Third Quarter Net Income Per Diluted Share
of $0.32
Third Quarter Core Earnings Per Diluted
Share of $0.33
Expect to Declare One-Time Year End Cash
Distribution to Shareholders in December
Tremont Mortgage Trust (Nasdaq: TRMT) today announced financial
results for the quarter and nine months ended September 30,
2020.
David Blackman, President and Chief Executive Officer of TRMT,
made the following statement:
"We continued to closely manage our existing
investments and actively engage with loan sponsors during the third
quarter. While the pandemic-induced economic challenges present an
ongoing risk to many borrowers, all of our investments remain
current. The relationship with our repurchase facility lender
remains strong, and in October we extended this facility with
Citibank by one year to November 2022. At the same time, the
proactive measures we have taken this year to preserve capital have
resulted in increased liquidity. Looking ahead to the fourth
quarter, in December we expect to declare a one-time cash
distribution to shareholders in order to pay out sufficient taxable
income to maintain our REIT tax status. At this time, we cannot
comment on the amount of any distribution, but our Board of
Trustees will determine this distribution based upon our forecasted
full year financial performance as compared to our distributions
paid through 2020 year-end."
Results for the Quarter Ended September 30, 2020:
For the quarter ended September 30, 2020, net income was $2.6
million, or $0.32 per diluted share, compared to net income of $2.1
million, or $0.25 per diluted share, for the same quarter last
year. Core Earnings for the quarter ended September 30, 2020 were
$2.7 million, or $0.33 per diluted share, compared to Core Earnings
of $2.1 million, or $0.26 per diluted share, for the same quarter
last year.
For the quarter ended September 30, 2020, TRMT generated
interest income from investments of $4.6 million and incurred
interest and related expenses of $1.2 million, which resulted in
$3.4 million of income from investments, net. For the same quarter
last year, TRMT generated interest income from investments of $5.0
million, including $0.9 million of deferred fees recognized by TRMT
on two loans that were repaid during the quarter ended September
30, 2019, as well as a prepayment premium earned on one of these
repaid loans. TRMT incurred interest and related expenses of $2.0
million for that 2019 period, which resulted in $3.0 million of
income from investments, net.
Results for the Nine Months Ended September 30, 2020:
For the nine months ended September 30, 2020, net income was
$6.7 million, or $0.81 per diluted share, compared to net income of
$3.5 million, or $0.63 per diluted share, for the same period last
year. Core Earnings for the nine months ended September 30, 2020
were $6.8 million, or $0.84 per diluted share, compared to Core
Earnings of $3.8 million, or $0.69 per diluted share, for the same
period last year.
For the nine months ended September 30, 2020, TRMT generated
interest income from investments of $13.4 million and incurred
interest and related expenses of $4.4 million, which resulted in
$9.0 million of income from investments, net. For the same period
last year, TRMT generated interest income from investments of $11.9
million, including $0.9 million of deferred fees recognized by TRMT
on two loans that were repaid during the quarter ended September
30, 2019, as well as a prepayment premium earned on one of these
repaid loans. TRMT incurred interest and related expenses of $5.6
million for that 2019 period, which resulted in $6.3 million of
income from investments, net.
Additional information and a reconciliation of net income
determined in accordance with U.S. generally accepted accounting
principles, or GAAP, to Core Earnings, a non-GAAP financial
measure, for the quarters and nine months ended September 30, 2020
and 2019, appear later in this press release.
Recent Investment Activities:
As of September 30, 2020, TRMT had approximately $294.0 million
in aggregate loan commitments, consisting of a diverse portfolio,
geographically and by property type, of 14 first mortgage whole
loans. As of November 2, 2020, all of TRMT's borrowers had paid
their debt service obligations owed and due to TRMT and none of the
loans included in TRMT's investment portfolio were in default.
In July 2020, the borrower under TRMT's loan related to a retail
property located in Coppell, TX sold a parcel of land that was a
part of the property securing the loan. The borrower used $2.1
million of the sale proceeds to repay part of the outstanding
principal balance under the loan which also reduced the committed
principal by the same amount and TRMT allowed the borrower to use
the remaining $0.1 million of sale proceeds to increase the reserve
for future debt service obligation payments owed to TRMT under the
loan.
