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,
2020 and certain updates. The Company reported fourth quarter 2020
total Company GAAP net loss attributable to common stockholders of
$(52.5) million, or $(0.41) per share, and total Company
Distributable Loss of $(25.7) million, or $(0.20) per share.
Excluding realized gains and losses on sales and fair value
adjustments, total Company Adjusted Distributable Earnings of $26.1
million, or $0.20 per share. As of December 31, 2020, total Company
GAAP net book value of $12.96 per share and undepreciated book
value of $14.14 per share.
Michael J. Mazzei commented, “After an unprecedented year full
of uncertainty related to COVID-19, we have successfully stabilized
the balance sheet and pivoted the organization to offense. We have
approximately $588 million of cash-on-hand, which provides us with
flexibility to protect the balance sheet while growing earnings in
2021.”
Michael J. Mazzei commented, “We realize the importance of a
dividend to shareholders and I am happy to announce that we will be
reinstituting a quarterly dividend of $0.10 per share for the first
quarter of 2021. Through our new loan origination activity and
other efforts, we are focused on growing earnings and the dividend
over time.”
Supplemental Financial
Report
A Fourth 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.
Fourth Quarter 2020 Conference
Call
The Company will conduct a conference call to discuss the
financial results on February 24, 2021 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 24, 2021 at 5:00 p.m. PT / 8:00
p.m. ET, through March 3, 2021, 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 13714793. International callers should dial (412) 317-6671
and enter the same conference ID number.
Dividend Announcement
The Company’s Board of Directors declared a quarterly cash
dividend of $0.10 per share to holders of Class A common stock for
the first quarter of 2021, which will be paid on April 15, 2021 to
respective stockholders of record on March 31, 2021.
Non-GAAP Financial Measures and
Definitions
Distributable Earnings/Legacy, Non-Strategic Distributable
Earnings
We present Distributable Earnings/Legacy, Non-Strategic
Distributable Earnings, which is a non-GAAP supplemental financial
measure of our performance. Our Distributable Earnings are
generated by the Core Portfolio and Legacy, Non-Strategic
Distributable Earnings are generated by the Legacy, Non-Strategic
Portfolio. We believe that Distributable Earnings/Legacy,
Non-Strategic Distributable 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,
and this metric is a useful indicator for investors in evaluating
and comparing our operating performance to our peers and our
ability to pay dividends. We elected to be taxed as a REIT under
the Internal Revenue Code of 1986, as amended, beginning with our
taxable year ended December 31, 2018. As a REIT, we are required to
distribute substantially all of our taxable income and we believe
that dividends are one of the principal reasons investors invest in
credit or commercial mortgage REITs such as our company. Over time,
Distributable Earnings has been a useful indicator of our dividends
per share and we consider that measure in determining the dividend,
if any, to be paid. This supplemental financial measure also 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. For
information on the fees we pay our Manager, see Note 10, “Related
Party Arrangements” to our consolidated financial statements
included in the Form 10-K to be filed with the SEC.
We define Distributable Earnings/Legacy, Non-Strategic
Distributable 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 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 (“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 Distributable Earnings/Legacy,
Non-Strategic Distributable 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. Distributable
Earnings/Legacy, Non-Strategic Distributable Earnings include
provision for loan losses when realized. Loan losses are realized
when such amounts are deemed nonrecoverable at the time the loan is
repaid, or if the underlying asset is sold following foreclosure,
or if we determine that it is probable that all amounts due will
not be collected; realized loan losses to be included in
Distributable Earnings is the difference between the cash received,
or expected to be received, and the book value of the asset.
Distributable Earnings/Legacy, Non-Strategic Distributable
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. In addition, our methodology for calculating
Distributable Earnings/Legacy, Non-Strategic Distributable Earnings
may differ from methodologies employed by other companies to
calculate the same or similar non-GAAP supplemental financial
measures, and accordingly, our reported Distributable Earnings may
not be comparable to the Distributable Earnings reported by other
companies.
The Company calculates Distributable Earnings/Legacy,
Non-Strategic Distributable 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 including expenses related to our secured
revolving credit facility, 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. It also
includes two portfolios of real estate private equity interests and
certain retail and other legacy loans originated prior to the
combination that created the Company. This segment also includes
corporate-level asset management and other fees including expenses
related to secured revolving credit facility, related party and
general and administrative expenses related to the Legacy,
Non-strategic Portfolio only. Commencing with reporting in the
first quarter of 2021, we will no longer report this segment and
the remaining Legacy, Non-Strategic assets will be reported within
the Core Portfolio segments.
