Colony Credit Real Estate, Inc. (NYSE: CLNC) (“Colony Credit
Real Estate” or the “Company”) today announced its financial
results for the fourth quarter and full year ended December 31,
2018.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20190228005866/en/
(Graphic: Business Wire)
Kevin P. Traenkle, President and Chief Executive Officer of
Colony Credit Real Estate commented, “2018 was a transformational
year for Colony Credit Real Estate as we successfully completed our
tri-party merger and listed on the NYSE stock exchange. We exceeded
our new investment targets by committing over $2 billion of
capital, significantly grew total assets with balance across
investment type, collateral and geographic diversification,
expanded into Europe, de-risked our exposure to retail and
hospitality, and prudently increased our leverage. During the
quarter, we continued to diversify our portfolio and leveraged
Colony’s global infrastructure, international track record and
best-in class deal-sourcing and asset management capabilities,
including completing our third investment in Europe.”
Mr. Traenkle added, “We’re also actively rotating out of legacy
investments that are low-yielding, non-core or that suffered recent
credit events. We have decided that the best path forward is to
accelerate the monetization of these assets, resulting in this
quarter’s approximately $147 million of impairments. Hitting our
stride and necessarily putting these low-yielding assets behind us,
Colony Credit Real Estate and management are poised to redeploy
this liquidity consistent with the successes evidenced throughout
2018, and importantly increase earnings power in 2019.”
Fourth Quarter and Fiscal Year 2018
Significant Developments and Subsequent Events
- Fourth quarter 2018 GAAP net loss
attributable to common stockholders of $(127.1) million, or $(1.00)
per diluted share, and core earnings of $(37.3) million, or $(0.29)
per diluted share. Excluding: (i) private equity secondaries
mark-to-market adjustments of $34.8 million and $34.9 million
deferred tax write-off and (ii) $10.2 million of realized losses
from sale of property and resolutions of loans: core earnings of
$42.6 million, or $0.33 per diluted share
- Fiscal year 2018 GAAP net loss
attributable to common stockholders of $(168.5) million, or $(1.41)
per diluted share, and core earnings of $86.1 million, or $0.70 per
diluted share. Excluding realized net losses, 2018 core earnings of
$175.8 million, or $1.42 per diluted share
- Undepreciated book value of $2.9
billion, or $21.81 per diluted share, as of December 31, 2018
- Declared and paid a monthly cash
dividend of $0.145 per share of Class A and Class B-3 common stock
for October, November and December 2018. The dividend represents an
annualized dividend of $1.74 per share of common stock, equating to
an 9.8% annualized dividend yield based on the $17.70 closing price
on February 26, 2019
- Subsequent to quarter end, the
Company’s Board of Directors declared a monthly cash dividend of
$0.145 per share of common stock for January and February 2019
- During the fourth quarter, allocated
and initially funded $561 million and $531 million of capital,
respectively. This includes a third European investment in a
mixed-use development project
- For the full year 2018, allocated
approximately $2.2 billion of capital across 38 investments with an
expected weighted average return on equity of approximately
12%
- During the fourth quarter, completed a
$125 million upsize under the accordion feature of the corporate
revolving credit facility, increasing total commitments from $400
million to $525 million. Subsequent to quarter end, executed an
additional $35 million upsize from $525 million to $560
million
- During the fourth quarter, closed on a
new master repurchase facility for $300 million, bringing total
master repurchase capacity to approximately $2.1 billion at quarter
end
- During the fourth quarter, sold largest
non-core operating real estate multi-tenant office portfolio by
book value for a total sales price of $177 million
- During the fourth quarter, recorded $77
million of loan loss provisions at CLNC ownership share related to
four separate borrowers as a result of updates to the timing and
likely range of outcomes achievable in connection with asset
foreclosures and dispositions
- During the fourth quarter, recorded a
$70 million impairment as a result of potential outcomes related to
the sale of our real estate private equity investments, which
included a $35 million write-off of a deferred tax asset
- Subsequent to quarter end, allocated
and initially funded an additional $247 million and $199 million of
capital, respectively
- As of February 26, 2019, total
corporate liquidity of approximately $278 million through
cash-on-hand and availability under the corporate revolving credit
facility
Common Stock and Operating Partnership
Units
On February 1, 2019, all Class B-3 common stock converted to
Class A common stock. As of February 26, 2019, the Company had
approximately 127.8 million shares of Class A common stock
outstanding and the Company’s operating partnership had
approximately 3.1 million operating partnership units (“OP units”)
outstanding held by members other than the Company or its
subsidiaries.