In October 2020, the borrower under TRMT's loan related to a
retail property located in Paradise Valley, AZ exercised its right
and satisfied the applicable conditions to extend the maturity date
of the loan by one year to November 30, 2021 pursuant to the terms
of the loan agreement.
In November 2020, TRMT expects to execute an amendment to its
loan agreement with the borrower under TRMT's loan related to a
multifamily property located in Houston, TX which will extend the
maturity date of the loan by one year to November 10, 2021, subject
to the borrower funding an interest reserve of $0.5 million and
definitive documentation.
The impacts from the COVID-19 pandemic have negatively impacted
some of TRMT's borrowers’ business operations or tenants,
particularly in the cases of TRMT's retail and hospitality
collateral, which are the types of properties that have been most
negatively impacted by the pandemic. TRMT expects those negative
impacts may continue and may apply to other borrowers and/or their
tenants. Therefore, certain of TRMT’s borrowers’ business plans
will likely take longer to execute than initially expected and
certain of TRMT’s borrowers may be unable to pay their debt service
obligations owed to TRMT as currently scheduled or at all. All of
the loans in TRMT’s portfolio are structured with risk mitigation
mechanisms, such as cash flow sweeps or interest reserves, to help
protect TRMT against investment losses. In addition, TRMT continues
to actively engage with its borrowers regarding their execution of
the business plan for the underlying collateral, among other
things.
Recent Financing Activities:
During the quarter ended September 30, 2020, Citibank, N.A., or
Citibank, advanced approximately $1.3 million to TRMT under its
master repurchase facility to fund advances made by TRMT to
borrowers on its loan commitments. In July 2020, TRMT repaid $1.4
million of outstanding principal under its master repurchase
facility using proceeds from the partial repayment of the Coppell,
TX loan.
As of September 30, 2020, TRMT had a $201.1 million aggregate
outstanding principal balance under its master repurchase facility.
In light of the impacts of the COVID-19 pandemic, TRMT continues to
actively engage with Citibank regarding its liquidity position and
the status of the loans in its portfolio that are financed under
its master repurchase facility. The agreement that governs TRMT's
master repurchase facility includes risk mitigation mechanisms,
including a cash flow sweep, which would allow Citibank to control
interest payments from TRMT's borrowers under its loans that are
financed under its master repurchase facility, and the ability to
accelerate dates of repurchase and institute margin calls which may
require TRMT to pay down balances associated with one or more of
its loans that are financed under its master repurchase facility.
As of November 2, 2020, TRMT believes that it was in compliance
with all covenants and other terms under its master repurchase
facility and, to date, Citibank has not utilized any such risk
mitigation mechanisms to date under the master repurchase
agreement.
In October 2020, TRMT amended the master repurchase agreement
to, among other things, extend the expiration date of its master
repurchase facility by one year to November 6, 2022, subject to
early termination as provided for in the master repurchase
agreement.
Distributions:
Beginning with the first quarter of 2020, TRMT reduced its
quarterly distribution rate on its common shares to $0.01 per share
in order to preserve its near term capital due to the economic
downturn and uncertainty as to future economic conditions from the
COVID-19 pandemic and its resulting impact on the U.S. economy.
On May 21, 2020 and August 20, 2020, TRMT paid a quarterly
distribution to common shareholders of record as of April 10, 2020
and July 27, 2020, respectively, of $0.01 per common share, or $0.1
million.
On October 15, 2020, TRMT declared a quarterly distribution of
$0.01 per common share, or approximately $0.1 million, payable to
shareholders of record on October 26, 2020.
TRMT’s Board of Trustees will continue to monitor TRMT’s
financial performance and economic outlook to determine a prudent
level for any subsequent quarterly distributions. In addition, TRMT
expects to declare in December 2020 and pay in January 2021 a
one-time cash distribution required to maintain TRMT’s
qualification for taxation as a real estate investment trust, or
REIT. The year-end distribution will be an amount that allows TRMT
to meet the requirement to pay out at least 90% of its REIT taxable
income for 2020.
Conference Call:
At 10:00 a.m. Eastern Time this morning, President and Chief
Executive Officer, David Blackman, and Chief Financial Officer and
Treasurer, Doug Lanois, will host a conference call to discuss
TRMT’s third quarter 2020 financial results. They will be joined by
Tom Lorenzini, who will assume his role as President of TRMT
effective January 1, 2021. The conference call telephone number is
(833) 366-1119. Participants calling from outside the United States
and Canada should dial (412) 902-6771. No pass code is necessary to
access the call from either number. Participants should dial in
about 15 minutes prior to the scheduled start of the call. A replay
of the conference call will be available through 11:59 p.m. on
Tuesday, November 10, 2020. To access the replay, dial (412)
317-0088. The replay pass code is 10148189.
