Colony Credit Real Estate, Inc. (NYSE: CLNC) (“Colony Credit
Real Estate” or the “Company”) today announced its financial
results for the third quarter ended September 30, 2020 and certain
updates. The Company reported third quarter 2020 total Company GAAP
net income attributable to common stockholders of $5.0 million, or
$0.04 per share, and total Core/LNS Earnings of $39.7 million, or
$0.30 per share. Excluding realized gains and mark to market losses
on CRE debt securities, provisions for loan losses and fair value
adjustments, and a one-time tax benefit, total Adjusted Core/LNS
Earnings were $31.0 million, or $0.24 per share. From June 30, 2020
to September 30, 2020, total Company GAAP net book value increased
from $13.06 to $13.25 per share and undepreciated book value
increased from $14.43 to $14.53 per share.
Michael J. Mazzei commented, “After considerable efforts, we
have succeeded in solidifying CLNC’s balance sheet. I am pleased to
report, that as of today, we have an unrestricted cash balance of
approximately $438 million, or $3.33 per share. We continue to
focus on asset and liability management and we have begun to pivot
the organization toward offense.”
Michael J. Mazzei commented, “We have started executing our plan
to build earnings and redeploy cash on hand into newly originated
first mortgage loans. Finally, while continuing to monitor market
conditions and performance, we realize the importance of a dividend
to shareholders and we plan to reinstitute a quarterly dividend in
2021.”
Supplemental Financial
Report
A Third Quarter 2020 Supplemental Financial Report will be
available on the Shareholders – Events and Presentations section of
the Company’s website at www.clncredit.com. This information will
be furnished to the SEC in a Current Report on Form 8-K.
Third Quarter 2020 Conference
Call
The Company will conduct a conference call to discuss the
financial results on November 5, 2020 at 2:00 p.m. PT / 5:00 p.m.
ET. To participate in the event by telephone, please dial (855)
327-6837 ten minutes prior to the start time (to allow time for
registration). International callers should dial (631) 891-4304.
The call will also be broadcast live over the Internet and can be
accessed on the Shareholders section of the Company’s website at
www.clncredit.com. A webcast of the call will be available for 90
days on the Company’s website.
For those unable to participate during the live call, a replay
will be available starting November 5, 2020 at 5:00 p.m. PT / 8:00
p.m. ET, through November 12, 2020, at 8:59 p.m. PT / 11:59 p.m.
ET. To access the replay, dial (844) 512-2921 (U.S.), and use
conference ID code 10011375. International callers should dial
(412) 317-6671 and enter the same conference ID number.
Internalization Discussions with Colony
Capital, Inc.
As previously disclosed, the Company’s Board of Directors formed
a special committee consisting exclusively of independent and
disinterested directors (the “Special Committee”) to explore an
internalization proposal made by Colony Capital as well as other
strategic alternatives. Subsequently, due to ongoing uncertainty
surrounding the duration and magnitude of the COVID-19 pandemic and
its impact on the global economy, on April 1, 2020, Colony Capital
reported in Amendment No. 3 to Schedule 13D (filed with the U.S.
Securities and Exchange Commission) that it has postponed any
decision regarding a disposition of its management agreement with
the Company until market conditions improve. During the third
quarter, the Special Committee explored alternatives but was unable
to negotiate mutually acceptable terms with Colony Capital. The
Special Committee will continue to consider value-enhancing
alternatives for the Company as opportunities arise.
Non-GAAP Financial Measures and
Definitions
Core Earnings/Legacy, Non-Strategic Earnings
We present Core Earnings/Legacy, Non-Strategic (“LNS”) Earnings,
which are non-GAAP supplemental financial measures of our
performance. Our Core Earnings are generated by the Core Portfolio
and Legacy, Non-Strategic Earnings are generated by the Legacy,
Non-Strategic Portfolio. We believe that Core Earnings/Legacy,
Non-Strategic Earnings provides meaningful information to consider
in addition to our net income and cash flow from operating
activities determined in accordance with accounting principles
generally accepted in the United States (“U.S. GAAP” or “GAAP”).
