Colony Credit Real Estate, Inc. (NYSE: CLNC) (“Colony Credit
Real Estate” or the “Company”) today announced its financial
results for the second quarter ended June 30, 2020 and certain
updates. The Company reported second quarter 2020 total Company
GAAP net income (loss) attributable to common stockholders of
$(227.1) million, or $(1.77) per share, and total Core/LNS
Earnings/(Loss) of $(230.5) million, or $(1.75) per share. These
resulted from certain loan losses and fair value adjustments,
losses incurred on sales of both loans and CMBS securities as well
as the completion of a non-recourse asset level financing.
Excluding such provisions for losses and fair value adjustments,
total Core/LNS Earnings were $34.7 million, or $0.26 per share.
Total Company GAAP net book value was $13.06 per share and
undepreciated book value was $14.43 per share, as of June 30,
2020.
Michael J. Mazzei commented, “COVID-19 is persistent and remains
a significant global event. We are committed to the welfare of all
our stakeholders as we work through these difficult times.”
Michael J. Mazzei commented, “During the second quarter and
subsequently, mindful of an unprecedented and uncertain economic
environment, we focused on solidifying our business and improving
overall financial flexibility by selling and financing select
assets with a goal of generating balance sheet liquidity. Our
strategic resolutions focused primarily on certain Core Portfolio
investments which included CMBS securities, certain hotel and
preferred equity interests as well as legacy, non-strategic
portfolio investments. While incurring losses this quarter, we more
than doubled our liquidity to approximately $525 million while also
reducing our recourse financing by over $600 million.
Mr. Mazzei continued, “These decisive actions equip us to better
navigate the challenges of COVID-19 as well as improve our
positioning for future investment and growth opportunities.”
Supplemental Financial
Report
A Second 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.
Second Quarter 2020 Conference
Call
The Company will conduct a conference call to discuss the
financial results on August 6, 2020 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 August 6, 2020 at 5:00 p.m. PT / 8:00
p.m. ET, through August 13, 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 13706786. 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. The Special Committee
has continued to explore alternatives but has been 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.
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 the ability to
source additional capital commitments to support such project),
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 March 31, 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)
June 30, 2020 (Unaudited) December 31, 2019
Assets Cash and cash equivalents
$ 437,951
$ 69,619
Restricted cash
84,011
126,065
Loans and preferred equity held for investment, net
2,242,574
2,576,332
Real estate securities, available for sale, at fair value
60,010
252,824
Real estate, net
823,531
1,484,796
Investments in unconsolidated ventures ($7,093 and $10,283 at fair
value, respectively)
417,307
595,305
Receivables, net
46,325
46,456
Deferred leasing costs and intangible assets, net
79,780
112,762
Assets held for sale
760,290
189,470
Other assets
58,535
87,707
Mortgage loans held in securitization trusts, at fair value
1,839,953
1,872,970
Total assets
$ 6,850,267
$ 7,414,306
Liabilities Securitization bonds payable, net
$ 834,088
$ 833,153
Mortgage and other notes payable, net
1,174,146
1,256,112
Credit facilities
900,173
1,099,233
Due to related party
9,639
11,016
Accrued and other liabilities
101,945
140,424
Intangible liabilities, net
8,378
22,149
Liabilities related to assets held for sale
12,131
294
Escrow deposits payable
50,605
74,497
Dividends payable
-
13,164
Mortgage obligations issued by securitization trusts, at fair value
1,758,325
1,762,914
Total liabilities
4,849,430
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 June 30, 2020 and December 31,
2019, respectively
-
-
Common stock, $0.01 par value per share Class A, 950,000,000 shares
authorized, 128,583,198 and 128,538,703 shares issued and
outstanding as of June 30, 2020 and December 31, 2019, respectively
1,286
1,285
Additional paid-in capital
2,840,134
2,909,181
Accumulated deficit
(1,186,754
)
(819,738
)
Accumulated other comprehensive income (loss)
25,241
28,294
Total stockholders’ equity
1,679,907
2,119,022
Noncontrolling interests in investment entities
281,041
31,631
Noncontrolling interests in the Operating Partnership
39,889
50,697
Total equity
2,000,837
2,201,350
Total liabilities and equity
$ 6,850,267
$ 7,414,306
COLONY CREDIT REAL ESTATE,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per
share data) (Unaudited)
Three Months Ended June
30,
2020
2019
Net interest income Interest income
$ 39,508
$ 42,073
Interest expense
(16,745
)
(21,046
)
Interest income on mortgage loans held in securitization trusts
20,539
38,656
Interest expense on mortgage obligations issued by securitization
trusts
(18,364
)
(35,756
)
Net interest income
24,938
23,927
Property and other income Property operating income
43,722
64,767
Other income (loss)
(8,360
)
434
Total property and other income
35,362
65,201
