Second Quarter Net Income Per Diluted Share
of $0.01
Net Income Includes Merger Related
Transaction Expenses of $0.22 per Diluted Share
Second Quarter Adjusted Distributable
Earnings Per Diluted Share of $0.25
Tremont Mortgage Trust (Nasdaq: TRMT) today announced financial
results for the quarter and six months ended June 30, 2021.
Tom Lorenzini, President of TRMT, made the following
statement:
"TRMT’s portfolio continues to perform well
as we execute on our business objective of investing capital in
first mortgage loans secured by middle market and transitional
commercial real estate. All our loans remain current on debt
service and our portfolio risk ratings remain stable, which speaks
to the strong credit quality of our borrowers and our manager’s
ability to originate high quality loans. Our deal pipeline remains
active with more than $600 million in transactions in various
stages of review, underwriting and diligence, and we are focused on
reinvesting capital as additional loans repay during the second
half of 2021.
Furthermore, we remain on track to complete
our merger with RMR Mortgage Trust during the third quarter of
2021. We believe this strategic transaction will provide compelling
benefits to TRMT shareholders while creating a larger, more
diversified commercial mortgage REIT approaching $1 billion in
assets when fully invested."
Quarterly Results
Three Months Ended
(dollars in thousands, except per share
data)
June 30, 2021
June 30, 2020
Change
Net income
$98
$2,362
(95.9%)
Net income per diluted share
$0.01
$0.29
(96.6%)
Adjusted Distributable Earnings
$2,048
$2,433
(15.8%)
Adjusted Distributable Earnings per
diluted share
$0.25
$0.30
(16.7%)
Income from investments, net
$3,160
$3,128
1.0%
Book value per share
$10.81
$10.72
0.8%
Additional information and a reconciliation of net income
determined in accordance with U.S. generally accepted accounting
principles, or GAAP, to Distributable Earnings and Adjusted
Distributable Earnings for the quarters and six months ended June
30, 2021 and 2020, appear later in this press release.
Portfolio Summary and Recent Investment Activities
(dollars in
thousands)
June 30, 2021
March 31, 2021
December 31, 2020
First mortgage loans
13
13
14
Total loan commitments
$246,029
$268,379
$293,890
Maximum weighted average maturity
(years)
2.2
2.4
2.6
Weighted average coupon rate
5.61%
5.73%
5.70%
Weighted average all in yield
6.36%
6.43%
6.39%
Weighted average LIBOR floor
1.94%
2.10%
2.10%
Weighted average risk rating
3.0
2.9
3.2
Weighted average loan to value
65%
67%
67%
- As previously reported, in April 2021, TRMT amended the
agreement governing its loan secured by an office property located
in Metairie, LA to extend the maturity date of the loan by six
months to October 11, 2021 and to eliminate any further borrower
extension rights.
- In May 2021, TRMT originated a first mortgage loan of $15.2
million that was used to refinance an office property with 125,000
square feet located in Westminster, CO. This loan requires the
borrower to pay interest at the floating rate of LIBOR plus a
premium of 375 basis points per annum. This floating rate loan
includes an initial funding of $13.5 million and a future funding
allowance of $1.7 million for tenant improvements, leasing
commissions and capital expenditures and has a three year initial
term with two, one-year extension options, subject to the borrower
meeting certain conditions.
- Also in May 2021, TRMT received $36.7 million of repayment
proceeds from the borrower relating to its loan that was secured by
an industrial facility located in Barrington, NJ, which included
the $36.2 million principal amount outstanding under the loan, as
well as accrued interest, an exit fee and TRMT's associated legal
expenses.
- In June 2021, at the borrower’s request, TRMT amended the
agreement governing its loan secured by an office property located
in Houston, TX to extend the maturity date of the loan by 45 days
to August 10, 2021. As of June 30, 2021, the outstanding principal
amount under this loan was $14.5 million.
- In July 2021, the borrower under TRMT's loan secured by a
retail property located in Paradise Valley, AZ notified TRMT that
the property is expected to be sold during the third 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 expenses. As of June 30, 2021, the
outstanding principal amount under this loan was $11.2
million.
- Also in July 2021, the borrower under TRMT's loan secured by a
multifamily property located in Houston, TX notified TRMT that the
property is expected to be sold during the third 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 expenses. As of June 30, 2021, the
outstanding principal amount under this loan was $27.9
million.
