Fourth Quarter Net Income Per Diluted Share
of $0.26
Fourth Quarter Distributable Earnings Per
Diluted Share of $0.28
Plans to Reinstate Regular Quarterly
Distributions in April 2021
Tremont Mortgage Trust (Nasdaq: TRMT) today announced financial
results for the quarter ended December 31, 2020.
Thomas Lorenzini, President of TRMT, made the following
statement regarding the fourth quarter 2020 results:
“We reported solid fourth quarter and full
year 2020 results that reflect our proactive measures over the past
year to preserve liquidity, enhance the stability of our balance
sheet and actively manage our loans. During the fourth quarter our
portfolio's overall performance improved further, as we upgraded
the risk ratings of two loans based upon continued improvement of
the underlying collateral. We are also pleased that all of our
loans continue to remain current on debt service. Looking ahead,
given the performance of our portfolio, we plan to reinstate our
regular quarterly distribution and to announce the amount of the
new distribution in April 2021."
Results for the Quarter Ended December 31, 2020:
For the quarter ended December 31, 2020, net income was $2.2
million, or $0.26 per diluted share, compared to net income of $1.3
million, or $0.16 per diluted share, for the same quarter last
year. Distributable Earnings for the quarter ended December 31,
2020 were $2.3 million, or $0.28 per diluted share, compared to
Distributable Earnings of $1.4 million, or $0.17 per diluted share,
for the same quarter last year.
For the quarter ended December 31, 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 $3.6 million and
incurred interest and related expenses of $1.5 million, which
resulted in $2.1 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 Distributable Earnings for the quarters and
years ended December 31, 2020 and 2019, appear later in this press
release.
Recent Investment Activities:
As of December 31, 2020, TRMT had fully invested its available
capital, with approximately $293.9 million in aggregate loan
commitments, consisting of a diverse portfolio, geographically and
by property type, of 14 first mortgage whole loans and none of the
loans included in TRMT's investment portfolio were in default.
As previously reported, in October 2020, the borrower under
TRMT's loan secured by a retail property located in Paradise
Valley, AZ satisfied the applicable conditions and exercised its
right to extend the maturity date of the loan by one year to
November 30, 2021 pursuant to the terms of the loan agreement.
Also as previously reported, in November 2020, TRMT amended the
agreement governing its loan secured by a multifamily property
located in Houston, TX to extend the maturity date of the loan by
one year to November 10, 2021. As part of this amendment, the
borrower funded an interest reserve of $0.5 million.
In February 2021, TRMT amended the agreement governing its loan
secured by a retail property located in Coppell, TX to extend the
maturity date of the loan by six months to August 12, 2021. As part
of this amendment, the borrower funded an interest reserve of $0.5
million and repaid $0.3 million of the principal balance of the
loan, thereby reducing the total loan commitment to $19.9 million.
This amendment also includes a six month extension option
contingent upon the borrower repaying $0.3 million of the principal
balance and meeting certain other conditions.
In February 2021, TRMT received $24.8 million of repayment
proceeds from the borrower on its loan that was used to finance the
acquisition of a 432 unit apartment community located in Rochester,
NY, which included the $24.6 million of principal outstanding under
the loan, as well as accrued interest, an exit fee and TRMT's
associated legal expenses.
In February 2021, the borrower under TRMT's loan secured by an
industrial facility located in Barrington, NJ notified TRMT that
the facility is expected to be sold in the second quarter of 2021.
Upon sale, TRMT expects to be repaid the principal amount
outstanding under the loan, as well as accrued interest, an exit
fee and TRMT's associated legal costs, and TRMT will be required to
repay the outstanding balance and accrued interest associated with
this loan under the master repurchase facility. As of December 31,
2020, the principal amount outstanding under the loan was $35.2
million.
The impacts from the COVID-19 pandemic have negatively impacted
some of TRMT's borrowers’ and their tenants' business operations,
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 plans for the underlying collateral, among other
things. As of February 19, 2021, 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.
