Attached files
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| EX-99.1 - EX-99.1 - Tremont Mortgage Trust | trmt_33121xearningsrelease.htm |
| 8-K - 8-K - Tremont Mortgage Trust | trmt-20210427.htm |
FIRST QUARTER 2021 Supplemental Operating and Financial Data ALL AMOUNTS IN THIS REPORT ARE UNAUDITED. Exhibit 99.2
2 Supplemental Q1 2021 2 Table of Contents CORPORATE INFORMATION Company Profile................................................................................................................................................ 3 Investor Information.......................................................................................................................................... 4 Research Coverage........................................................................................................................................... 5 FINANCIALS First Quarter 2021 Highlights.......................................................................................................................... 6 Condensed Consolidated Balance Sheets.................................................................................................... 7 Condensed Consolidated Statements of Operations.................................................................................. 8 Debt Summary................................................................................................................................................... 9 Reconciliation of Net Income to Distributable Earnings............................................................................. 10 PORTFOLIO OVERVIEW First Quarter 2021 Portfolio Summary............................................................................................................ 11 Loan Investment Details................................................................................................................................... 12 Loan Portfolio Composition............................................................................................................................. 13 Loan Portfolio Credit Quality........................................................................................................................... 14 Interest Rate Sensitivity..................................................................................................................................... 15 Capital Structure Overview.............................................................................................................................. 16 WARNING CONCERNING FORWARD-LOOKING STATEMENTS........................................................................... 17 NON-GAAP FINANCIAL MEASURES AND CERTAIN DEFINITIONS........................................................................ 18 TRMT Nasdaq Listed Please refer to Non-GAAP Financial Measures and Certain Definitions for terms used throughout this document.
3 Supplemental Q1 2021 3 Management: Our Manager, Tremont Realty Advisors LLC, or TRA, is registered with the Securities and Exchange Commission, or SEC, as an investment adviser. In addition to TRMT, TRA also provides management services to RMR Mortgage Trust (Nasdaq: RMRM), a publicly traded mortgage REIT that focuses on originating and investing in floating rate first mortgage whole loans secured by middle market and transitional CRE. TRA is owned by The RMR Group LLC, or RMR LLC, the majority owned operating subsidiary of The RMR Group Inc., or RMR Inc., a holding company listed on The Nasdaq Stock Market LLC, or Nasdaq, under the symbol “RMR”. We collectively refer to RMR Inc. and its consolidated subsidiaries, including RMR LLC, as RMR. RMR is an alternative asset management company that is focused on commercial real estate and related businesses. RMR primarily provides management services to publicly traded real estate companies, privately held real estate funds and real estate related operating businesses. As of March 31, 2021, RMR had $31.8 billion of real estate assets under management and the combined RMR managed companies had approximately $10.0 billion of annual revenues, nearly 2,100 properties and approximately 43,000 employees. We believe our Manager’s relationship with RMR provides us with a depth of market knowledge that may allow us to identify high