Tremont Mortgage Trust Reports First Quarter 2019 Results

First Quarter Loan Originations of $47.5 Million

First Quarter Net Income per diluted share of $0.18

First Quarter Core Earnings per diluted share of $0.20

Quarterly Dividend Increased from $0.11 to $0.22 per common share

NEWTON, Mass.–(BUSINESS WIRE)–Tremont Mortgage Trust (Nasdaq: TRMT) today announced financial results
for the quarter ended March 31, 2019.

David Blackman, President and Chief Executive Officer of TRMT, made the
following statement:

Tremont achieved three important milestones since its last quarterly
earnings announcement. First, we fully committed the remainder of our
IPO capital by closing two first mortgage whole loans for $47.5 million
in aggregate commitments. Second, our manager, a wholly owned subsidiary
of The RMR Group, committed $50.0 million in debt capital to us, which
will allow us to originate approximately $180.0 million in new first
mortgage whole loans while we explore other capital raising
opportunities. Third, we increased our quarterly distribution rate from
$0.11 per common share to $0.22 per common share.

Our origination momentum remains strong. Since the end of the first
quarter, we closed an additional two first mortgage whole loans for
$65.6 million in aggregate commitments, we have one whole loan under
application for a $14.5 million commitment and we have a number of term
sheets outstanding.”

Results for the Quarter Ended March 31, 2019:

For the quarter ended March 31, 2019, net income was $0.6 million, or
$0.18 per diluted share. For the quarter ended March 31, 2019, TRMT
generated interest income of $3.0 million and incurred interest and
related expenses of $1.5 million, which resulted in $1.5 million of
income from investments, net.

Core Earnings for the quarter ended March 31, 2019 was $0.6 million, or
$0.20 per diluted share.

Additional information and a reconciliation of net income determined in
accordance with U.S. generally accepted accounting principles, or GAAP,
to Core Earnings, a non-GAAP measure, for the quarters ended March 31,
2019 and 2018 appear later in this press release.

Recent Investment Activities:

In January 2019, TRMT closed a $24.6 million first mortgage whole loan
to finance the acquisition of a 432 unit apartment community located in
Rochester, NY at an as is loan to value ratio, or LTV, of approximately
74%. This loan requires the borrower to pay interest at a per annum
floating rate of LIBOR plus a premium of 325 basis points. This loan was
fully funded at closing and has a three year initial term with two, one
year, extension options subject to the borrower meeting certain
conditions.

In February 2019, TRMT closed a $22.9 million first mortgage whole loan
to refinance a 96,000 square foot retail center located in Coppell, TX
at an as is LTV of approximately 73%. This loan requires the borrower to
pay interest at a per annum floating rate of LIBOR plus a premium of 350
basis points. This loan funded $20.0 million at closing, includes a
future funding allowance of $2.9 million for building improvements and
leasing capital and has a two year term with no extension options. As of
March 31, 2019, TRMT had not advanced any of the future funding
allowance.

During the first quarter of 2019, a loan application on an office
portfolio located in Dallas, TX, expired. TRMT decided not to extend
this application due to conditions uncovered during diligence that did
not meet its investment criteria.

In May 2019, TRMT closed a $37.6 million first mortgage whole loan to
finance the acquisition of a 932,000 square foot industrial facility in
Barrington, NJ at an as is LTV of approximately 79%. This loan requires
the borrower to pay interest at a per annum floating rate of LIBOR plus
a premium of 350 basis points. This loan funded $34.9 million at
closing, includes a future funding allowance of $2.7 million for
building improvements and leasing capital and has a three year term with
a one year extension option subject to the borrower meeting certain
conditions.

Also in May 2019, TRMT closed a $28.0 million first mortgage whole loan
to refinance a 220 unit apartment community in Houston, TX at an as is
LTV of approximately 56%. This loan requires the borrower to pay
interest at a per annum floating rate of LIBOR plus a premium of 350
basis points. This loan funded $27.5 million at closing, includes a
future funding allowance of $0.5 million to cover interest shortfalls
and has an 18 month term with two, one year, extension options subject
to the borrower meeting certain conditions.

Additionally, TRMT entered into a loan application with a borrower for a
first mortgage whole loan with a total commitment of $14.5 million to
finance the acquisition of a retail property in Omaha, NE.

