Update on Mortgage Portfolio
The financial information presented below is given as of July 31, 2026, and is management prepared and presented on an unaudited and unreviewed basis.
The portfolio consists of 26 remaining mortgage files totaling approximately $45.4M of principal outstanding, excluding any internally recorded provisions for loss and additional fees and interest that may or may not be collectible.
The 26 files are segmented as follows:
- 4 Residential mortgages totaling approximately $4.1M of outstanding principal;
- 15 Construction mortgages totaling approximately $24.1M of outstanding principal;
- 3 Vacant Land mortgages totaling approximately $1.3M of outstanding principal;
- 4 Residential Development mortgages totaling approximately $15.8M of outstanding principal, which are all related to the legacy large development property and are all currently in a court-appointed receivership.
File concentration is summarized as follows:
- Top 5 files by outstanding principal represent roughly 48% of the portfolio balance;
- Top 10 files by outstanding principal represent roughly 71% of the portfolio balance;
- Top 15 files by outstanding principal represent roughly 87% of the portfolio balance; and
- Top 20 files by outstanding principal represent roughly 97% of the portfolio balance
Current actions being taken on the remaining 26 files are broken down as follows:
- 26 files ($29.6M) are in Power of Sale; however, are conditionally sold ($0.5M) and we are otherwise awaiting possession of 5 properties ($4.6M), all of which may individually yield some full payouts, but are expected to incur losses overall; and
- 4 files (Residential Development loan – $15.8M) are in Power of Sale but are in a court-appointed receivership process, and the secured properties are actively being marketed for sale, which are expected to incur losses.
Readers are cautioned that the principal amount of a mortgage does not reflect its current fair value for accounting purposes, and may not be indicative of the value that may be realized on the mortgage by the Company. There can be no assurance that the Company will recover any amounts owing under any mortgage in its portfolio, or that any amounts actually recovered will be equal to its outstanding principal amount.
Given the current status of the majority of the Company’s mortgage loans, recovery of amounts owing is expected to be derived primarily through enforcement proceedings and the sale of the underlying secured properties, including through Power of Sale and the currently active court-appointed receivership process. Accordingly, the collectability of these mortgage loans is largely dependent on the estimated realizable value of the underlying secured properties, the timing of possession and sale, and the costs associated with enforcement and disposition.
Realizable value of a property is influenced by a number of factors, including prevailing real estate market conditions, property-specific considerations (such as location, condition, completion status for construction projects, and marketability), and broader economic conditions. In addition, delays in obtaining possession, carrying costs (including property taxes, insurance, utilities, and maintenance), legal and receivership costs, and further market softening may negatively impact net recovery. Where the estimated net proceeds from sale are less than the outstanding principal, interest, and enforcement costs, losses may be realized. As a result, there is inherent uncertainty regarding the ultimate recovery on these loans, and actual losses may differ, potentially materially, from current estimates.
Management has identified certain mortgages as likely to result in credit losses. In accordance with prudent accounting practices, the Company has recorded provisions and set aside reserves in respect of such expected credit losses. Such reserves have been excluded from amounts determined to be available for distribution to shareholders pursuant to share redemptions and other returns of capital made pursuant to the Company’s orderly wind-up plan. To the extent expected credit loss reserves exceed the actual losses incurred by the Company in connection with the liquidation of its mortgage portfolio, excess reserve amounts are expected to be available for distribution to shareholders, subject to applicable corporate laws. Readers are cautioned that actual losses incurred in connection with the liquidation of the Company’s portfolio may be substantial, and could materially exceed the expected credit losses.
Source : Frontenac Mortgage Investment Corporation
