First Quarter Net Income Per Diluted Share
of $0.19
First Quarter Distributable Earnings Per
Diluted Share of $0.27, an Increase of 29% Year Over Year
First Quarter Income from Investments, Net,
of $3.4 Million, an Increase of 33% Year Over Year
Reinstates Regular Quarterly Distributions
at $0.10 Per Common Share
Announced Agreement to Merge with RMR
Mortgage Trust
Tremont Mortgage Trust (Nasdaq: TRMT) today announced financial
results for the quarter ended March 31, 2021.
Tom Lorenzini, President of TRMT, made the following
statement:
“Our first quarter results underscore the
strength of TRMT’s commercial mortgage portfolio, with all of our
loans remaining current on debt service and our portfolio risk
rating continuing to improve. We received one early repayment
during the quarter and used the proceeds to pay down our master
repurchase facility. We intend to reinvest the capital and remain
active in the market evaluating prospective opportunities. In the
meantime, based on the health of our portfolio and our strong
operating results, we were pleased to have reinstated a regular
quarterly distribution to our shareholders.
Yesterday, we were excited to announce our
plans to merge with and into RMR Mortgage Trust, which will result
in a combined company having increased scale, a more diversified
loan portfolio and a greater presence within the commercial real
estate lending market."
Quarterly Results
Three Months Ended
(dollars in thousands, except per share
data)
March 31, 2021
March 31, 2020
Change
Net income
$1,575
$1,666
(5.5%)
Net income per diluted share
$0.19
$0.20
(5.0%)
Distributable Earnings
$2,246
$1,708
31.5%
Distributable Earnings per share
$0.27
$0.21
28.6%
Income from investments, net
$3,351
$2,527
32.6%
Book value per share
$10.90
$10.44
4.4%
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
ended March 31, 2021 and 2020, appear later in this press
release.
Portfolio Summary and Recent Investment Activities
As of the Three Months
Ended
(dollars in
thousands)
March 31, 2021
December 31, 2020
September 30, 2020
First mortgage whole loans
13
14
14
Total loan commitments
$268,379
$293,890
$293,961
Maximum weighted average maturity
(years)
2.4
2.6
2.9
Weighted average coupon rate
5.73%
5.70%
5.70%
Weighted average all In yield
6.43%
6.39%
6.38%
Weighted average loan to value
67%
67%
67%
- As previously reported, 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 an
additional $0.3 million of the principal balance and meeting
certain other conditions.
- Also as previously reported, 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 an apartment community
located in Rochester, NY, which included the $24.6 million
principal amount outstanding under the loan, as well as accrued
interest, an exit fee and TRMT's associated legal expenses.
- Also as previously reported, 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.
- 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.
Merger with RMR Mortgage Trust
As previously announced, TRMT and RMR Mortgage Trust (Nasdaq:
RMRM) have 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. 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 merger is expected
to close during the third quarter of 2021.
Recent Financing Activities
- In February 2021, TRMT repaid $23.9 million of outstanding
balances under its master repurchase facility with Citibank,
N.A.
- As of March 31, 2021, TRMT had $180.8 million in aggregate
outstanding principal balance under its master repurchase facility.
As of March 31, 2021, TRMT was in compliance with all covenants and
other terms under its master repurchase facility.
Distributions
- On January 15, 2021, TRMT paid a one-time cash distribution of
$4.4 million, or $0.53 per common share, to shareholders of record
as of December 17, 2020, as required to satisfy TRMT's 2020
distribution requirements as a real estate investment trust, or
REIT.
- On April 15, 2021, TRMT declared a quarterly distribution of
$0.10 per common share, or approximately $0.8 million, to
shareholders of record as of April 26, 2021. TRMT expects to pay
this distribution on or about May 20, 2021.
Conference Call
At 10:00 a.m. Eastern Time on Wednesday, April 28, 2021,
President, Tom Lorenzini, and Chief Financial Officer and
Treasurer, Doug Lanois, will host a conference call to discuss
TRMT’s first quarter 2021 financial results and our previously
announced merger with RMRM. 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, May 5, 2021. To access the replay, dial (412) 317-0088.
The replay pass code is 10153758.
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 first quarter conference call are strictly
prohibited without the prior written consent of TRMT.
Supplemental Data
A copy of TRMT’s First 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 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, 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, 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 a reconciliation of net income determined in accordance with
GAAP to that amount.