Recent Financing Activities:

As previously reported, in February 2019, TRMT entered into a credit
agreement with its manager, Tremont Realty Advisors LLC, as lender, or
the RMR Credit Agreement, pursuant to which, from time to time within
six months following the date of the RMR Credit Agreement, TRMT could
borrow up to $25.0 million in unsecured loans at a rate of 6.50% per
annum. In May 2019, TRMT’s manager increased its total commitment under
the RMR Credit Agreement to $50.0 million. TRMT intends to use the
proceeds of any borrowings under the RMR Credit Agreement principally to
fund additional investments in first mortgage whole loans consistent
with TRMT’s business strategy and approved by its Board of Trustees. As
of May 13, 2019, there was $14.2 million of outstanding borrowings under
the RMR Credit Agreement.

In connection with the increase in commitment under the RMR Credit
Agreement, also in May 2019, TRMT amended its master repurchase
agreement with Citibank, N.A., or Citibank, to increase the maximum
amount available for advancement under the master repurchase facility
from $210.0 million to $250.0 million, with the additional advancements
becoming available for borrowing under the facility if and as TRMT
borrows under the RMR Credit Agreement or if and as TRMT receives
proceeds from any public offering of its common shares or preferred
equity, as further provided in the master repurchase facility agreement.

During the quarter ended March 31, 2019, Citibank advanced an aggregate
of $31.9 million to TRMT under the master repurchase facility with
respect to two first mortgage whole loans. This aggregate amount
represented 75% of the aggregate outstanding principal of those two
first mortgage whole loans. In May 2019, Citibank advanced an additional
$48.2 million to TRMT under the facility with respect to the two first
mortgage whole loans that closed in May 2019.

Distributions:

On February 21, 2019, TRMT paid a distribution of $0.11 per common
share, or $350,000. This distribution was paid to shareholders of record
as of the close of business on January 28, 2019.

On April 18, 2019, TRMT declared a distribution payable to common
shareholders of record on April 29, 2019 of $0.22 per common share, or
approximately $700,000. TRMT expects to pay this distribution on or
about May 16, 2019.

Conference Call:

At 10:00 a.m. Eastern Time this morning, President and Chief Executive
Officer, David Blackman, and Chief Financial Officer and Treasurer, Doug
Lanois, will host a conference call to discuss TRMT’s first quarter 2019
financial results. 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 Tuesday, May 21, 2019. To access the
replay, dial (412) 317-0088. The replay pass code is 05142019.

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 following the call for about one
week. 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 2019 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.

TRMT is a real estate finance company that focuses primarily on
originating and investing in 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 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 Core Earnings (Loss) which is considered a “non-GAAP
financial measure” within the meaning of the applicable SEC rules. Core
Earnings (Loss) does not represent net income (loss) or cash generated
from operating activities and should not be considered as an alternative
to net income (loss) 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 Core Earnings (Loss) may differ from the
methodologies employed by other companies to calculate the same or
similar supplemental performance measures; therefore, TRMT’s reported
Core Earnings (Loss) may not be comparable to the core earnings as
reported by other companies.

TRMT believes that Core Earnings (Loss) 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 and GAAP adjustments that TRMT believes are not necessarily
indicative of TRMT’s current loan portfolio and operations. In addition,
Core Earnings (Loss) is used in determining the amount of business
management and 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 Core Earnings (Loss) and a reconciliation of
net income (loss) 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,
2019   2018
INCOME FROM INVESTMENTS:
Interest income from investments $ 3,000 $ 233
Less: interest and related expenses (1,549 ) (37 )
Income from investments, net 1,451   196  
 
OTHER EXPENSES:
Management fees (1) 225
General and administrative expenses 503 545
Reimbursement of shared services expenses 370   375  
Total expenses 873   1,145  
 
Net income (loss) $ 578   $ (949 )
 
Weighted average common shares outstanding – basic 3,136   3,111  
Weighted average common shares outstanding – diluted 3,142   3,111  
 
Net income (loss) per common share – basic and diluted $ 0.18   $ (0.31 )
 

(1)In June 2018, TRMT’s manager agreed to waive any
base management fees otherwise due and payable pursuant to TRMT’s
management agreement for the period beginning July 1, 2018 until June
30, 2020. As a result, TRMT did not recognize any base management fees
for the quarter ended March 31, 2019. If TRMT’s manager had not agreed
to waive these base management fees, TRMT would have recognized base
management fees of $223 for the quarter ended March 31, 2019.

