Colony Credit Real Estate, Inc. Provides Company Updates
April 17 2020 - 5:26PM
Business Wire
Colony Credit Real Estate, Inc. (NYSE: CLNC) (“Colony Credit
Real Estate” or the “Company”) announced today updates on its
continuing business operations and a suspension of its monthly
dividend in connection with the impact of the COVID-19 global
pandemic.
- Management Actions. Michael J.
Mazzei joined as Chief Executive Officer and President of the
Company on April 1, 2020. Mr. Mazzei and management have been
engaged in the Company’s business, including banking, financial,
borrower and partner relationships, regarding its properties and
business operations, and taking measures to support the balance
sheet and financial flexibility, as described in further detail
below. In addition, notwithstanding governmental mandated stay-home
policies, business continuity systems at the Company and its
manager have allowed the team to effectively communicate, execute
corporate, investment and portfolio management demands, maintain
internal financial and other controls, and stay virtually
connected, while protected by in-place cybersecurity systems and
protocols.
- Cash Position. As of the date
hereof, the Company has approximately $329 million of available
liquidity between cash on hand and the Company’s corporate
revolving credit facility.
- Corporate Revolving Bank Credit
Facility. As of December 31, 2019 and the date hereof, the
borrowing base valuation is sufficient to support the outstanding
borrowings under the bank credit facility. Given ongoing impact of
the COVID-19 global pandemic on the Company’s underlying
investments, the Company is in discussions regarding potential
modifications to the bank credit facility.
- CRE CMBS Securities and Master Repurchase
Facilities. As of December 31, 2019, the Company’s exposure
to CRE CMBS securities had a carrying value of $362.8 million,
which was approximately 6.5% of the Company’s total book value and
8% of the book value of the Company’s Core Portfolio. As of
December 31, 2019, $252.7 million of such CRE CMBS securities were
financed by master repurchase facilities. The Company has met all
margin calls under financing arrangements on its CMBS securities,
with the most recent call received and timely paid on March 26,
2020. Subsequently:
- On April 6, 2020, the Company consolidated its CMBS securities
master repurchase facility borrowings with one existing
counterparty bank.
- On April 6, 2020, the Company paid down its master repurchase
facility borrowing advance rate to a blended borrowing advance rate
of 61% and extended the repurchase date on all such borrowings to
June 30, 2020. This pay down provides a 15% buffer on a bond
specific basis before further margin calls.
- As of the date hereof, the Company maintains approximately $125
million of repurchase financing on such CMBS securities, which are
collateralized by both investment grade-rated bonds ($99 million
obligation) and non-investment grade-rated bonds ($26 million
obligation). The financing bears a fixed interest rate of
4.50%.
- Senior Loans and Master Repurchase
Facilities. As of December 31, 2019, the Company’s exposure
to CRE senior mortgage loan investments had a carrying value of
$2.33 billion, which was approximately 42% of the Company’s total
book value and 51% of the book value of the Company’s Core
Portfolio; $1.1 billion was financed with $780.2 million under its
senior loan master repurchase facilities with 5 repurchase facility
bank lenders.
- As of the date hereof, the Company’s exposure to senior loan
master repurchase facility financing was approximately $715
million, diversified across 23 loans. As a percentage of total
outstanding borrowings, this repurchase financing is comprised of
37% office, 24% hospitality, 11% self-storage, 10% multifamily, 7%
mixed-use, 7% student housing and 2% retail.
- Hospitality and Retail Senior Mortgage
Loans on Repurchase Financing. As of the date hereof, the
Company maintains (i) four senior mortgage hospitality loans with
aggregate outstanding borrowings of $172.7 million and (ii) one
senior mortgage retail loan with outstanding borrowing of $15.2
million. The Company received and timely paid one margin call on
one hospitality loan. In addition, the Company made voluntarily
paydowns on 2 other hospitality loans and the retail loan, received
a holiday from future margin calls between 3 and 4 months, and
obtained broader discretion to enter into permitted modifications
with its borrowers on these 3 specific loans, if necessary, in the
upcoming 4 to 6 months.
- Other Efforts. The Company is in
active discussions with other master repurchase facility lenders to
achieve a result similar to the agreements described above, either
on an asset specific basis or across all assets with the specific
lender.
- Legacy, Non-Strategic (“LNS”) Portfolio
Sales. During the first quarter of 2020 through the date
hereof:
- 10 Sold Investments: 10 LNS
investments were sold for a total gross sales price of $231 million
and a net sales price of $153 million after transaction costs, debt
repayment and promote, representing an approximately $4 million
loss and a 3% discount to GAAP net book value on such
investments.
- NY Hospitality Loans. Given the
immediate and significant detrimental impact of COVID-19 on the
U.S. hospitality industry, including on operations at the
1,300-room hotel collateralizing the Company’s four New York
Hospitality Loans, subsidiaries of the Company are discussing
solutions with the borrowers and other related parties. The Company
anticipates incurring an approximate $37 million loss (or $0.27 per
common share) against the carrying value of such investment as of
December 31, 2019.
- Investment and Portfolio Updates.
- No New Investments in 2020. The
Company has not closed any new investments in 2020 through the date
hereof and is primarily focused on existing investments and
commitments.
- Loan Portfolio Management; Use of
Reserves and/or Payment-in-Kind. The Company is working
closely with its borrowers to address the impacts of COVID-19 on
their business. To the extent that certain borrowers are
experiencing significant financial dislocation, the Company may
consider the use of interest and other reserves and/or
replenishment obligations of the borrower and/or guarantors to meet
current interest payment obligations, for a limited period of time.
Similarly, the Company may evaluate converting certain current
interest payment obligations to payment-in-kind as a potential
bridge period solution.
- Dividend Policy. The COVID-19
pandemic has caused extraordinary volatility and unprecedented
market conditions, including actual and unanticipated consequences
to the Company and certain investments, which may continue. Having
made stock dividend payments through March 31, 2020, the Board of
Directors and management believe it is prudent and in the best
interests of the Company to conserve available liquidity and
suspend the Company’s monthly stock dividend beginning with the
monthly period ending April 30, 2020. The Board of Directors will
evaluate dividends in future periods based upon customary
considerations, including market conditions. Importantly, the
Company continues to monitor its taxable income to ensure that the
Company meets the minimum distribution requirements to maintain its
status as a REIT for the annual period ending December 31,
2020.
- Internalization Discussions with Colony
Capital, Inc. 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 Securities and
Exchange Commission) that it has postponed any decision regarding a
disposition of its management agreement with the Company until
market conditions improve. Previously, on February 27, 2020, the
Company and Colony Capital, Inc. acknowledged a process regarding
the potential disposition of Colony Capital’s management agreement
with the Company, subject to its consent, whether in the form of an
internalization of the Company’s management, a sale of Colony
Capital’s management agreement with the Company to a third-party,
or similar transaction the effect of which is to dispose of Colony
Capital’s management agreement with the Company.
For further information regarding the Company’s business,
portfolio and earnings, and risk factors, see the cautionary
statement regarding forward-looking statements below and the
Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, as well as the Company’s other filings with the
Securities and Exchange Commission.
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
elected to be taxed as a REIT for U.S. federal income tax purposes
commencing with our initial taxable year ended 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; 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), 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, 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.
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Investor Relations Colony Credit Real Estate, Inc. Addo
Investor Relations Lasse Glassen 310-829-5400
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