quality investment opportunities and to evaluate them more thoroughly than many of our competitors, including other commercial mortgage REITs. We also believe RMR’s broad platform provides us with access to RMR’s extensive network of real estate owners, operators, intermediaries, sponsors, financial institutions and other real estate related professionals and businesses with which RMR has historical relationships. We also believe that our Manager provides us with significant experience and expertise in investing in middle market and transitional CRE. The Company: Tremont Mortgage Trust, or TRMT, we, our or us, is a real estate investment trust, or REIT, that focuses on originating and investing in floating rate first mortgage whole loans secured by middle market and transitional commercial real estate, or CRE. We define middle market CRE as commercial properties that have values up to $100.0 million and transitional CRE as commercial properties subject to redevelopment or repositioning activities that are expected to increase the value of the properties. Corporate Headquarters: Two Newton Place 255 Washington Street, Suite 300 Newton, MA 02458-1634 (617) 796-8317 Stock Exchange Listing: Nasdaq Trading Symbol: Common Shares: TRMT Key Data (as of and for the three months ended March 31, 2021): (dollars in thousands) Q1 2021 income from investments, net $ 3,351 Q1 2021 net income $ 1,575 Q1 2021 Distributable Earnings $ 2,246 Loans held for investment, net $ 260,179 Total assets $ 272,304 Company Profile RETURN TO TABLE OF CONTENTS
4 Supplemental Q1 2021 4 Investor Information Board of Trustees John L. Harrington William A. Lamkin Joseph L. Morea Independent Trustee Independent Trustee Independent Trustee Matthew P. Jordan Adam D. Portnoy Managing Trustee Managing Trustee Executive Officers Thomas J. Lorenzini G. Douglas Lanois President Chief Financial Officer and Treasurer Contact Information Investor Relations Inquiries Tremont Mortgage Trust Financial, investor and media inquiries should be directed to: Two Newton Place Kevin Barry, Manager, Investor Relations 255 Washington Street, Suite 300 at (617) 796-7651 or kbarry@trmtreit.com (617) 796-7651 kbarry@trmtreit.com www.trmtreit.com RETURN TO TABLE OF CONTENTS
5 Supplemental Q1 2021 5 Equity Research Coverage UBS Securities LLC Citibank Global Markets, Inc. Brock Vandervliet Arren Cyganovich, CFA (212) 713-2382 (212) 816-3733 brock.vandervliet@ubs.com arren.cyganovich@citi.com JMP Securities Jones Trading Institutional Services, LLC Steven C. DeLaney Jason M. Stewart (212) 906-3517 (646) 465-9932 sdelaney@jmpsecurities.com jstewart@jonestrading.com TRMT is followed by the analysts listed above. Please note that any opinions, estimates or forecasts regarding TRMT’s performance made by these analysts do not represent opinions, estimates or forecasts of TRMT or its management. TRMT does not by its reference above imply its endorsement of or concurrence with any information, conclusions or recommendations provided by any of these analysts. Research Coverage RETURN TO TABLE OF CONTENTS
6 Supplemental Q1 2021 6 Financial Results Loan Portfolio Capitalization Interest Rates Note: As of March 31, 2021 • Net income of $1.6 million and Distributable Earnings of $2.2 million, or $0.19 and $0.27 per diluted common share, respectively. • Book value per common share of $10.90. • One-time cash distribution of $0.53 per common share declared in December 2020 and paid in January 2021. • 13 first mortgage whole loans diversified among office, retail, multifamily, industrial and hotel collateral, with an aggregate total loan commitment of $268.4 million. ◦ Weighted average maturity of 2.4 years based on Maximum Maturities. ◦ Weighted average coupon of 5.73% and weighted average All In Yield of 6.43%. ◦ All loans are current on debt service. • All loans held for investment have floating interest rates and we require borrowers to obtain hedging instruments to mitigate the risk of increasing interest rates. The weighted average LIBOR floor for the portfolio is 2.10%. • Borrowings under our Master Repurchase Facility are subject to floating interest rates with no LIBOR floor. • Floating rate investments and floating rate liabilities support earnings stability. • Our master repurchase facility with Citibank, N.A., or our Master Repurchase Facility, has $32.7 million available, comprised of $13.2 million immediately available to be drawn on loans and $19.5 million available to be drawn to fund future advances on unfunded loan commitments. • Outstanding principal balance of $180.8 million under our Master Repurchase Facility; 1.9x Net Debt to Book Equity ratio. First Quarter 2021 Highlights RETURN TO TABLE OF CONTENTS