These supplemental financial measures help us to evaluate our
performance excluding the effects of certain transactions and U.S.
GAAP adjustments that we believe are not necessarily indicative of
our current portfolio and operations. For information on the fees
we pay our Manager, see Note 10, “Related Party Arrangements” to
our consolidated financial statements included in Form 10-Q to be
filed with the SEC. In addition, we believe that our investors also
use Core Earnings/Legacy, Non-Strategic Earnings or a comparable
supplemental performance measure to evaluate and compare the
performance of us and our peers, and as such, we believe that the
disclosure of Core Earnings/Legacy, Non-Strategic Earnings is
useful to our investors.
We define Core Earnings/Legacy, Non-Strategic Earnings as U.S.
GAAP net income (loss) attributable to our common stockholders (or,
without duplication, the owners of the common equity of our direct
subsidiaries, such as our operating partnership or “OP”) and
excluding (i) non-cash equity compensation expense, (ii) the
expenses incurred in connection with our formation or other
strategic transactions, (iii) the incentive fee, (iv) acquisition
costs from successful acquisitions, (v) gains or losses from sales
of real estate property and impairment write-downs of depreciable
real estate, including unconsolidated joint ventures and preferred
equity investments, (vi) CECL reserves determined by probability of
default / loss given default (or “PD/LGD”) model, (vii)
depreciation and amortization, (viii) any unrealized gains or
losses or other similar non-cash items that are included in net
income for the current quarter, regardless of whether such items
are included in other comprehensive income or loss, or in net
income, (ix) one-time events pursuant to changes in U.S. GAAP and
(x) certain material non-cash income or expense items that in the
judgment of management should not be included in Core
Earnings/Legacy, Non-Strategic Earnings. For clauses (ix) and (x),
such exclusions shall only be applied after discussions between our
Manager and our independent directors and after approval by a
majority of our independent directors. U.S. GAAP net income (loss)
attributable to our common stockholders and Core Earnings/Legacy,
Non-Strategic Earnings include provisions for loan losses.
Prior to the third quarter of 2019, Core Earnings reflected
adjustments to U.S. GAAP net income to exclude impairment of real
estate and provision for loan losses. During the third quarter of
2019, we revised our definition of Core Earnings to include the
provision for loan losses while excluding realized losses of sales
of real estate property and impairment write-downs of preferred
equity investments. This was approved by a majority of our
independent directors.
Core Earnings/Legacy, Non-Strategic Earnings does not represent
net income or cash generated from operating activities and should
not be considered as an alternative to U.S. GAAP net income or an
indication of our cash flows from operating activities determined
in accordance with U.S. GAAP, a measure of our liquidity, or an
indication of funds available to fund our cash needs, including our
ability to make cash distributions. In addition, our methodology
for calculating Core Earnings/Legacy, Non-Strategic Earnings may
differ from methodologies employed by other companies to calculate
the same or similar non-GAAP supplemental financial measures, and
accordingly, our reported Core Earnings/Legacy, Non-Strategic
Earnings may not be comparable to the Core Earnings/Legacy,
Non-Strategic Earnings reported by other companies.
The Company calculates Core Earnings/Legacy, Non-Strategic
Earnings per share, which are non-GAAP supplemental financial
measures, based on a weighted average number of common shares and
operating partnership units (held by members other than the Company
or its subsidiaries).
Core Portfolio
We present the Core Portfolio, which consists of four business
and reportable segments including senior and mezzanine loans and
preferred equity, CRE debt securities, net leased real estate and
corporate. Senior and mezzanine loans and preferred equity consists
of CRE debt investments including senior mortgage loans, mezzanine
loans, and preferred equity interests as well as participations in
such loans. The segment also includes acquisition, development and
construction loan arrangements accounted for as equity method
investments as well as loans and preferred equity interests held
through joint ventures with an affiliate of Colony Capital which
were deconsolidated as a result of our formation transaction and
subsequently treated as equity method investments. CRE debt
securities include both investment grade and non-investment grade
rated CMBS bonds (including “B-pieces” of CMBS securitization pools
or “B-Piece” investments). Net leased real estate includes direct
investments in commercial real estate principally composed of
long-term leases to tenants on a net lease basis, where such
tenants are generally responsible for property operating expenses
such as insurance, utilities, maintenance capital expenditures and
real estate taxes. Corporate includes corporate-level asset
management and other fees, related party and general and
administrative expenses related to the Core Portfolio only.