- Also in July 2021, the borrower under TRMT's loan secured by an
office property located in Dublin, OH notified TRMT that the
property is expected to be refinanced during the third quarter of
2021. Upon refinance, 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 expenses. As of June 30, 2021,
the outstanding principal amount under this loan was $21.6
million.
Merger with RMR Mortgage Trust
As previously announced, TRMT and RMR Mortgage Trust (Nasdaq:
RMRM) entered into a definitive agreement and plan of merger, dated
April 26, 2021, or the Merger Agreement, pursuant to which TRMT
will merge with and into RMRM, with RMRM continuing as the
surviving company, or the Merger. Pursuant to the terms of the
Merger Agreement, TRMT’s shareholders will receive 0.52 of one
newly issued common share of RMRM for each common share of TRMT
they hold, with cash paid in lieu of fractional shares. Completion
of the Merger will require certain approvals of TRMT’s and RMRM’s
shareholders and the satisfaction or waiver of other conditions.
The record date for determining the shareholders entitled to
receive notice of, and to vote at, the TRMT and RMRM special
meetings of shareholders is July 14, 2021. The special meetings of
shareholders of TRMT and RMRM are scheduled to be held on September
17, 2021 and, pending the requisite approval by TRMT and RMRM
shareholders, the Merger is expected to close during the third
quarter of 2021.
Recent Financing Activities
- During the second quarter of 2021, Citibank, N.A., or Citibank,
advanced $13.5 million to TRMT under its master repurchase
facility, and TRMT repaid $38.1 million of outstanding balances
under its master repurchase facility with Citibank.
- As of June 30, 2021, TRMT had an aggregate $156.2 million
outstanding principal balance under, and was in compliance with all
covenants and other terms of, its master repurchase facility with
Citibank.
Distributions
- On May 20, 2021, TRMT paid a quarterly distribution to common
shareholders of record as of April 26, 2021 of $0.10 per common
share, or approximately $0.8 million in aggregate.
- On July 15, 2021, TRMT declared a quarterly distribution for
the second quarter of 2021 payable on August 19, 2021 to its
shareholders of record as of July 26, 2021 of $0.10 per common
share, or approximately $0.8 million in aggregate.
Conference Call
At 10:00 a.m. Eastern Time on Wednesday, July 28, 2021,
President, Tom Lorenzini, and Chief Financial Officer and
Treasurer, Doug Lanois, will host a conference call to discuss
TRMT’s second quarter 2021 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 Wednesday, August 4, 2021. To
access the replay, dial (412) 317-0088. The replay pass code is
10157613.
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 second quarter conference call are strictly
prohibited without the prior written consent of TRMT.
Supplemental Data
A copy of TRMT’s Second Quarter 2021 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.
About Tremont Mortgage Trust
TRMT is a real estate finance company that originates and
invests in first mortgage loans secured by middle market and
transitional commercial real estate. TRMT is managed by an
affiliate of The RMR Group Inc. (Nasdaq: RMR). Substantially all of
RMR’s business is conducted by its majority owned subsidiary, The
RMR Group LLC, which is an alternative asset management company
with $32 billion in assets under management and more than 35 years
of institutional experience in buying, selling, financing and
operating commercial real estate. For more information about TRMT,
please visit www.trmtreit.com.
Non-GAAP Financial Measures
TRMT presents Distributable Earnings and Adjusted Distributable
Earnings, which are considered “non-GAAP financial measures” within
the meaning of the applicable rules of the Securities and Exchange
Commission, or SEC. Distributable Earnings and Adjusted
Distributable Earnings do not represent net income or cash
generated from operating activities and should not be considered as
alternatives to net income determined in accordance with GAAP or
indications of TRMT’s cash flows from operations determined in
accordance with GAAP, measures of TRMT’s liquidity or operating
performance or indications of funds available for TRMT’s cash
needs. In addition, TRMT’s methodologies for calculating
Distributable Earnings and Adjusted 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 and Adjusted
Distributable Earnings may not be comparable to the distributable
earnings and adjusted distributable earnings as reported by other
companies.
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 management 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.
TRMT defines Adjusted Distributable Earnings as Distributable
Earnings excluding certain non-recurring expenses, such as
transaction expenses related to the Merger and the other
transactions contemplated by the Merger Agreement.
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 and Adjusted Distributable Earnings
provide meaningful information to consider in addition to net
income and cash flows from operating activities determined in
accordance with GAAP. These measures help TRMT to evaluate its
performance excluding the effects of certain transactions, the
variability of any management incentive fees that may be paid or
payable 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 management 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 Adjusted Distributable Earnings and a reconciliation of net
income determined in accordance with GAAP to those amounts.