A live audio webcast of the conference call will also be
available in a listen-only mode on TRMT’s website, which is located
at www.trmtreit.com. Participants wanting to access the webcast
should visit TRMT’s website about five minutes before the call. The
archived webcast will be available for replay on TRMT’s website
following the call for about one week. The transcription,
recording and retransmission in any way of TRMT’s third quarter
conference call are strictly prohibited without the prior written
consent of TRMT.
Supplemental Data:
A copy of TRMT’s Third Quarter 2020 Supplemental Operating and
Financial Data is available for download at TRMT’s website,
www.trmtreit.com. TRMT’s website is not incorporated as part of
this press release.
TRMT is a real estate finance company that focuses on
originating and investing in floating rate first mortgage whole
loans secured by middle market and transitional commercial real
estate. TRMT is managed by Tremont Realty Advisors LLC, an SEC
registered investment adviser and an indirect, majority owned
subsidiary of The RMR Group Inc. (Nasdaq: RMR), an alternative
asset management company that is headquartered in Newton, MA.
Non-GAAP Financial Measures:
TRMT presents Core Earnings, which is considered a “non-GAAP
financial measure” within the meaning of the applicable SEC rules.
Core Earnings does not represent net income or cash generated from
operating activities and should not be considered as an alternative
to net income determined in accordance with GAAP or an indication
of TRMT’s cash flows from operations determined in accordance with
GAAP, a measure of TRMT’s liquidity or operating performance or an
indication of funds available for TRMT’s cash needs. In addition,
TRMT’s methodology for calculating Core Earnings may differ from
the methodologies employed by other companies to calculate the same
or similar supplemental performance measures; therefore, TRMT’s
reported Core Earnings may not be comparable to the core earnings
as reported by other companies.
TRMT believes that Core Earnings provides meaningful information
to consider in addition to net income and cash flows from operating
activities determined in accordance with GAAP. This measure helps
TRMT to evaluate its performance excluding the effects of certain
transactions and GAAP adjustments that TRMT believes are not
necessarily indicative of TRMT’s current loan portfolio and
operations. In addition, Core Earnings is used in determining the
amount of base management and incentive fees payable by TRMT to
TRMT’s manager under TRMT’s management agreement.
Please see the pages attached hereto for a more detailed
statement of TRMT’s operating results and financial condition and
for an explanation of TRMT’s calculation of Core Earnings and a
reconciliation of net income determined in accordance with GAAP to
that amount.
TREMONT MORTGAGE TRUST
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(amounts in thousands, except
per share data)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
INCOME FROM INVESTMENTS:
Interest income from investments
$
4,632
$
4,959
$
13,412
$
11,872
Less: interest and related expenses
(1,242)
(1,992)
(4,367)
(5,572)
Income from investments, net
3,390
2,967
9,045
6,300
OTHER EXPENSES:
General and administrative expenses
576
541
1,640
1,662
Reimbursement of shared services
expenses
189
370
752
1,110
Total expenses (1)
765
911
2,392
2,772
Net income
$
2,625
$
2,056
$
6,653
$
3,528
Weighted average common shares outstanding
- basic and diluted
8,190
8,156
8,179
5,583
Net income per common share - basic and
diluted
$
0.32
$
0.25
$
0.81
$
0.63
(1)
TRMT’s manager has waived any base
management or incentive fees otherwise due and payable by TRMT
under its management agreement for and through the periods ending
December 31, 2020. If TRMT's manager had not waived these base
management and incentive fees, TRMT would have recognized $332 and
$322 of base management fees for the three months ended September
30, 2020 and 2019, respectively, $975 and $812 of base management
fees for the nine months ended September 30, 2020 and 2019,
respectively, and $129 and $164 of incentive fees for the three and
nine months ended September 30, 2020, respectively. No incentive
fees would have been paid or payable by TRMT for either of the
three or nine months ended September 30, 2019.