7 Supplemental Q1 2021 7 Financial Summary March 31, December 31, 2021 2020 ASSETS Cash and cash equivalents $ 10,890 $ 10,521 Loans held for investment, net 260,179 282,246 Accrued interest receivable 922 996 Prepaid expenses and other assets 313 419 Total assets $ 272,304 $ 294,182 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable, accrued liabilities and deposits $ 748 $ 5,041 Master repurchase facility, net 180,040 200,233 Due to related persons 987 5 Total liabilities 181,775 205,279 Commitments and contingencies Shareholders' equity: Common shares of beneficial interest, $0.01 par value per share; 25,000,000 shares authorized; 8,305,911 and 8,302,911 shares issued and outstanding, respectively 83 83 Additional paid in capital 89,211 89,160 Cumulative net income 12,363 10,788 Cumulative distributions (11,128) (11,128) Total shareholders’ equity 90,529 88,903 Total liabilities and shareholders' equity $ 272,304 $ 294,182 Condensed Consolidated Balance Sheets (dollars in thousands, except per share data) RETURN TO TABLE OF CONTENTS
8 Supplemental Q1 2021 8 Condensed Consolidated Statements of Operations (1) Our Manager waived any base management or management incentive fees that would have otherwise been due and payable by us under our management agreement for the period beginning July 1, 2018 until December 31, 2020. If our Manager had not waived these base management and management incentive fees, we would have recognized $320 of base management fees for the three months ended March 31, 2020. No management incentive fees would have been paid or payable by us for the three months ended March 31, 2020. Three Months Ended March 31, 2021 2020 INCOME FROM INVESTMENTS: Interest income from investments $ 4,486 $ 4,284 Less: interest and related expenses (1,135) (1,757) Income from investments, net 3,351 2,527 OTHER EXPENSES: Base management fees (1) 342 — Management incentive fees (1) 620 — General and administrative expenses 669 540 Reimbursement of shared services expenses 138 321 Total expenses (1) 1,769 861 Income before income tax expense 1,582 1,666 Income tax expense (7) — Net income $ 1,575 $ 1,666 Weighted average common shares outstanding - basic 8,211 8,169 Weighted average common shares outstanding - diluted 8,239 8,169 Net income per common share - basic and diluted $ 0.19 $ 0.20 (amounts in thousands, except per share data) RETURN TO TABLE OF CONTENTS
9 Supplemental Q1 2021 9 DE BT S UM M AR Y March 31, 2021 Coupon Rate Principal Balance Maturity Date Financings Under Master Repurchase Facility: Office, Metairie, LA (1) L + 2.35% $ 8,377 04/11/2021 Office, Houston, TX L + 2.15% 10,815 06/26/2021 Retail, Coppell, TX (2) L + 2.10% 10,132 08/12/2021 Multifamily, Houston, TX L + 1.85% 21,980 11/10/2021 Retail, Paradise Valley, AZ L + 2.10% 7,699 11/30/2021 Office, St. Louis, MO L + 1.85% 20,229 12/19/2021 Hotel, Atlanta, GA L + 2.00% 15,067 12/21/2021 Office, Dublin, OH L + 2.10% 15,823 02/18/2022 Industrial, Barrington, NJ (3) L + 2.00% 27,085 05/06/2022 Retail, Omaha, NE L + 2.00% 9,761 06/14/2022 Office, Yardley, PA L + 2.00% 10,506 11/06/2022 Multifamily, Orono, ME L + 1.85% 12,778 11/06/2022 Industrial, Allentown, PA L + 2.00% 10,500 11/06/2022 Total/weighted average L + 2.00% $ 180,751 (1) In April 2021, we amended the agreement governing this loan to extend the maturity date by six months to October 11, 2021 and to eliminate any further borrower extension rights. (2) In February 2021, we amended the agreement governing this loan to extend the maturity date by six months to August 12, 2021. (3) In February 2021, the borrower notified us that the property securing the loan is expected to be sold in the second quarter of 2021. Upon sale, we expect to be repaid the principal amount outstanding under the loan, as well as accrued interest, an exit fee and our associated legal costs, and we will be required to repay the outstanding balance and accrued interest associated with this loan under the Master Repurchase Facility. Debt Summary (dollars in thousands) RETURN TO TABLE OF CONTENTS