Legacy, Non-Strategic Portfolio
We present the Legacy, Non-Strategic Portfolio, which is a
business and reportable segment that consists of direct investments
in operating real estate such as multi-tenant office and
multifamily residential assets, real estate acquired in settlement
of loans, real estate private equity interests and certain retail
and other legacy loans originated prior to the combination that
created the Company. This segment includes corporate-level asset
management and other fees, related party and general and
administrative expenses related to the Legacy, Non-strategic
Portfolio only.
About Colony Credit Real Estate,
Inc.
Colony Credit Real Estate (NYSE: CLNC) is one of the largest
publicly traded commercial real estate (CRE) credit REITs, focused
on originating, acquiring, financing and managing a diversified
portfolio consisting primarily of CRE debt investments and net
leased properties predominantly in the United States. CRE debt
investments primarily consist of first mortgage loans, which we
expect to be the primary investment strategy. Colony Credit Real
Estate is externally managed by a subsidiary of leading global real
estate and investment management firm, Colony Capital, Inc. Colony
Credit Real Estate is organized as a Maryland corporation and taxed
as a REIT for U.S. federal income tax purposes. For additional
information regarding the Company and its management and business,
please refer to www.clncredit.com.
Cautionary Statement Regarding
Forward-Looking Statements
This press release may contain forward-looking statements within
the meaning of the federal securities laws. Forward-looking
statements relate to expectations, beliefs, projections, future
plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. In
some cases, you can identify forward-looking statements by the use
of forward-looking terminology such as “may,” “will,” “should,”
“expects,” “intends,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” or “potential” or the negative of these
words and phrases or similar words or phrases which are predictions
of or indicate future events or trends and which do not relate
solely to historical matters. Forward-looking statements involve
known and unknown risks, uncertainties, assumptions and
contingencies, many of which are beyond our control, and may cause
actual results to differ significantly from those expressed in any
forward-looking statement. Among others, the following
uncertainties and other factors could cause actual results to
differ from those set forth in the forward-looking statements:
operating costs and business disruption may be greater than
expected; uncertainties regarding the ongoing impact of the novel
coronavirus (COVID-19), the severity of the disease, the duration
of the COVID-19 outbreak, actions that may be taken by governmental
authorities to contain the COVID-19 outbreak or to treat its
impact, the potential negative impacts of COVID-19 on the global
economy and its adverse impact on the real estate market, the
economy and the Company’s investments (including, but not limited
to, the Los Angeles mixed-use development loan and other
hospitality loans), financial condition and business operation;
defaults by borrowers in paying debt service on outstanding
indebtedness and borrowers’ abilities to manage and stabilize
properties; deterioration in the performance of the properties
securing our investments (including depletion of interest and other
reserves or payment-in-kind concessions in lieu of current interest
payment obligations) that may cause deterioration in the
performance of our investments and, potentially, principal losses
to us; the Company's operating results may differ materially from
the information presented in the Company’s Annual Report on Form
10-K for the fiscal year ended December 31, 2019, as well as in
Colony Credit Real Estate’s other filings with the Securities and
Exchange Commission; the fair value of the Company's investments