TREMONT MORTGAGE TRUST
CALCULATION AND RECONCILIATION
OF CORE EARNINGS
(amounts in thousands, except
per share data)
(unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Reconciliation of Net Income to Core
Earnings (1):
Net income
$
2,625
$
2,056
$
6,653
$
3,528
Non-cash equity compensation expense
76
80
189
300
Core earnings
$
2,701
$
2,136
$
6,842
$
3,828
Weighted average common shares outstanding
- basic and diluted
8,190
8,156
8,179
5,583
Core earnings per common share - basic and
diluted
$
0.33
$
0.26
$
0.84
$
0.69
(1)
TRMT calculates Core Earnings as net
income, computed in accordance with GAAP, including realized losses
not otherwise included in net income determined in accordance with
GAAP, and excluding: (a) the incentive fees earned by TRMT’s
manager (if any); (b) depreciation and amortization (if any); (c)
non-cash equity compensation expense; (d) unrealized gains, losses
and other similar non-cash items that are included in net income
for the period of the calculation (regardless of whether such items
are included in or deducted from net income or in other
comprehensive income under GAAP) (if any); and (e) one-time events
pursuant to changes in GAAP and certain non-cash items (if
any).
TREMONT MORTGAGE TRUST
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except
per share data)
(unaudited)
September 30,
December 31,
2020
2019
ASSETS
Cash and cash equivalents
$
11,036
$
8,732
Restricted cash
—
143
Loans held for investment, net
280,219
242,078
Accrued interest receivable
946
755
Prepaid expenses and other assets
40
221
Total assets
$
292,241
$
251,929
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable, accrued liabilities and
deposits
$
658
$
1,011
Master repurchase facility, net
200,501
164,694
Due to related persons
19
3
Total liabilities
201,178
165,708
Commitments and contingencies
Shareholders' equity:
Common shares of beneficial interest,
$0.01 par value per share; 25,000,000 shares authorized; 8,303,254
and 8,239,610 shares issued and outstanding, respectively
83
82
Additional paid in capital
89,035
88,869
Cumulative net income
8,590
1,937
Cumulative distributions
(6,645)
(4,667)
Total shareholders’ equity
91,063
86,221
Total liabilities and shareholders'
equity
$
292,241
$
251,929
Warning Concerning
Forward-Looking Statements
This press release contains statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and other securities laws.
Also, whenever TRMT uses words such as “believe”, “expect”,
“anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and
negatives or derivatives of these or similar expressions, TRMT is
making forward-looking statements. These forward-looking statements
are based upon TRMT’s present intent, beliefs or expectations, but
forward-looking statements are not guaranteed to occur and may not
occur. Actual results may differ materially from those contained in
or implied by TRMT’s forward-looking statements. Forward-looking
statements involve known and unknown risks, uncertainties and other
factors, some of which are beyond TRMT’s control. For example:
- Mr. Blackman states that while the pandemic-induced economic
challenges present an ongoing risk to many borrowers, all of TRMT's
investments remain current. This statement may imply that TRMT's
investments will continue to remain current. However, the COVID-19
pandemic and resulting economic slowdown has negatively impacted
TRMT's borrowers and those borrowers' tenants. If these conditions
continue, worsen or do not sufficiently improve, TRMT's borrowers
may not be able to remain current on their obligations owed and due
to TRMT. TRMT's actions to actively manage its investments to
minimize the impact of the economic challenges imposed by the
COVID-19 pandemic may not succeed or any success it may have may
not help TRMT avoid realizing negative impacts resulting from
economic challenges imposed by the COVID-19 pandemic, including
with respect to its liquidity and financial results.
- Mr. Blackman also states that the proactive measures TRMT has
taken this year to preserve capital have resulted in increased
liquidity. This statement may imply that TRMT's actions to preserve
its capital will be sufficient to meet TRMT's future cash flow
needs. However, the impacts of the COVID-19 pandemic are affecting
all parts of the U.S. economy and may result in TRMT's borrowers
being unable to pay their obligations owed and due to TRMT.
Further, the underlying collateral that secures TRMT’s investments
may decline or not increase, which may give rise to TRMT’s lender,
Citibank, making margin calls on amounts outstanding under TRMT’s
master repurchase facility. In addition, in order to comply with
the applicable REIT tax requirements, TRMT expects to declare a
one-time distribution in December 2020 that would be payable in
January 2021. As a result, TRMT may not succeed in preserving
sufficient capital or maintaining its current liquidity.