10 Supplemental Q1 2021 10 Three Months Ended March 31, 2021 2020 Reconciliation of net income to Distributable Earnings: Net income $ 1,575 $ 1,666 Management incentive fees 620 — Non-cash equity compensation expense 51 42 Distributable Earnings $ 2,246 $ 1,708 Weighted average common shares outstanding - basic 8,211 8,169 Weighted average common shares outstanding - diluted 8,239 8,169 Distributable Earnings per common share - basic and diluted $ 0.27 $ 0.21 Reconciliation of Net Income to Distributable Earnings (amounts in thousands, except per share data) RETURN TO TABLE OF CONTENTS
11 Supplemental Q1 2021 11 First Quarter 2021 Portfolio Activity Total Commitments Unfunded Commitments March 31, 2021 Number of loans 13 Average loan commitment $19,170 Total loan commitments $268,379 Unfunded loan commitments $8,989 Principal balance $259,390 Weighted average coupon rate 5.73% Weighted average All In Yield 6.43% Weighted average Maximum Maturity 2.4 Weighted average LTV 67% Weighted average LIBOR floor 2.10% Loans with active LIBOR floors 100% Weighted average risk rating 2.9 Principal Balance (dollars in thousands) First Quarter 2021 Portfolio Summary RETURN TO TABLE OF CONTENTS
12 Supplemental Q1 2021 12 First Mortgage Whole Loans as of March 31, 2021: Location Property Type Origination Date Committed Principal Amount Principal Balance Coupon Rate All in Yield Maturity Date Maximum Maturity Date LTV Risk Rating Metairie, LA (1) Office 04/11/2018 $ 18,102 $ 17,351 L + 5.00% L + 5.65% 04/11/2021 04/11/2023 79% 3 Houston, TX Office 06/26/2018 15,200 14,489 L + 4.00% L + 4.59% 06/26/2021 06/26/2023 69% 4 Coppell, TX (2) Retail 02/05/2019 19,865 19,865 L + 3.50% L + 4.24% 08/12/2021 02/12/2022 73% 4 Houston, TX Multifamily 05/10/2019 27,929 27,929 L + 3.50% L + 4.52% 11/10/2021 11/10/2022 56% 3 Paradise Valley, AZ Retail 11/30/2018 11,853 11,197 L + 4.25% L + 5.71% 11/30/2021 11/30/2022 48% 3 St. Louis, MO Office 12/19/2018 29,500 27,763 L + 3.25% L + 3.74% 12/19/2021 12/19/2023 72% 2 Atlanta, GA Hotel 12/21/2018 24,000 23,904 L + 3.25% L + 3.72% 12/21/2021 12/21/2023 62% 4 Dublin, OH Office 02/18/2020 22,820 21,556 L + 3.75% L + 4.83% 02/18/2022 02/18/2023 33% 3 Barrington, NJ (3) Industrial 05/06/2019 37,600 36,162 L + 3.50% L + 4.03% 05/06/2022 05/06/2023 79% 1 Omaha, NE Retail 06/14/2019 14,500 13,054 L + 3.65% L + 4.05% 06/14/2022 06/14/2024 77% 4 Yardley, PA Office 12/19/2019 14,900 14,264 L + 3.75% L + 4.47% 12/19/2022 12/19/2024 75% 4 Orono, ME Multifamily 12/20/2019 18,110 17,856 L + 3.25% L + 3.86% 12/20/2022 12/20/2024 72% 2 Allentown, PA Industrial 01/24/2020 14,000 14,000 L + 3.50% L + 4.02% 01/24/2023 01/24/2025 67% 3 Total/weighted average $ 268,379 $ 259,390 L + 3.64% L + 4.33% 67% 2.9 (1) In April 2021, we amended the agreement governing this loan to extend the maturity date by six months to October 11, 2021 and to eliminate any further borrower extension rights. (2) In February 2021, we amended the agreement governing this loan 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 $500 and repaid $250 of the principal balance of the loan, thereby reducing the total loan commitment to $19,865. This amendment also includes a six month extension options contingent upon the borrower repaying an additional $250 of the principal balance and meeting certain other conditions. (3) In February 2021, the borrower notified us that the property securing the loan is expected to be sold in the second quarter of 2021. Upon sale, we expect to be repaid the principal amount outstanding under the loan, as well as accrued interest, an exit fee and our associated legal costs, and we will be required to repay the outstanding balance and accrued interest associated with this loan under our Master Repurchase Facility. (dollars in thousands) Loan Investment Details RETURN TO TABLE OF CONTENTS
13 Supplemental Q1 2021 13 Retail Geographic Region (1) Property Type (1) Maximum Maturity Profile (2) (dollars in thousands) Loan Portfolio Composition RETURN TO TABLE OF CONTENTS (1) Based on book value of loans held for investment as of March 31, 2021. (2) Based on principal balances as of March 31, 2021.