may be subject to uncertainties; the Company's use of leverage
could hinder its ability to make distributions and may
significantly impact its liquidity position; given the Company's
dependence on its external manager, an affiliate of Colony Capital,
Inc., any adverse changes in the financial health or otherwise of
its manager or Colony Capital, Inc. could hinder the Company's
operating performance and return on stockholder's investment; the
ability to realize substantial efficiencies as well as anticipated
strategic and financial benefits, including, but not limited to
expected returns on equity and/or yields on investments; adverse
impacts on the Company's corporate revolver, including covenant
compliance and borrowing base capacity; adverse impacts on the
Company's liquidity, including margin calls on master repurchase
facilities, debt service or lease payment defaults or deferrals,
demands for protective advances and capital expenditures, or its
ability to continue to generate liquidity from sales of Legacy,
Non-Strategic assets; the Company’s ability to liquidate its
Legacy, Non-Strategic assets within the projected timeframe or at
the projected values; the timing of and ability to deploy available
capital; the Company’s ability to pay, maintain or grow the
dividend at all in the future; the timing of and ability to
complete repurchases of the Company’s stock; the ability of the
Company to refinance certain mortgage debt on similar terms to
those currently existing or at all; whether Colony Capital will
continue to serve as our external manager or whether we will pursue
another strategic transaction; and the impact of legislative,
regulatory and competitive changes, and the actions of government
authorities, including the current U.S. presidential
administration, and in particular those affecting the commercial
real estate finance and mortgage industry or our business. The
foregoing list of factors is not exhaustive. Additional information
about these and other factors can be found in Part I, Item 1A of
the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2019 and Part II, Item 1A of the Company’s Form 10-Q
for the quarter ended June 30, 2020, as well as in Colony Credit
Real Estate’s other filings with the Securities and Exchange
Commission. Moreover, each of the factors referenced above are
likely to also be impacted directly or indirectly by the ongoing
impact of COVID-19 and investors are cautioned to interpret
substantially all of such statements and risks as being heightened
as a result of the ongoing impact of the COVID-19.
We caution investors not to unduly rely on any forward-looking
statements. The forward-looking statements speak only as of the
date of this press release. Colony Credit Real Estate is under no
duty to update any of these forward-looking statements after the
date of this press release, nor to conform prior statements to
actual results or revised expectations, and Colony Credit Real
Estate does not intend to do so. We caution investors not to unduly
rely on any forward-looking statements. The forward-looking
statements speak only as of the date of this press release. Colony
Credit Real Estate is under no duty to update any of these
forward-looking statements after the date of this press release,
nor to conform prior statements to actual results or revised
expectations, and Colony Credit Real Estate does not intend to do
so.
COLONY CREDIT REAL ESTATE,
INC.
CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
and per share data)
September 30, 2020
(Unaudited)
December 31, 2019
Assets Cash and cash equivalents
$
461,990
$
69,619
Restricted cash
73,059
126,065
Loans and preferred equity held for investment
2,143,938
2,848,956
Allowance for loan losses
(40,524
)
(272,624
)
Loans and preferred equity held for investment, net
2,103,414
2,576,332
Real estate securities, available for sale, at fair value
36,250
252,824
Real estate, net
1,133,318
1,484,796
Investments in unconsolidated ventures ($7,093 and $10,283 at fair