Dividend
The Company’s Board of Directors declared a monthly cash
dividend of $0.145 per share of Class A and Class B-3 common stock
(the “common stock”) (i) for the monthly period ended October 31,
2018, which was paid on November 9, 2018, to stockholders of record
on October 31, 2018, (ii) for the monthly period ended November 30,
2018, which was paid on December 10, 2018, to stockholders of
record on November 30, 2018, and (iii) for the monthly period ended
December 31, 2018, which was paid on January 10, 2019, to
stockholders of record on December 31, 2018.
Subsequent to the end of the fourth quarter, the Company’s Board
of Directors declared a monthly cash dividend of $0.145 per share
of common stock (i) for the monthly period ended January 31, 2019,
which was paid on February 11, 2019, to stockholders of record on
January 31, 2019, and (ii) for the monthly period ended February
28, 2019, which will be paid on March 11, 2019, to stockholders of
record on February 28, 2019.
Common Stock Repurchase
Plan
The Company’s Board of Directors have authorized a stock
repurchase program, under which the Company may repurchase up to
$300 million of its outstanding Class A common stock until March
31, 2020 (the “Stock Repurchase Program”), replacing the Company’s
prior stock repurchase program announced in February 2018. Under
the Stock Repurchase Program, the Company may repurchase shares in
open market purchases, in privately negotiated transactions or
otherwise. The Stock Repurchase Program will be utilized at
management's discretion and in accordance with the requirements of
the Securities and Exchange Commission. The timing and actual
number of shares repurchased will depend on a variety of factors
including price, corporate requirements and other conditions.
Non-GAAP Financial Measures and
Definitions
Core Earnings
We present Core Earnings, which is a non-GAAP supplemental
financial measure of our performance. We believe that Core Earnings
provides meaningful information to consider in addition to our net
income and cash flow from operating activities determined in
accordance with U.S. GAAP. This supplemental financial measure
helps 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.
We also use Core Earnings to determine the incentive fees we pay to
our Manager. For information on the fees we pay our Manager, see
Note 11, “Related Party Arrangements” to our consolidated financial
statements included in Form 10-K. In addition, we believe that our
investors also use Core 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 is useful to our investors.
We define Core 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 OP) and excluding (i) non-cash equity compensation expense,
(ii) the expenses incurred in connection with our formation, (iii)
the incentive fee, (iv) acquisition costs from successful
acquisitions, (v) depreciation and amortization, (vi) 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, (vii) one-time events pursuant to changes
in U.S. GAAP and (viii) certain material non-cash income or expense
items that in the judgment of management should not be included in
Core Earnings. For clauses (vii) and (viii), 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. Core Earnings reflects adjustments to U.S.
GAAP net income to exclude impairment of real estate and provision
for loan losses. Such impairment and losses may ultimately be
realized, in part or full, upon a sale or monetization of the
related investments and such realized losses would be reflected in
Core Earnings.
Core 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 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 may
not be comparable to the Core Earnings reported by other
companies.
The Company calculates core earnings per share, a non-GAAP
financial measure, based on a weighted average number of common
shares and operating partnership units (held by members other than
the Company or its subsidiaries).
Return on Equity
We present Return on Equity (“ROE”), which is a supplemental
financial measure that represents the initial net investment-level
earnings generated by an investment expressed as a percentage of
the net equity capital invested. The Company calculates net
investment-level earnings for investments in loans and CRE debt
securities as the sum of the stated cash coupon income and any
non-cash income (such as payment in-kind income and
amortization/accretion of purchase discounts and origination,
extension and exit fees) less investment-level financing costs. For
investments in net lease real estate, the Company calculates net
investment-level earnings by subtracting investment-level financing
costs from net operating income. Net equity capital invested is
calculated by taking the gross initial invested capital less any
financing. With respect to certain loans and investment-level
financing, the Company assumes the one-month USD LIBOR as of
December 31, 2018 when calculating ROE. The Company’s ROE
calculation relies on a number of assumptions and estimates that
are subject to change, some of which are outside the control of the
Company. Actual results may differ materially from the Company’s
expectations. As such, there can be no assurance that the actual
ROE will be equivalent to the estimated ROE. In addition, the
Company’s methodology for calculating ROE may differ from
methodologies employed by other companies to calculate the same or
similar supplemental financial measures, and accordingly, the
presented ROE may not be comparable to the ROE reported by other
companies.
Fourth Quarter 2018 Conference
Call
The Company will conduct a conference call to discuss the
financial results on February 28, 2019 at 2:00 p.m. PT / 5:00 p.m.
ET. To participate in the event by telephone, please dial (877)
407-0784 ten minutes prior to the start time (to allow time for
registration). International callers should dial (201) 689-8560.
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 February 28, 2019, at 5:00 p.m. PT /
8:00 p.m. ET, through March 7, 2019, at 8:59 p.m. PT / 11:59 p.m.
ET. To access the replay, dial (844) 512-2921 (U.S.), and use
passcode 13687086. International callers should dial (412) 317-6671
and enter the same conference ID number.
