sample Financing Structure Equity 25% T • TFCC originates total First F Mortgage loan of 75% LTV at 12% Up to 90% p.a.+ 2% fee C Syndication • TFCC will then syndicate the First C Property Mortgage up to 90% retail investors First Mortgage Value • The spread to the investor ranges 75% LTV from 2% to 3% @ 12% p.a. • The syndication has no recourse to TFCC • Syndication market offers TFCC flexibility in capital allocation • Some syndications are in the form of Senior A tranches Overall IRR before syndication ~12% including fee (2 year term) Overall IRR after syndication is 20% + including fee (2 year term) 9
S IMPLIFIED L OOK A T B USINESS M ODEL Capital Source Spread Amount Income Range Syndicate Investors 2% to 3% US$69MM US$1.4MM US$2.1MM • As at Q2 2019 Texas Capital 5% to 6% US$35MM US$1.8MM US$2.1MM • Fully Drawn Invested Equity 11% to 13% US$39MM US$4.3MM US$5.1MM • Fully Invested Total: US$7.5MM US$9.3MM G & A (2018) US$3MM Note: Current corporate debt facility is not included as a capital source that earns a spread. While the spread is approximately 1% to 2%, the offset of the cost of carrying cash balances makes the income immaterial. This debt facility is primarily used to warehouse transactions and facilitate sponsor capital for the spreads listed above. 10
L EVERAGE DEBT TO EQUITY RATIO Amount as at June 30, 2019 Total Debt $ 88,425,000 Less: Loan and Mortgage Syndications $ (69,223,000) Adjusted Total Debt $ 19,202,000 Shareholders' Equity $ 38,225,000 Debt to Equity (1) 2.31 : 1.00 Adjusted Debt to Equity (1) 0.50 : 1.00 (1) Total debt, adjusted total debt, debt to equity and adjusted debt to equity are non-IFRS Measures. • The debt to equity ratio, when subtracting the Loan and Mortgage Syndications from the debt (required to be including by IFRS), more accurately represents the Company’s risk related to leverage. • The Company has no risk related to recourse or subordination from Loan and Mortgage Syndications 11
O PERATING M ARGIN Q2 2019 Revenue $ 3,957,000 Less: Interest Earned on Loan and Mortgage Syndications $ (1,575,000) Adjusted Revenue (1) $ 2,382,000 Expenses $ 2,779,000 Less: Interest on Loan and Mortgage Syndications $ (1,575,000) Adjusted Expenses (1) $ 1,204,000 Income from Operations before Income Taxes $ 1,178,000 Operating Margin (1) 49.5% (1) Adjusted revenue, adjusted expenses and operating margin are non-IFRS Measures. • The operating margin, when subtracting the amounts earned and paid to syndicate investors (required to be included by IFRS), more accurately represents the Company’s profitability. • The Company has no entitlement or related payment obligations to the syndicate investors’ income from loans and investments other 12 than as agent
Q2 2019 S UMMARY • Revenue and earnings were up • 6 transactions closed in Q2 2019 and 1 transaction closed in early Q3 2019 for a combined total of $57MM of originations. • Pipeline and loan originations in the US remain strong. TFCC continues to see opportunity for growth and expansion in the US. • $33.4MM of loans were fully or partially repaid over the quarter. • With a $9MM loan fully funded subsequent to the end of Q2 2019 and $40MM of unfunded commitments, the investment portfolio is poised for growth through to the end of 2019 • AUM has increased by 11% from $176 million $195 million over the first half of the Year. 13
US O PPORTUNITY • TFCC has originated approximately US$310MM of transactions since commencing its US expansion 4 years ago. Repayments of approximately US$100MM have been received on those transactions. The company continues to build on its US track record of success and now has 92% of its investments in the US. • Continued Proven strength in TFCC targeted markets • Significant growth opportunities – banks still not providing adequate support for development • Less competition = outsized risk adjusted returns • Diversification – TFCC currently active in 8 markets in the US • Higher Yields for the same or better risk profile than in Canada 14
W HY THE FUTURE LOOKS BRIGHT • The strong US housing market continues to grow 15
S YNDICATION A CTIVITIES Terra Firma has developed a robust syndication platform • Raised over US$420MM in third party capital from high net worth individuals • TFCC generally funds loans from its balance sheet and recycles it with syndications with accredited investors • TFCC generally retains 10% to 20% of the deal and acts as Mortgage Administrator • Terra Firma earns an additional 200bp to 300bp spread plus the commitment fee • No recourse to Terra Firma • In house function – no fees or commissions paid 16
S YNDICATION A CTIVITIES • Total syndications outstanding Q2 2019 were US$69.2MM compared to US$67.3MM Q2 2018, representing 2.9% growth year over year • Syndication demand remains strong • Successful syndication of every offering to date • Implemented new digital syndication platform which will streamline our syndication process and reporting process 17
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