value, respectively)
424,557
595,305
Receivables, net
80,674
46,456
Deferred leasing costs and intangible assets, net
85,881
112,762
Assets held for sale
203,466
189,470
Other assets
69,658
87,707
Mortgage loans held in securitization trusts, at fair value
1,839,390
1,872,970
Total assets
$
6,511,657
$
7,414,306
Liabilities Securitization bonds payable, net
$
834,621
$
833,153
Mortgage and other notes payable, net
1,102,999
1,256,112
Credit facilities
608,632
1,099,233
Due to related party
9,192
11,016
Accrued and other liabilities
111,525
140,424
Intangible liabilities, net
8,443
22,149
Liabilities related to assets held for sale
10,787
294
Escrow deposits payable
37,642
74,497
Dividends payable
-
13,164
Mortgage obligations issued by securitization trusts, at fair value
1,770,924
1,762,914
Total liabilities
4,494,765
5,212,956
Commitments and contingencies
Equity Stockholders’ equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no
shares issued and outstanding as of September 30, 2020 and December
31, 2019, respectively
-
-
Common stock, $0.01 par value per share Class A, 950,000,000 shares
authorized, 128,582,965 and 128,538,703 shares issued and
outstanding as of September 30, 2020 and December 31, 2019,
respectively
1,286
1,285
Additional paid-in capital
2,842,892
2,909,181
Accumulated deficit
(1,181,747
)
(819,738
)
Accumulated other comprehensive income
40,954
28,294
Total stockholders’ equity
1,703,385
2,119,022
Noncontrolling interests in investment entities
272,803
31,631
Noncontrolling interests in the Operating Partnership
40,704
50,697
Total equity
2,016,892
2,201,350
Total liabilities and equity
$
6,511,657
$
7,414,306
COLONY CREDIT REAL ESTATE,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per
share data) (Unaudited)
Three Months Ended September
30,
2020
2019
Net interest income Interest income
$
36,391
$
46,991
Interest expense
(13,426
)
(23,167
)
Interest income on mortgage loans held in securitization trusts
20,462
22,586
Interest expense on mortgage obligations issued by securitization
trusts
(18,204
)
(20,299
)
Net interest income
25,223
26,111
Property and other income Property operating income
41,678
63,492
Other income
30
820
Total property and other income
41,708
64,312
Expenses Management fee expense
7,083
11,355
Property operating expense
15,277
29,756
Transaction, investment and servicing expense
1,627
1,433
Interest expense on real estate
12,205
14,281
Depreciation and amortization
14,770
25,934
Provision for loan losses
10,404
110,314
Impairment of operating real estate
3,451
272,722
Administrative expense (including $1,376 and $2,910 of equity-based
compensation expense, respectively)
5,780
7,732
Total expenses
70,597
473,527
Other income (loss) Unrealized loss on mortgage loans
and obligations held in securitization trusts, net
(13,162
)
(1,976
)
Realized gain on mortgage loans and obligations held in
securitization trusts, net
-
2,724
Other gain (loss), net
9,680
(2,688
)
Loss before equity in earnings of unconsolidated ventures and
income taxes
(7,148
)
(385,044
)
Equity in earnings (loss) of unconsolidated ventures
(1,779
)
(15,905
)
Income tax benefit (expense)
15,357
(1,046
)
Net income (loss)
6,430
(401,995
)
Net (income) loss attributable to noncontrolling interests:
Investment entities
(1,222
)
37,445
Operating Partnership
(201
)
8,519
Net income (loss) attributable to Colony Credit Real Estate,
Inc. common stockholders
$
5,007
$
(356,031
)
Net income (loss) per common share – basic and
diluted
$
0.04
$
(2.77
)
Weighted average shares of common stock outstanding –
basic and diluted
128,583
128,541
COLONY CREDIT REAL ESTATE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION (In
thousands, except per share data) (Unaudited)
GAAP Net Income
(Loss) to Core Earnings / LNS Earnings
Three Months Ended September
30, 2020
Core Portfolio
Legacy, Non-Strategic
Portfolio
Total
Net income (loss) attributable to Colony Credit Real Estate, Inc.