14 Supplemental Q1 2021 14 Loan to Value (1) Loan Portfolio Credit Quality Loan Count 3 1 2 4 3 1 2Loan Count 5 5 0 Risk Rating Distribution (1) Weighted Average LTV: 67% Weighted Average Risk Rating: 2.9 RETURN TO TABLE OF CONTENTS (1) Percent of portfolio based on carrying value of loans held for investment as of March 31, 2021
15 Supplemental Q1 2021 15 The interest income on our loans held for investment and the interest expense on our borrowings float with LIBOR subject to applicable LIBOR floor arrangements. We have interest rate floor provisions in our loan agreements with borrowers which set a LIBOR minimum for each loan. These floors range from 1.50% to 2.50% and the portfolio weighted average is 2.10% as of March 31, 2021. As a result, our interest income will increase if LIBOR exceeds the floor established in any of our investments, and if LIBOR further decreases below the floor established in any of our investments, our interest income will not be impacted. We do not currently have a LIBOR floor provision relating to any of the outstanding balances under our Master Repurchase Facility and as a result our interest expense will increase as LIBOR increases and will decrease as LIBOR decreases. The above table illustrates the incremental impact on our annual income from investments, net, due to hypothetical increases and decreases in LIBOR, taking into consideration our borrowers’ interest rate floors as of March 31, 2021. The hypothetical decreases in LIBOR have been limited in the analysis above to 11 basis points to result in a LIBOR of 0.00%. The results in the table above are based on our loan portfolio and debt outstanding and LIBOR of 0.11% at March 31, 2021. Any changes to the mix of our investments or debt outstanding could impact the interest rate sensitivity analysis and this illustration is not meant to forecast future results. LIBOR is currently expected to be phased out for new contracts by December 31, 2021 and for pre-existing contracts by June 30, 2023. On October 30, 2020, we amended our Master Repurchase Agreement to, among other things, provide that at such time as LIBOR is no longer available as a base rate to calculate interest payable on amounts outstanding under our Master Repurchase Facility, the replacement base rate shall be the secured overnight financing rate, or SOFR, or if SOFR is not available, such other rate as may be determined by Citibank, N.A. in accordance with the terms of our Master Repurchase Agreement. We also currently expect that, as a result of any phase out of LIBOR, the interest rates under our loan agreements with borrowers would be revised as provided under the agreements or amended as necessary to provide for an interest rate that approximates the existing interest rate as calculated in accordance with LIBOR. Interest Rate Sensitivity Net Interest Income Per Share Sensitivity to LIBOR (Annualized impact per share) RETURN TO TABLE OF CONTENTS
16 Supplemental Q1 2021 16 CA PI TA L ST RU CT UR E O VE RV IE W Secured Financing Maximum Facility Size Coupon Rate (1) Maturity Date Principal Balance Master Repurchase Facility $ 213,482 L + 2.00% 11/06/2022 $ 180,751 Book Value per Common Share Shareholders’ equity $ 90,529 Total outstanding common shares 8,306 Book value per common share $ 10.90 Capital Structure Detail (1) Weighted average rate based on outstanding principal balances as of March 31, 2021. (amounts in thousands) Capital Structure Overview as of March 31, 2021 Capital Structure Composition Outstanding Debt to Funded Investments Leverage Capacity RETURN TO TABLE OF CONTENTS
17 Supplemental Q1 2021 17 This supplemental operating and financial data may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever we use words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, we are making forward-looking statements. These forward-looking statements are based upon our 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 our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. The information contained in our filings with the SEC, including under “Risk Factors” in our periodic reports, or incorporated therein, identifies important factors that could cause our actual results to differ materially from those stated in or implied by our forward-looking statements. Our 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, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise. Warning Concerning Forward-Looking Statements RETURN TO TABLE OF CONTENTS
18 Supplemental Q1 2021 18 Non-GAAP Financial Measures: We present Distributable 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 our cash flows from operations determined in accordance with GAAP, a measure of our liquidity or operating performance or an indication of funds available for our cash needs. In addition, our methodology for calculating Distributable Earnings may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures; therefore, our reported Distributable Earnings may not be comparable to the distributable earnings as reported by other companies. In order to maintain our qualification for taxation as a REIT, we are generally required to distribute substantially all of our taxable income, subject to certain adjustments, to our shareholders. We believe 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 our shareholders and is a measure that is considered by our Board of Trustees when determining the amount of such distributions. We believe 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 us to evaluate our performance excluding the effects of certain transactions, the variability of any management incentive fees that may be paid or payable and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings is used in determining the amount of base management and management incentive fees payable by us to our Manager under our management agreement. Distributable Earnings: We calculate 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 our 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. Other Measures: All In Yield: All In Yield represents the yield on a loan, excluding any repurchase debt funding applicable to the loan and including amortization of deferred fees over the initial term of the loan. Maximum Maturity: Maximum Maturity assumes all loan extension options are exercised, which options are subject to the borrower meeting certain conditions. LTV: Loan to value ratio, or LTV, represents the initial loan amount divided by the underwritten in place value of the underlying collateral at closing. Net Debt: Principal balance of debt, less cash. Non-GAAP Financial Measures and Certain Definitions RETURN TO TABLE OF CONTENTS