     
TREMONT MORTGAGE TRUST
CALCULATION AND RECONCILIATION OF CORE EARNINGS (LOSS)
(amounts in thousands, except per share data)
(unaudited)
 
 
Three Months Ended March 31,
2019   2018
Reconciliation of Net Income (Loss) to Core Earnings (Loss)(1):
Net income (loss) $ 578 $ (949 )
Non-cash equity compensation expense 35   28  
Core Earnings (Loss) $ 613   $ (921 )
 
Weighted average common shares outstanding – basic 3,136   3,111  
Weighted average common shares outstanding – diluted 3,142   3,111  
 
Core Earnings (Loss) per common share – basic and diluted $ 0.20   $ (0.30 )
 

(1)TRMT defines Core Earnings (Loss) as net income
(loss), computed in accordance with GAAP, including realized losses not
otherwise included in net income (loss) determined in accordance with
GAAP, and excluding: (a) the 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 (loss) for the period of
the calculation (regardless of whether such items are included in or
deducted from net income (loss) or in other comprehensive income (loss)
under GAAP) (if any); and (e) one time events pursuant to changes in
GAAP and certain non-cash items (if any).

       
TREMONT MORTGAGE TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)
 
 
March 31, December 31,
2019 2018

ASSETS

Cash and cash equivalents $ 13,899 $ 27,024
Restricted cash 429 311
Loans held for investment, net 180,911 135,844
Accrued interest receivable 683 344
Prepaid expenses and other assets 286   390  
Total assets $ 196,208   $ 163,913  
 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Accounts payable, accrued liabilities and deposits $ 1,189 $ 935
Master repurchase facility, net 103,576 71,691
Note payable, net 31,504 31,485
Due to related persons 8   134  
Total liabilities 136,277   104,245  
 
Commitments and contingencies
 
Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value per share;
25,000,000 shares authorized; 3,178,817 shares issued and outstanding
32 32
Additional paid in capital 62,575 62,540
Cumulative net loss (2,326 ) (2,904 )
Cumulative distributions (350 )  
Total shareholders’ equity 59,931   59,668  
Total liabilities and shareholders’ equity $ 196,208   $ 163,913  
 

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. Blackman’s statement that TRMT’s manager committed $50.0 million
    to TRMT in debt capital which will allow TRMT to originate
    approximately $180.0 million in new first mortgage whole loans while
    it explores other capital raising opportunities may imply that TRMT
    will receive such additional capital. TRMT’s manager’s obligation to
    fund this commitment is subject to conditions; if those conditions are
    not satisfied or waived by TRMT’s manager, TRMT may not receive such
    capital. Further, TRMT may not be successful in obtaining all or any
    of the leverage it expects it may be able to obtain as a result of
    TRMT’s manager’s capital commitment. In addition, TRMT may not be able
    to obtain additional longer term capital on desirable terms or at all.
  • Mr. Blackman’s statement that TRMT has raised its distribution rate
    from $0.11 per common share to $0.22 per common share may imply that
    TRMT will continue to declare and pay quarterly distributions at these
    or higher amounts in the future; however, any future distributions
    TRMT may make are subject to being declared by TRMT’s Board of
    Trustees, in its sole discretion. TRMT’s Board of Trustees considers
    many factors when determining whether to declare distributions,
    including TRMT’s historical and projected income, Core Earnings
    (Loss), the then current and expected needs and availability of cash
    to pay TRMT’s obligations and fund its investments, distributions
    which may be required to be paid by TRMT to maintain its qualification
    for taxation as a real estate investment trust and other factors
    deemed relevant by TRMT’s Board of Trustees in its discretion.
    Accordingly, any future distributions by TRMT could decline in amount
    or be suspended or discontinued.
  • Mr. Blackman’s statement that TRMT’s origination momentum remains
    strong may imply that TRMT’s financial condition and results of
    operations will continue to improve as a result. However, TRMT’s
    business momentum and additional opportunities may not be successfully
    realized or provide TRMT with the currently expected benefits.
    Further, TRMT’s business is subject to various risks, including those
    not within TRMT’s control, which may prevent TRMT’s successful
    execution of its business strategy and decrease the likelihood that
    TRMT will realize the currently expected benefits from pursuing and
    executing that strategy.
  • TRMT’s pending and prospective loans and applications may not be
    completed or become loans, the timing for when they may become loans
    may be delayed or their terms may change.

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.

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.

Contacts

Christopher Ranjitkar
Senior Director, Investor Relations
(617)
796-7651

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