Recent Financing Activities:
As of December 31, 2020, TRMT had a $201.1 million aggregate
outstanding principal balance under its master repurchase facility
with Citibank, N.A., or Citibank. 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 February 19,
2021, 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 under
the master repurchase agreement.
As previously reported, 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.
In February 2021, TRMT repaid $23.9 million of outstanding
balances under its master repurchase facility.
Distributions:
Beginning in 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 October 15, 2020, TRMT declared a quarterly distribution of
$0.01 per common share, or approximately $0.1 million, payable to
shareholders of record as of October 26, 2020.
On December 7, 2020, TRMT declared a one-time cash distribution,
as required to satisfy TRMT's distribution requirements as a real
estate investment trust, or REIT, to common shareholders of record
as of December 17, 2020, of $0.53 per common share, or
approximately $4.4 million. TRMT paid this distribution on January
15, 2021.
TRMT’s Board of Trustees currently plans to reinstate TRMT's
regular quarterly distribution beginning with the quarter ending
March 31, 2021 and to announce the amount of the new distribution
in April 2021.
Conference Call:
At 10:00 a.m. Eastern Time on Monday, February 22, 2021,
President, Thomas Lorenzini, and Chief Financial Officer and
Treasurer, Doug Lanois, will host a conference call to discuss
TRMT’s fourth quarter 2020 financial results. 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 Monday, March 1, 2021. To access
the replay, dial (412) 317-0088. The replay pass code is
10150726.
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
after the call. The transcription, recording and retransmission
in any way of TRMT’s fourth quarter conference call are strictly
prohibited without the prior written consent of TRMT.
Supplemental Data:
A copy of TRMT’s Fourth 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, a
Securities and Exchange Commission, or 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 Distributable Earnings (formerly referred to as
Core Earnings), which is considered a “non-GAAP financial measure”
within the meaning of the applicable SEC rules. Distributable
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 Distributable Earnings may
differ from the methodologies employed by other companies to
calculate the same or similar supplemental performance measures;
therefore, TRMT’s reported Distributable Earnings may not be
comparable to the distributable earnings as reported by other
companies.
In order to maintain its qualification for taxation as a REIT,
TRMT is generally required to distribute substantially all of its
taxable income, subject to certain adjustments, to its
shareholders. TRMT believes that one of the factors that investors
consider important in deciding whether to buy or sell securities of
a REIT is its distribution rate. Over time, Distributable Earnings
has been a useful indicator of distributions to TRMT's shareholders
and is a measure that is considered by TRMT's Board of Trustees
when determining the amount of such distributions. TRMT believes
that Distributable 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, Distributable 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 Distributable Earnings
and a reconciliation of net income determined in accordance with
GAAP to that amount.
TREMONT MORTGAGE TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except
per share data) (unaudited)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
INCOME FROM INVESTMENTS:
Interest income from investments
$
4,618
$
3,603
$
18,030
$
15,475
Less: interest and related expenses
(1,224)
(1,475)
(5,591)
(7,047)
Income from investments, net
3,394
2,128
12,439
8,428
OTHER EXPENSES:
General and administrative expenses
714
468
2,354
2,130
Reimbursement of shared services
expenses
407
347
1,159
1,457
Total expenses (1)
1,121
815
3,513
3,587
Income before income tax expense
2,273
1,313
8,926
4,841
Income tax expense
(75)
—
(75)
—
Net income
$
2,198
$
1,313
$
8,851
$
4,841
Weighted average common shares outstanding
- basic and diluted
8,209
8,167
8,186
6,234
Net income per common share - basic and
diluted
$
0.26
$
0.16
$
1.07
$
0.77
(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 $336 and $319 of base management fees
for the three months ended December 31, 2020 and 2019,
respectively, $1,311 and $1,131 of base management fees for the
year ended December 31, 2020 and 2019, respectively, and $303 and
$467 of incentive fees for the three months and year ended December
31, 2020, respectively. No incentive fees would have been
recognized for the three months or year ended December 31,
2019.