Expenses Management fee expense
7,206
11,357
Property operating expense
16,311
28,140
Transaction, investment and servicing expense
2,907
1,051
Interest expense on real estate
11,818
13,898
Depreciation and amortization
14,020
29,257
Provision for loan losses
(51
)
110,258
Impairment of operating real estate
25,935
10,124
Administrative expense (including $1,549 and $2,713 of equity-based
compensation expense, respectively)
6,751
8,010
Total expenses
84,897
212,095
Other income (loss) Unrealized gain (loss) on
mortgage loans and obligations held in securitization trusts, net
(8,975
)
5,549
Other loss, net
(119,633
)
(6,062
)
Loss before equity in earnings of unconsolidated ventures and
income taxes
(153,205
)
(123,480
)
Equity in earnings (loss) of unconsolidated ventures
(85,277
)
12,557
Income tax benefit (expense)
(2,102
)
133
Net loss
(240,584
)
(110,790
)
Net loss attributable to noncontrolling interests: Investment
entities
8,107
880
Operating Partnership
5,418
2,569
Net loss attributable to Colony Credit Real Estate, Inc. common
stockholders
$ (227,059
)
$ (107,341
)
Net loss per common share – basic and diluted
$ (1.77
)
$ (0.84
)
Weighted average shares of common stock outstanding –
basic and diluted
128,539
128,534
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 (Loss)/LNS Earnings (Loss)
Three Months Ended June 30, 2020 Total
Legacy, Non-Strategic Portfolio Core Portfolio Net
loss attributable to Colony Credit Real Estate, Inc. common
stockholders
$ (227,059
)
$ (16,728
)
$ (210,331
)
Adjustments: Net loss attributable to noncontrolling interest of
the Operating Partnership
(5,418
)
(373
)
(5,045
)
Non-cash equity compensation expense
1,549
697
852
Transaction costs
705
292
413
Depreciation and amortization
13,386
4,318
9,068
Net unrealized loss (gain) on investments: Impairment of operating
real estate and preferred equity
25,935
25,935
-
Other unrealized gain on investments
(23,798
)
(1
)
(23,797
)
CECL reserves
(20,925
)
-
(20,925
)
Losses on sale of operating real estate and preferred equity
13,520
3,437
10,083
Adjustments related to noncontrolling interests in investment
entities
(8,428
)
(8,329
)
(99
)
Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss)
attributable to Colony Credit Real Estate, Inc. common stockholders
and noncontrolling interest of the Operating Partnership
$ (230,533
)
$ 9,248
$ (239,781
)
Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss) per
share(1)
$ (1.75
)
$ 0.07
$ (1.82
)
Weighted average number of common shares and OP units(1)
131,615
131,615
131,615
(1)
The Company calculates Core Earnings (Loss)/Legacy,
Non-Strategic Earnings (Loss) 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 June 30, 2020, the
weighted average number of common shares and OP units was
approximately 131.6 million; includes 3.1 million of OP units
Core Earnings
(Loss)/LNS Earnings (Loss) to Core Earnings (Loss)/LNS Earnings
(Loss) Excluding Gains/(Losses)
Three Months Ended June 30, 2020 Total
Legacy, Non-Strategic Portfolio Core Portfolio Core
Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss)
attributable to Colony Credit Real Estate, Inc. common stockholders
and noncontrolling interest of the Operating Partnership
$ (230,533
)
$ 9,248
$ (239,781
)
Adjustments: Realized loss on CRE debt securities sales
57,045
-
57,045
Realized loss on unwind of IRS hedges
34,019
-
34,019
Provision for loan losses
58,866
-
58,866
Reversal of provision for loan losses on note sales
(10,202
)
(10,202
)
-
Fair value adjustments on investments in unconsolidated ventures
96,236
-
96,236
Impairment of CRE debt securities
29,240
-
29,240
Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss)
excluding gains / (losses) attributable to Colony Credit Real
Estate, Inc. common stockholders and noncontrolling interest of the
Operating Partnership
$ 34,670
$ (954
)
$ 35,625
Core Earnings (Loss) / Legacy, Non-Strategic Earnings (Loss)
excluding gains / (losses) per share(1)
$ 0.26
$ (0.01
)
$ 0.27
Weighted average number of common shares and OP units(1)
131,615
131,615
131,615
(1)
The Company calculates Core Earnings (Loss) / Legacy,
Non-Strategic Earnings (Loss) excluding gains / (losses) 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 June
30, 2020, the weighted average number of common shares and OP units
was approximately 131.6 million; includes 3.1 million of OP
units
GAAP Net Book
Value to Undepreciated Book Value
As of June 30, 2020
Total Legacy, Non-Strategic Portfolio Core
Portfolio GAAP net book value (excl. noncontrolling interests
in investment entities)
$ 1,719,796
$ 88,649
$ 1,631,147
Accumulated depreciation and amortization(1)
180,467
82,727
97,740
Undepreciated book value
$ 1,900,263
$ 171,376
$ 1,728,887
GAAP net book value per share (excl. noncontrolling
interests in investment entities)
$ 13.06
$ 0.67
$ 12.39
Accumulated depreciation and amortization per share(1)
1.37
0.63
0.74
Undepreciated book value per share
$ 14.43
$ 1.30
$ 13.13
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, 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 June 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/20200806005897/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 Mar 2024 to Apr 2024
Colony Credit Real Estate (NYSE:CLNC)
Historical Stock Chart
From Apr 2023 to Apr 2024