TREMONT MORTGAGE TRUST
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in
thousands, except per share data) (unaudited)
Three Months Ended 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
1,769
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
(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 $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.
TREMONT MORTGAGE TRUST
CALCULATION AND RECONCILIATION OF DISTRIBUTABLE EARNINGS (amounts
in thousands, except per share data) (unaudited)
Three Months Ended March
31,
2021
2020
Reconciliation of net income to
Distributable Earnings (1):
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
(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 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.
TREMONT MORTGAGE TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands, except
per share data) (unaudited)
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
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 first quarter results
underscore the strength of TRMT's commercial mortgage portfolio
with all of its loans remaining current on debt service and its
portfolio risk rating continuing to improve. This statement may
imply that TRMT's loan portfolio performance will remain stable.
However, TRMT, 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 or at all. 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 TRMT may have may not prevent TRMT from
realizing negative impacts resulting from such economic challenges,
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 risk ratings may
decline.
- Mr. Lorenzini also states that TRMT received one early
repayment during the quarter and used the proceeds to pay down its
master repurchase facility and that TRMT intends to reinvest the
capital and remain active in the market evaluating prospective
opportunities. This may imply that TRMT will be able to
successfully reinvest these 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 these proceeds in new loan
investments and any such investments made may not be on as
favorable terms or risk to TRMT as those for the loans that were
repaid.
- Mr. Lorenzini also states that based on the health of TRMT's
portfolio and strong operating results, TRMT has reinstated a
regular quarterly distribution to its shareholders. 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.
- TRMT and RMRM have entered into a definitive agreement to
merge. The merger is expected to close during the third quarter of
2021, subject to the satisfaction or waiver of closing conditions,
including the receipt of the requisite approvals by TRMT’s and
RMRM’s shareholders, and TRMT cannot be sure that these conditions
will be satisfied or waived. Accordingly, the merger may not close
by the end of the third quarter of 2021, or at all, or the terms
contemplated by the Merger Agreement may change.
- TRMT expects to realize benefits from the merger, including
increased scale, a more diversified loan portfolio and a greater
presence within the commercial real estate lending market. These
expectations are contingent upon the consummation 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 proposed merger, RMRM expects to file
with the SEC a registration statement on Form S-4, containing a
joint proxy statement/prospectus, and other documents with respect
to the proposed merger and other transactions contemplated by the
Merger Agreement. The joint proxy/prospectus will contain important
information about the proposed merger and related transactions.
SHAREHOLDERS OF TRMT AND RMRM ARE URGED TO READ THE REGISTRATION
STATEMENT AND THE JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL
AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS
FILED BY TRMT AND RMRM WITH THE SEC CAREFULLY IF AND WHEN THEY
BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT TRMT, RMRM AND THE PROPOSED MERGER AND RELATED
TRANSACTIONS.
Shareholders of TRMT and RMRM may obtain free copies of the
registration statements, the joint proxy statement/prospectus and
other relevant documents filed by TRMT or RMRM with the SEC (if and
when they become available) through the website maintained by the
SEC at www.sec.gov. Copies of the documents filed by TRMT with the
SEC are also available free of charge on TRMT's website at
www.trmtreit.com. Copies of the documents filed by RMRM with the
SEC are also available free of charge on RMRM's website at
www.rmrmortgagetrust.com.
This press release is for informational purposes only and is not
intended to and shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, or the solicitation
of any vote or approval in any jurisdiction pursuant to or in
connection with the proposed transaction or otherwise, nor shall
there be any sale of securities in any jurisdiction in which such
offer, solicitation or sale of securities would be unlawful prior
to registration or qualification under the securities laws of any
such jurisdiction. No offering of securities shall be made except
by means of a prospectus meeting the requirements of Section 10 of
the U.S. Securities Act of 1933, as amended.
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 the shareholders of TRMT and RMRM in respect of the
proposed merger. Information regarding TRMT’s trustees and
executive officers can be found in TRMT’s proxy statement filed
with the SEC on March 25, 2021. Information regarding RMRM’s
trustees and executive officers can be found in RMRM’s proxy
statement filed with the SEC on March 24, 2021. Additional
information regarding the interests of such potential participants
will be included in the joint proxy statement/prospectus and other
relevant documents filed with the SEC in connection with the
proposed merger if and when they become available. 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/20210427006056/en/
Kevin Barry Manager, Investor Relations (617) 796-7651
Tremont Mortgage (NASDAQ:TRMT)
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