TREMONT MORTGAGE TRUST
CALCULATION AND RECONCILIATION OF DISTRIBUTABLE EARNINGS (amounts
in thousands, except per share data) (unaudited)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Reconciliation of net income to
Distributable Earnings (1):
Net income
$
2,198
$
1,313
$
8,851
$
4,841
Non-cash equity compensation expense
127
44
316
344
Distributable Earnings
$
2,325
$
1,357
$
9,167
$
5,185
Weighted average common shares outstanding
- basic and diluted
8,209
8,167
8,186
6,234
Distributable Earnings per common share -
basic and diluted
$
0.28
$
0.17
$
1.12
$
0.83
(1)
TRMT calculates Distributable 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. Distributable
Earnings are reduced for realized losses on loan investments when
amounts are deemed uncollectable.
TREMONT MORTGAGE TRUST
CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share
data) (unaudited)
December 31,
2020
2019
ASSETS
Cash and cash equivalents
$
10,521
$
8,732
Restricted cash
—
143
Loans held for investment, net
282,246
242,078
Accrued interest receivable
996
755
Prepaid expenses and other assets
419
221
Total assets
$
294,182
$
251,929
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable, accrued liabilities and
deposits
$
5,041
$
1,011
Master repurchase facility, net
200,233
164,694
Due to related persons
5
3
Total liabilities
205,279
165,708
Commitments and contingencies
Shareholders' equity:
Common shares of beneficial interest,
$0.01 par value per share; 25,000,000 shares authorized; 8,302,911
and 8,239,610 shares issued and outstanding, respectively
83
82
Additional paid in capital
89,160
88,869
Cumulative net income
10,788
1,937
Cumulative distributions
(11,128)
(4,667)
Total shareholders’ equity
88,903
86,221
Total liabilities and shareholders'
equity
$
294,182
$
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. Lorenzini states that TRMT's solid fourth quarter and full
year 2020 results reflect its proactive measures over the past year
to preserve liquidity, enhance the stability of its balance sheet
and actively manage its loans. This statement may imply that TRMT's
proactive measures will be sufficient to enable TRMT meet its
current and expected cash needs and that its loan portfolio
performance will remain stable. However, TRMT's and its borrowers'
and their tenants' businesses are subject to risks, including the
COVID-19 pandemic and its resulting economic impact. The impacts of
the COVID-19 pandemic are affecting all parts of the U.S. economy,
and are impacting borrowers and their tenants to varying degrees,
and these impacts may result in TRMT's borrowers being unable to
pay their obligations owed to TRMT as currently scheduled. Further,
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. As a result of the impacts of the
COVID-19 pandemic or other factors, TRMT's loan portfolio
performance and operating results may deteriorate.
- Mr. Lorenzini also states that TRMT upgraded the risk ratings
of two loans based upon continued improvement of the underlying
collateral, thereby further improving the overall performance of
TRMT's portfolio, and TRMT is pleased that all of TRMT's loans
continue to remain current on debt service. This may imply that
TRMT's borrowers will continue to have strong credit qualities and
that TRMT's loan portfolio is not subject to credit risk. However,
TRMT's business is subject to various risks, including the impacts
of the COVID-19 pandemic on its borrowers' business operations or
tenants. As a result, the credit qualities of TRMT's borrowers may
decline and TRMT's borrowers may default on their payment
obligations to TRMT.
- Mr. Lorenzini also states that, given the performance of its
portfolio, TRMT plans to reinstate its regular quarterly
distribution and to announce the amount of the new distribution in
April 2021. However, 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 Distributable 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.
- This press release references TRMT’s active engagement with
Citibank and TRMT’s borrowers. This statement may imply that TRMT's
active engagement with Citibank and its borrowers 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,
TRMT's 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, and TRMT may not have sufficient capital to
meet its required commitments to Citibank if TRMT's borrowers
default on their obligations owed to TRMT or the values of the
collateral underlying TRMT's loans decline below required levels or
otherwise, and Citibank utilizes one or more of the risk mitigation
mechanisms as a result.
- 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.
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/20210219005467/en/
Kevin Barry Manager, Investor Relations (617) 796-7651
Tremont Mortgage (NASDAQ:TRMT)
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