TREMONT MORTGAGE TRUST
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(amounts in thousands, except
per share data)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
INCOME FROM INVESTMENTS:
Interest income from investments
$
4,148
$
4,496
$
8,634
$
8,780
Less: interest and related expenses
(988)
(1,368)
(2,123)
(3,125)
Income from investments, net
3,160
3,128
6,511
5,655
OTHER EXPENSES:
Base management fees (1)
341
—
682
—
Management incentive fees (1)
—
—
620
—
General and administrative expenses
685
524
1,328
1,064
Reimbursement of shared services
expenses
206
242
344
563
Transaction related expenses
1,822
—
1,849
—
Total expenses
3,054
766
4,823
1,627
Income before income tax expense
106
2,362
1,688
4,028
Income tax expense
(8)
—
(15)
—
Net income
$
98
$
2,362
$
1,673
$
4,028
Weighted average common shares outstanding
- basic
8,218
8,177
8,215
8,173
Weighted average common shares outstanding
- diluted
8,266
8,177
8,253
8,173
Net income per common share - basic and
diluted
$
0.01
$
0.29
$
0.20
$
0.49
(1)
TRMT’s manager previously waived any base management or
management incentive fees that would have otherwise been due and
payable by TRMT under its management agreement for the period
beginning July 1, 2018 until December 31, 2020. If TRMT's manager
had not waived these base management and management incentive fees,
TRMT would have recognized $323 and $643 of base management fees
for the three and six months ended June 30, 2020, respectively.
Management incentive fees of $36 would have been paid or payable by
TRMT for each of the three and six months ended June 30, 2020.
TREMONT MORTGAGE TRUST
CALCULATION AND RECONCILIATION
OF NET INCOME TO DISTRIBUTABLE EARNINGS AND ADJUSTED DISTRIBUTABLE
EARNINGS
(amounts in thousands, except
per share data)
(unaudited)
Three Months Ended June
30,
Six Months Ended June
30,
2021
2020
2021
2020
Reconciliation of net income to
Distributable Earnings and Adjustable Distributable
Earnings:
Net income
$
98
$
2,362
$
1,673
$
4,028
Management incentive fees
—
—
620
—
Non-cash equity compensation expense
128
71
179
113
Distributable Earnings
226
2,433
2,472
4,141
Transaction related expenses
1,822
—
1,849
—
Adjusted Distributable Earnings
$
2,048
$
2,433
$
4,321
$
4,141
Weighted average common shares outstanding
- basic
8,218
8,177
8,215
8,173
Weighted average common shares outstanding
- diluted
8,266
8,177
8,253
8,173
Adjusted Distributable Earnings per common
share - basic
$
0.25
$
0.30
$
0.53
$
0.51
Adjusted Distributable Earnings per common
share - diluted
$
0.25
$
0.30
$
0.52
$
0.51
TREMONT MORTGAGE TRUST
CONDENSED CONSOLIDATED BALANCE
SHEETS
(dollars in thousands, except
per share data)
(unaudited)
June 30,
December 31,
2021
2020
ASSETS
Cash and cash equivalents
$
8,273
$
10,521
Restricted cash
95
—
Loans held for investment, net
237,697
282,246
Accrued interest receivable
796
996
Prepaid expenses and other assets
303
419
Total assets
$
247,164
$
294,182
LIABILITIES AND
SHAREHOLDERS' EQUITY
Accounts payable, accrued liabilities and
deposits
$
1,127
$
5,041
Master repurchase facility, net
155,562
200,233
Due to related persons
602
5
Total liabilities
157,291
205,279
Commitments and contingencies
Shareholders' equity:
Common shares of beneficial interest,
$0.01 par value per share; 25,000,000 shares authorized; 8,312,322
and 8,302,911 shares issued and outstanding, respectively
83
83
Additional paid in capital
89,288
89,160
Cumulative net income
12,461
10,788
Cumulative distributions
(11,959)
(11,128)
Total shareholders’ equity
89,873
88,903
Total liabilities and shareholders'
equity
$
247,164
$
294,182
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 portfolio continues to perform
well as TRMT executes on its business objective of investing in
first mortgage loans secured by middle market and transitional
commercial real estate, that all of TRMT’s loans remain current on
debt service and that TRMT’s portfolio risk ratings remain stable.