- This press release states that TRMT expects to execute an
amendment to its loan agreement with the borrower under TRMT's loan
related to a multifamily property located in Houston, TX to extend
the maturity date of the loan by one year to November 10, 2021.
This may imply that the amendment will be executed. However, this
amendment is subject to conditions. These conditions may not be
satisfied and this amendment may not occur, may be delayed or the
terms may change.
- This press release references TRMT’s active engagement with
Citibank and TRMT’s borrowers and that its relationship with
Citibank remains strong. These statements may imply that those
engagements will enable TRMT to maximize its receipt of interest
and principal on its investments and minimize any actions that
Citibank may take if TRMT’s borrowers default or the value of any
of the collateral underlying TRMT’s loans declines below prescribed
levels. However, these actions may not succeed, or any success they
may have may not prevent TRMT from realizing negative impacts from
the current business conditions, including with respect to its
liquidity and financial results. Further, despite TRMT’s active
engagement with Citibank, Citibank may ultimately determine to
utilize one or more of the risk mitigation mechanisms available to
it under the master repurchase agreement.
- This press release states that all the loans in TRMT’s
portfolio are structured with risk mitigation mechanisms, such as
cash flow sweeps or interest reserves, to help protect TRMT against
investment losses. However, these mechanisms may not adequately
cover the debt service amount and will likely not be able to fully
fund the debt service if the tenants’ businesses fail or they
default on their debt service obligations owed to TRMT.
- This press release states that beginning with the first quarter
of 2020, TRMT reduced its quarterly distribution rate on its common
shares to $0.01 per share in order to preserve its near term
capital due to the economic downturn and uncertainty as to future
economic conditions from the COVID-19 pandemic and its resulting
impact on the U.S. economy, and that TRMT’s Board of Trustees will
continue to monitor TRMT’s financial performance and economic
outlook to determine a prudent level for any subsequent quarterly
distributions. An implication of these statements may be that TRMT
will increase its quarterly distributions in a future period.
However, TRMT may not resume paying quarterly distributions at
historic levels or at amounts greater than the currently reduced
rate at all in the near term, and the reduced rate may extend for
an indefinite period and could be discontinued. Moreover, capital
market conditions may not improve or TRMT’s own financial
circumstances may change so that it becomes unable or unwilling to
increase its quarterly distributions. Also, TRMT’s historical rate
of distributions on its common shares may be changed because of
changes in TRMT’s earnings, liquidity, financial leverage or other
circumstances. Further, this press release states that TRMT expects
to declare in December 2020 and pay in January 2021 a one-time cash
distribution required to maintain TRMT’s qualification for taxation
as a REIT and that the distribution will be an amount that allows
TRMT to meet the requirement to pay out at least 90% of TRMT's REIT
taxable income for 2020. TRMT’s distributions and distribution rate
are set from time to time by its Board of Trustees. The timing,
amount, and form of future distributions will be determined at the
discretion of TRMT’s Board of Trustees and will depend upon various
factors that its Board of Trustees deems relevant, including TRMT’s
historical and projected income, its Core Earnings, the
then-current and expected needs and availability of cash to pay its
obligations and fund its investments, distributions which may be
required to be paid to maintain TRMT’s qualification for taxation
as a REIT, limitations on distributions contained in TRMT’s
financing arrangements and other factors deemed relevant by TRMT’s
Board of Trustees, in its discretion.
The information contained in TRMT’s filings with the SEC,
including under “Risk Factors” in TRMT’s periodic reports, or
incorporated therein, identifies other important factors that could
cause TRMT’s actual results to differ materially from those stated
in or implied by TRMT’s forward-looking statements. TRMT’s filings
with the SEC are available on the SEC’s website at www.sec.gov.
You should not place undue reliance upon forward-looking
statements.
Except as required by law, TRMT does not intend to update or
change any forward-looking statements as a result of new
information, future events or otherwise.
A Maryland Real Estate Investment Trust with
transferable shares of beneficial interest listed on the Nasdaq. No
shareholder, Trustee or officer is personally liable for any act or
obligation of the Trust.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201103005118/en/
Kevin Barry Manager, Investor Relations (617) 796-7651
Tremont Mortgage (NASDAQ:TRMT)
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