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, other hospitality
loans, and Dublin development financings), 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, 2020, 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; whether the Company will achieve its anticipated 2021
Distributable Earnings per share (as adjusted), or maintain or
produce higher Distributable Earnings per share (as adjusted) in
the near term or ever; the Company’s ability to maintain or grow
the dividend at all in the future, including the Company
maintaining its common stock dividend at $0.10 per share for each
quarter during calendar year 2021; 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 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, 2020 and Part II, Item 1A of the Company’s Form 10-Q
for the quarter ended September 30, 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)
December 31, 2020 December 31, 2019
Assets Cash and cash equivalents
$
474,817
$
69,619
Restricted cash
65,213
126,065
Loans and preferred equity held for investment
2,220,688
2,848,956
Allowance for loan losses
(37,191
)
(272,624
)
Loans and preferred equity held for investment, net
2,183,497
2,576,332
Real estate securities, available for sale, at fair value
10,389
252,824
Real estate, net
839,257
1,484,796
Investments in unconsolidated ventures ($6,883 and $10,283 at fair
value, respectively)
373,364
595,305
Receivables, net
37,375
46,456
Deferred leasing costs and intangible assets, net
75,700
112,762
Assets held for sale
323,356
189,470
Other assets
60,900
87,707
Mortgage loans held in securitization trusts, at fair value
1,768,069
1,872,970
Total assets
$
6,211,937
$
7,414,306
Liabilities Securitization bonds payable, net
$
835,153
$
833,153
Mortgage and other notes payable, net
1,022,757
1,256,112
Credit facilities
535,224
1,099,233
Due to related party
10,060
11,016
Accrued and other liabilities
96,578
140,424
Intangible liabilities, net
7,657
22,149
Liabilities related to assets held for sale
323
294
Escrow deposits payable
36,973
74,497
Dividends payable
-
13,164
Mortgage obligations issued by securitization trusts, at fair value
1,708,534
1,762,914
Total liabilities
4,253,259
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 December 31, 2020 and December
31, 2019, respectively
-
-
Common stock, $0.01 par value per share Class A, 950,000,000 shares
authorized, 128,564,930 and 128,538,703 shares issued and
outstanding as of December 31, 2020 and December 31, 2019,
respectively
1,286
1,285
Additional paid-in capital
2,844,023
2,909,181
Accumulated deficit
(1,234,224
)
(819,738
)
Accumulated other comprehensive income
54,588
28,294
Total stockholders’ equity
1,665,673
2,119,022
Noncontrolling interests in investment entities
253,225
31,631
Noncontrolling interests in the Operating Partnership
39,780
50,697
Total equity
1,958,678
2,201,350
Total liabilities and equity
$
6,211,937
$
7,414,306
COLONY CREDIT REAL ESTATE,
INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
(In thousands, except per
share data)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Net interest income Interest income
$
34,848
$
47,696
$
156,851
$
175,169
Interest expense
(12,128
)
(24,225
)
(63,043
)
(87,730
)
Interest income on mortgage loans held in securitization trusts
30,905
20,485
92,461
120,203
Interest expense on mortgage obligations issued by securitization
trusts
(29,325
)
(18,274
)
(83,952
)
(109,964
)
Net interest income
24,300
25,682
102,317
97,678
Property and other income Property operating income
37,124
62,562
175,037
253,955
Other income
757
902
1,836
2,333
Total property and other income
37,881
63,464
176,873
256,288
Expenses Management fee expense
7,504
8,320
29,739
42,390
Property operating expense
10,868
26,725
64,987
112,801
Transaction, investment and servicing expense
2,307
4,178
9,975
7,191
Interest expense on real estate
11,759
13,629
48,860
55,415
Depreciation and amortization
13,000
20,367
59,766
103,220
Provision for loan losses
(1,724
)
-
78,561
220,572
Impairment of operating real estate
9,302
(97
)
42,814
282,749
Administrative expense (including $1,100, $3,344, $4,367 and
$10,810 of equity-based compensation expense, respectively)
6,983
9,541
26,551
31,936
Total expenses
59,999
82,663
361,253
856,274
Other income (loss) Unrealized gain (loss) on
mortgage loans and obligations held in securitization trusts, net
(8,932
)
(512
)
(50,521
)
4,090
Realized gain on mortgage loans and obligations held in
securitization trusts, net
-
-
-
2,772
Other gain (loss), net
11,390
12,857
(118,725
)
(972
)
Income (loss) before equity in earnings of unconsolidated
ventures and income taxes
4,640
18,828
(251,309
)
(496,418
)
Equity in earnings (loss) of unconsolidated ventures
(65,284
)
18,980
(135,173
)
36,942
Income tax benefit (expense)
(646
)
(2,628
)
10,898
(3,172
)
Net income (loss)
(61,290
)
35,180
(375,584
)
(462,648
)
Net (income) loss attributable to noncontrolling interests:
Investment entities
7,563
(415
)
13,924
38,208
Operating Partnership
1,252
(813
)
8,361
9,928
Net income (loss) attributable to Colony Credit Real Estate,
Inc. common stockholders
$
(52,475
)
$
33,952
$
(353,299
)
$
(414,512
)
Net income (loss) per common share – basic and
diluted
$
(0.41
)
$
0.26
$
(2.75
)
$
(3.25
)
Weighted average shares of common stock outstanding –
basic and diluted
128,581
128,539
128,548
128,391
COLONY CREDIT REAL ESTATE,
INC.
RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL INFORMATION
(In thousands, except per
share data) (Unaudited)
GAAP Net Loss to
Distributable Loss / Legacy, Non-Strategic Distributable
Loss
Three Months Ended December 31, 2020
Core Portfolio
Legacy, Non-
Strategic Portfolio
Total
Net loss attributable to Colony Credit Real Estate, Inc. common
stockholders
$
(42,742
)
$
(9,733
)
$
(52,475
)
Adjustments: Net loss attributable to noncontrolling interest of
the Operating Partnership
(1,019
)
(233
)
(1,252
)
Non-cash equity compensation expense
880
220
1,100
Transaction costs
243
61
304
Depreciation and amortization
9,669
3,494
13,163
Net unrealized loss (gain) on investments: Impairment of operating
real estate and preferred equity
-
9,302
9,302
Other unrealized loss on investments
10,526
-
10,526
CECL reserves
(1,650
)
-
(1,650
)
Gains on sales of real estate and preferred equity
(585
)
(3,893
)
(4,478
)
Adjustments related to noncontrolling interests in investment
entities
-
(198
)
(198
)
Distributable Loss / Legacy, Non-Strategic Distributable Loss
attributable to Colony Credit Real Estate, Inc. common stockholders
and noncontrolling interest of the Operating Partnership
$
(24,678
)
$
(980
)
$
(25,658
)
Distributable Loss / Legacy, Non-Strategic Distributable Loss per
share(1)
$
(0.19
)
$
(0.01
)
$
(0.20
)
Weighted average number of common shares and OP units(1)
131,657
131,657
131,657
_______________
(1)
The Company calculates Distributable Loss
/ LNS Distributable 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 December 31, 2020, the
weighted average number of common shares and OP units was
approximately 131.7 million; includes 3.1 million of OP units
Distributable
Loss / Legacy, Non-Strategic Distributable Loss to Adjusted
Distributable Earnings / Legacy, Non-Strategic Distributable
Earnings
Three Months Ended December 31, 2020
Core Portfolio
Legacy, Non-
Strategic Portfolio
Total
Distributable Loss / Legacy, Non-Strategic Distributable Loss
attributable to Colony Credit Real Estate, Inc. common stockholders
and noncontrolling interest of the Operating Partnership
$
(24,678
)
$
(980
)
$
(25,658
)
Adjustments: Realized gain on CRE debt securities sales
(9,736
)
-
(9,736
)
Fair value adjustments on investments in unconsolidated ventures
57,743
-
57,743
Realized loss on investments in unconsolidated ventures
-
2,598
2,598
Income tax expense
-
1,113
1,113
Adjusted Distributable Earnings / Legacy, Non-Strategic
Distributable Earnings attributable to Colony Credit Real Estate,
Inc. common stockholders and noncontrolling interest of the
Operating Partnership(1)
$
23,329
$
2,731
$
26,060
Adjusted Distributable Earnings / Legacy, Non-Strategic
Distributable Earnings per share(1)(2)
$
0.18
$
0.02
$
0.20
Weighted average number of common shares and OP units(2)
131,657
131,657
131,657
_______________
(1)
Adjusted Distributable Earnings / LNS
Distributable Earnings excludes realized gains and losses on sales
and fair value adjustments
(2)
The Company calculates Adjusted
Distributable Earnings / LNS Distributable Earnings 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
December 31, 2020, the weighted average number of common shares and
OP units was approximately 131.7 million; includes 3.1 million of
OP units
GAAP Net Book
Value to Undepreciated Book Value
As of December 31, 2020
Core Portfolio
Legacy, Non-
Strategic Portfolio
Total
GAAP net book value (excl. noncontrolling interests in investment
entities)
$
1,709,289
$
(3,836
)
$
1,705,453
Accumulated depreciation and amortization(1)
94,078
61,752
155,830
Undepreciated book value
$
1,803,367
$
57,916
$
1,861,283
GAAP net book value per share (excl. noncontrolling
interests in investment entities)
$
12.98
$
(0.02
)
$
12.96
Accumulated depreciation and amortization per share(1)
0.72
0.46
1.18
Undepreciated book value per share
$
13.70
$
0.44
$
14.14
Total common shares and OP units outstanding(2)
131,641
131,641
131,641
_______________
(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, which are non-GAAP
financial measures, 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, 2020, the total number of common shares and OP units
outstanding was approximately 131.6 million
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Investor Relations Colony Credit Real Estate, Inc. Addo
Investor Relations Lasse Glassen 310-829-5400
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