common stockholders
$
(2,710
)
$
7,717
$
5,007
Adjustments: Net loss attributable to noncontrolling interest of
the Operating Partnership
16
185
201
Non-cash equity compensation expense
1,046
330
1,376
Transaction costs
319
101
420
Depreciation and amortization
11,246
3,854
15,100
Net unrealized loss (gain) on investments: Impairment of operating
real estate and preferred equity
-
3,452
3,452
Other unrealized loss (gain) on investments
13,650
(7
)
13,643
CECL reserves
8,892
-
8,892
Losses (gains) on sales of real estate and preferred equity
(8,341
)
183
(8,158
)
Adjustments related to noncontrolling interests in investment
entities
-
(186
)
(186
)
Core Earnings / Legacy, Non-Strategic Earnings attributable to
Colony Credit Real Estate, Inc. common stockholders and
noncontrolling interest of the Operating Partnership
$
24,118
$
15,629
$
39,747
Core Earnings / Legacy, Non-Strategic Earnings per share(1)
$
0.18
$
0.12
$
0.30
Weighted average number of common shares and OP units(1)
131,659
131,659
131,659
________________
(1)
The Company calculates Core
Earnings / LNS Earnings per share, which are non-GAAP financial
measures, based on a weighted average number of common shares and
OP units (held by members other than the Company or its
subsidiaries). For the three months ended September 30, 2020, the
weighted average number of common shares and OP units was
approximately 131.7 million; includes 3.1 million of OP units
Core Earnings /
LNS Earnings to Adjusted Core Earnings / LNS
Earnings(1)
Three Months Ended September
30, 2020
Core Portfolio
Legacy, Non-Strategic
Portfolio
Total
Core Earnings / Legacy, Non-Strategic Earnings attributable to
Colony Credit Real Estate, Inc. common stockholders and
noncontrolling interest of the Operating Partnership
$
24,118
$
15,629
$
39,747
Adjustments: Realized gain on CRE debt securities sales
(5,156
)
-
(5,156
)
Realization of CRE debt securities mark-to-market loss
3,366
-
3,366
Provision for loan losses
4,066
-
4,066
Reversal of provision for loan losses on note sales
(272
)
-
(272
)
Fair value adjustments on investments in unconsolidated ventures
2,200
-
2,200
Income tax benefit
-
(12,926
)
(12,926
)
Adjusted Core Earnings / Legacy, Non-Strategic Earnings
attributable to Colony Credit Real Estate, Inc. common stockholders
and noncontrolling interest of the Operating Partnership(1)
$
28,322
$
2,703
$
31,025
Adjusted Core Earnings / Legacy, Non-Strategic Earnings per
share(1)(2)
$
0.22
$
0.02
$
0.24
Weighted average number of common shares and OP units(2)
131,659
131,659
131,659
________________
(1)
Adjusted Core Earnings / LNS
Earnings excludes all gains/losses and a significant one-time tax
benefit that occurred during the third quarter 2020
(2)
The Company calculates Adjusted
Core Earnings / LNS Earnings per share, which are non-GAAP
financial measures, based on a weighted average number of common
shares and OP units (held by members other than the Company or its
subsidiaries). For the three months ended September 30, 2020, the
weighted average number of common shares and OP units was
approximately 131.7 million; includes 3.1 million of OP units
GAAP Net Book
Value to Undepreciated Book Value
As of September 30,
2020
Core Portfolio
Legacy, Non-Strategic
Portfolio
Total
GAAP net book value (excl. noncontrolling interests in investment
entities)
$
1,645,569
$
98,520
$
1,744,089
Accumulated depreciation and amortization(1)
83,573
84,958
168,531
Undepreciated book value
$
1,729,142
$
183,478
$
1,912,620
GAAP net book value per share (excl. noncontrolling
interests in investment entities)
$
12.50
$
0.75
$
13.25
Accumulated depreciation and amortization per share(1)
0.63
0.65
1.28
Undepreciated book value per share
$
13.13
$
1.40
$
14.53
Total common shares and OP units outstanding(2)
131,659
131,659
131,659
________________
(1)
Represents at-share net
accumulated depreciation and amortization on real estate
investments, including related intangible assets and
liabilities
(2)
The Company calculates GAAP net
book value (excluding noncontrolling interests in investment
entities) per share and undepreciated book value per share, which
are non-GAAP financial measures, based on the total number of
common shares and OP units (held by members other than the Company
or its subsidiaries) outstanding at the end of the reporting
period. As of September 30, 2020, the total number of common shares
and OP units outstanding was approximately 131.7 million
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201105005974/en/
Investor Relations Colony Credit Real Estate, Inc. Addo
Investor Relations Lasse Glassen 310-829-5400
Colony Credit Real Estate (NYSE:CLNC)
Historical Stock Chart
From Apr 2024 to May 2024
Colony Credit Real Estate (NYSE:CLNC)
Historical Stock Chart
From May 2023 to May 2024