Supplemental Financial
Report
A Fourth Quarter 2018 Supplemental Financial Report will be
available on the Company’s website at www.clncredit.com. This
information will be furnished to the SEC in a Current Report on
Form 8-K.
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 senior mortgage loans,
mezzanine loans, preferred equity, debt securities and net leased
properties predominantly in the United States. 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 that
intends to elect to be taxed as a REIT for U.S. federal income tax
purposes for its taxable year ending December 31, 2018. 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; 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, 2018; 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; and the impact of legislative,
regulatory and competitive changes. 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, 2018, as
well as in Colony Credit Real Estate’s other filings with the
Securities and Exchange Commission.
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 was formed on January 31, 2018,
through the combination of a select commercial real estate debt and
credit real estate portfolio of Colony Capital, Inc. (“Colony
Capital Investment Entities”) with substantially all of the assets
and liabilities of NorthStar Real Estate Income Trust, Inc. and all
of the assets and liabilities of NorthStar Real Estate Income II,
Inc. For the period ending and prior to December 31, 2017, the
following financial statements represent only the results of
operations for the Colony Capital Investment Entities, the
Company’s accounting predecessor, on a stand-alone basis. As a
result, comparisons of the Company’s period to period accompanying
consolidated financial information may not be meaningful.
COLONY CREDIT REAL ESTATE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per
share data)
December 31, 2018
December 31, 2017 Assets Cash and cash
equivalents $ 77,317 $ 25,204 Restricted cash 110,146 41,901 Loans
and preferred equity held for investment, net 2,020,497 1,300,784
Real estate securities, available for sale, at fair value 228,185 -
Real estate, net 1,959,690 219,740 Investments in unconsolidated
ventures ($160,851 and $24,417 at fair value, respectively) 903,037
203,720 Receivables, net 48,806 35,512 Deferred leasing costs and
intangible assets, net 134,068 11,014 Other assets 62,006 1,527
Mortgage loans held in securitization trusts, at fair value
3,116,978 -
Total assets $
8,660,730 $ 1,839,402
Liabilities Securitization bonds payable, net $ 81,372 $
108,679 Mortgage and other notes payable, net 1,173,019 280,982
Credit facilities 1,365,918 - Due to related party 15,019 - Accrued
and other liabilities 106,187 5,175 Intangible liabilities, net
15,096 36 Escrow deposits payable 65,995 36,960 Dividends payable
18,986 - Mortgage obligations issued by securitization trusts, at
fair value 2,973,936 -
Total
liabilities 5,815,528
431,832 Commitments and contingencies
Equity
Stockholders’ equity Preferred stock, $0.01 par value, 50,000,000
shares authorized, no shares issued and outstanding as of December
31, 2018 and December 31, 2017 - - Common stock, $0.01 par value
per share Class A, 905,000,000 shares authorized, 83,410,376 and
100 shares issued and outstanding as of December 31, 2018 and
December 31, 2017, respectively 834 - Class B-3, 45,000,000 shares
authorized, 44,399,444 and no shares issued and outstanding as of
December 31, 2018 and December 31, 2017, respectively 444 -
Additional paid-in capital 2,899,353 821,031 Retained earnings
(accumulated deficit) (193,327 ) 258,777 Accumulated other
comprehensive loss (399 ) - Total stockholders’
equity 2,706,905 1,079,808 Noncontrolling interests in investment
entities 72,683 327,762 Noncontrolling interests in the Operating
Partnership 65,614 - Total equity
2,845,202 1,407,570
Total liabilities and
equity $ 8,660,730 $
1,839,402 COLONY CREDIT REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands,
except per share data) Three
Months Ended December 31, Year Ended December 31,
2018 2017
2018 2017 Net interest
income Interest income $ 38,580 $ 31,772 $ 151,653 $ 140,214
Interest expense (16,808 ) (4,574 ) (47,074 ) (21,019 ) Interest
income on mortgage loans held in securitization trusts 38,749 -
143,371 - Interest expense on mortgage obligations issued by
securitization trusts (35,380 ) -
(132,411 ) - Net interest income 25,141 27,198
115,539 119,195
Property and other income Property
operating income 58,633 6,543 178,339 23,750 Other income
499 132 3,651 791
Total property and other income 59,132 6,675 181,990 24,541
Expenses Management fee expense 11,522 - 43,190 - Property
operating expense 24,430 2,271 73,616 7,978 Transaction, investment
and servicing expense (1,412 ) 444 36,800 2,570 Interest expense on
real estate 13,990 1,336 43,437 5,095 Depreciation and amortization
18,297 1,570 90,986 9,137 Provision for loan losses 79,369 518
113,911 518 Impairment of operating real estate 2,435 - 31,813 -
Administrative expense (including $3,208, $0, $7,113 and $0 of
equity-based compensation expense, respectively) 9,725
3,015 26,634 12,669
Total expenses 158,356 9,154
460,387 37,967
Other income
(loss) Unrealized gain on mortgage loans and obligations held
in securitization trusts, net 1,749 - 5,003 - Realized loss on
mortgage loans and obligations held in securitization trusts, net
(695 ) - (3,447 ) - Other gain (loss) on investments, net
(3,226 ) 3 (2,766 ) (390 )
Income
(loss) before equity in earnings of unconsolidated ventures and
income taxes (76,255 ) 24,722
(164,068 ) 105,379 Equity in earnings of
unconsolidated ventures (15,999 ) 9,410 23,774 24,709 Income tax
expense (39,906 ) (2,081 ) (37,059 )
(2,208 )
Net income (loss) (132,160 )
32,051 (177,353 ) 127,880 Net (income)
loss attributable to noncontrolling interests: Investment entities
1,983 (10,634 ) 4,771 (39,376 ) Operating Partnership 3,088
- 4,084 -
Net
income (loss) attributable to Colony Credit Real Estate, Inc.