These statements may imply that TRMT's loan portfolio performance
will continue to perform well and execute on its business objective
and that TRMT will benefit as a result. However, TRMT, its
borrowers' and their tenants' businesses are subject to risks,
including those related to the COVID-19 pandemic and its resulting
economic impacts, and TRMT operates in a highly competitive
industry. As a result of these or other factors, TRMT's loan
portfolio performance and risk ratings may decline and it may not
be able to execute its business objective or realize any benefits
from doing so.
- Mr. Lorenzini also states that TRMT is focused on reinvesting
capital as additional loans repay during the second half of 2021.
This may imply that TRMT will be able to successfully reinvest
repayment proceeds in new loan investments. However, the market for
loans to commercial real estate borrowers of the type TRMT seeks to
invest in is highly competitive. TRMT may be not be able to
successfully reinvest any repayment proceeds in new loan
investments and any such investments made may not be on as
favorable terms or risk to TRMT.
- Mr. Lorenzini also states that TRMT's deal pipeline remains
active with transactions in various stages of review, underwriting
and diligence. This may imply that TRMT will be able to
successfully convert pipeline transactions into originated loan
investments. However, TRMT's business is subject to various risks,
including the competitive nature of the commercial real estate
lending industry, and TRMT may not be able to access capital in the
near or longer term on desirable terms or at all. As a result, TRMT
may not be successful in converting its deal pipeline into
originated loan investments.
- Mr. Lorenzini also states that TRMT remains on track to
complete the Merger during the third quarter of 2021. The closing
of the Merger is subject to the satisfaction or waiver of
conditions, including the receipt of requisite approvals by TRMT’s
and RMRM’s shareholders. TRMT cannot be sure that any or all of
these conditions will be satisfied or waived. Accordingly, the
Merger may not close when expected or at all, or the terms of the
Merger may change.
- Mr. Lorenzini also states that TRMT believes the Merger will
provide compelling benefits to TRMT's shareholders while creating a
larger, more diversified commercial mortgage REIT approaching $1
billion in assets when fully invested. These expectations are
contingent upon the completion of the Merger and may not be
realized as currently expected or at all.
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.
Additional Information about the Merger
In connection with the Merger, RMRM has filed with the SEC a
Registration Statement on Form S-4 containing a definitive joint
proxy statement/prospectus and other documents with respect to the
Merger, which was declared effective by the SEC on July 26, 2021.
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. SHAREHOLDERS ARE URGED TO READ THE JOINT
PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND
SUPPLEMENTS THERETO) AND ANY OTHER DOCUMENTS FILED OR TO BE FILED
WITH THE SEC IN CONNECTION WITH THE MERGER OR INCORPORATED BY
REFERENCE IN THE JOINT PROXY STATEMENT/PROSPECTUS BECAUSE THEY
CONTAIN AND WILL CONTAIN IMPORTANT INFORMATION ABOUT THE
MERGER.
The definitive joint proxy statement/prospectus has been mailed
to TRMT’s and RMRM’s shareholders. Shareholders may obtain free
copies of the RMRM Registration Statement on Form S-4, the
definitive joint proxy statement/prospectus and any other relevant
documents filed or to be filed with the SEC at the SEC’s website at
www.sec.gov. In addition, shareholders may obtain copies free of
TRMT’s filings with the SEC from TRMT's website at www.trmtreit.com
or RMRM’s filings with the SEC from RMRM's website at
www.rmrmortgagetrust.com.
Participants in Solicitation Relating to the Merger
TRMT, RMRM and their respective trustees and executive officers,
and Tremont Realty Advisors LLC, The RMR Group LLC, The RMR Group
Inc. and certain of their respective directors, officers and
employees, may be deemed to be participants in the solicitation of
proxies from TRMT and RMRM shareholders in respect of the Merger
and the other transactions contemplated by the Merger Agreement.
Information regarding the persons who may, under the rules of the
SEC, be considered participants in the solicitation of TRMT’s and
RMRM’s shareholders in connection with the Merger and the other
transactions contemplated by the Merger Agreement is set forth in
the definitive joint proxy statement/prospectus. Information
regarding TRMT’s trustees and executive officers and RMRM’s
trustees and executive officers can be found in TRMT’s and RMRM’s
respective definitive proxy statement for its 2021 Annual Meeting
of Shareholders. These documents are available free of charge on
the SEC's website and from TRMT or RMRM, as applicable, using the
sources indicated above.
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/20210727006024/en/
Kevin Barry Manager, Investor Relations (617) 796-7651
Tremont Mortgage (NASDAQ:TRMT)
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