common stockholders $ (127,089 ) $
21,417 $ (168,498 ) $
88,504 Net income (loss) per common share –
basic and diluted $ (1.00 ) $
0.45 $ (1.41 ) $
1.86 Weighted average shares of common
stock outstanding – basic and diluted $ 127,872
$ 44,399 $ 120,677
$ 44,399 COLONY CREDIT REAL ESTATE,
INC. RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL
INFORMATION (In thousands, except per share data)
(Unaudited)
GAAP Net Loss to
Core Earnings
Three Months EndedDecember 31,
2018
Year EndedDecember 31,
2018
Net loss attributable to Colony Credit Real Estate, Inc. common
stockholders $ (127,089 ) $ (168,498 ) Adjustments: Net income
attributable to noncontrolling interest of the Operating
Partnership (3,088 ) (4,084 ) Non-cash equity compensation expense
3,208 7,113 Transaction costs (1,045 ) 31,882 Depreciation and
amortization 19,161 93,272 Net unrealized loss: Provision for loan
losses(1) 79,369 114,428 Impairment of operating real estate(1)
2,435 31,813 Other unrealized loss 2,241 1,568
Depreciation, amortization and impairment
previously adjusted for Core earnings (loss) on real estate
sold
(9,491 ) (9,491 ) Adjustments related to noncontrolling interests
in investment entities (3,041 ) (11,891 )
Core earnings (loss) attributable to
Colony Credit Real Estate, Inc. common stockholders and
noncontrolling interest of the Operating Partnership(1)
$ (37,340 ) $ 86,112
Core earnings (loss) per share(2)(3)
$ (0.29 ) $ 0.70 Weighted average number of common shares
and OP units(2)(3) 130,948 123,752
____________________________________________________
(1)
Core earnings reflects adjustments to U.S.
GAAP net income to exclude impairment of real estate and provision
for loan losses. Upon realization of the related investments, such
impairment and losses, to the extent realized, would be reflected
in Core Earnings
(2) The Company calculates core earnings per share, a non-GAAP
financial measure, based on a weighted average number of common
shares and OP units (held by members other than the Company or its
subsidiaries). For the fourth quarter 2018, the weighted average
number of common shares and OP units was approximately 130.9
million (3) The Company calculates core earnings per share, a
non-GAAP financial measure, based on a weighted average number of
common shares and OP units (held by members other than the Company
or its subsidiaries). For Core Earnings per share, the Company
assumes 44.4 million shares of Class B-3 stock and 3.1 million of
OP units were outstanding prior to January 31, 2018 to reflect the
standalone pre-merger financial information of the accounting
acquirer. Following January 31, 2018, the Company assumes
approximately 131.0 million of shares of Class A common stock,
Class B-3 common stock and OP units were outstanding. For the year
ended 2018, the weighted average number of common shares and OP
units was approximately 123.8 million
GAAP Book Value
to Undepreciated Book Value
As ofDecember 31, 2018
GAAP book value (excluding noncontrolling interests in investment
entities) $ 2,772,519 Accumulated depreciation and amortization
82,398 Undepreciated book value $ 2,854,917 Undepreciated
book value per share(1) $ 21.81 Total common shares and OP units
outstanding(1) 130,885
____________________________________________________
(1) The Company calculates undepreciated book value
per share, a non-GAAP financial measure, 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 December 31, 2018, the total number of
common shares and OP units outstanding was approximately 130.9
million
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190228005866/en/
Investor RelationsColony Credit Real Estate, Inc.Addo
Investor RelationsLasse Glassen310-829-5400
Colony Credit Real Estate (NYSE:CLNC)
Historical Stock Chart
From Aug 2024 to Sep 2024
Colony Credit Real Estate (NYSE:CLNC)
Historical Stock Chart
From Sep 2023 to Sep 2024