Tremont Mortgage Trust Reports Fourth Quarter and Year End 2018 Results

Income From Investments, Net, For The Fourth Quarter of $1.0
Million

Fourth Quarter Loan Originations of $66.3 Million

Declared First Quarterly Distribution in January 2019

NEWTON, Mass.–(BUSINESS WIRE)–Tremont Mortgage Trust (Nasdaq: TRMT) today announced its financial
results for the quarter and year ended December 31, 2018.

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

Our primary business strategy is to deploy capital principally as
investments in first mortgage loans secured by middle market and
transitional commercial real estate and to return cash to our
shareholders by paying a quarterly distribution. We closed three loans
totaling $66.3 million during the fourth quarter of 2018 and we closed
two additional loans totaling $47.5 million since year end, increasing
our total loan commitments to $202.2 million. Also, in January 2019 we
declared our first distribution of $0.11 per common share, and we expect
to declare a distribution of between $0.20 and $0.24 per common share in
the second quarter of 2019. Our origination activity remains robust,
with our manager having committed to us $25.0 million of additional
capital. We believe, with leverage, that this additional capital will
support approximately $100.0 million of additional loan originations. We
remain confident in our business model and long term prospects.”

Results for the Quarter and Year Ended December 31, 2018:

For the quarter ended December 31, 2018, net income was $0.2 million, or
$0.06 per diluted share. For the quarter ended December 31, 2018, TRMT
generated interest income of $1.8 million and incurred interest and
related expenses of $0.8 million, which resulted in $1.0 million of
income from investments, net.

For the year ended December 31, 2018, net loss was $1.6 million, or
$0.51 per diluted share. For the year ended December 31, 2018, TRMT
generated interest income of $3.9 million and incurred interest and
related expenses of $1.5 million, which resulted in $2.4 million of
income from investments, net.

Recent Investment Activities:

In November 2018, TRMT closed a $12.8 million first mortgage bridge loan
to finance the acquisition of a 123,000 square foot retail center in
Phoenix, AZ at an as is loan to value ratio, or LTV, of approximately
48%. This loan requires the borrower to pay interest at a per annum
floating rate of LIBOR plus a premium of 425 basis points. This loan
funded $5.9 million at closing, includes a future funding allowance of
$6.9 million for building improvements and leasing capital and has a two
year initial term with two, one year extension options subject to the
borrower meeting certain conditions. As of December 31, 2018, TRMT had
not advanced any of the future funding allowance.

In December 2018, TRMT closed a $29.5 million first mortgage bridge loan
to finance the acquisition of a 299,000 square foot, three building
office portfolio located in St. Louis, MO at an as is LTV of
approximately 72%. 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 funded $26.4 million at closing, includes a future funding
allowance of $3.1 million for building improvements and leasing capital
and has a three year initial term with two, one year extension options
subject to the borrower meeting certain conditions. As of December 31,
2018, TRMT had not advanced any of the future funding allowance.

Also in December 2018, TRMT closed a $24.0 million first mortgage bridge
loan to refinance a 330 key hotel located adjacent to the
Hartsfield-Jackson Atlanta International Airport at an as is LTV of
approximately 62%. 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 funded $21.9 million at closing, includes a future funding
allowance of $2.1 million for a property improvement plan and has a
three year initial term with two, one year extension options subject to
the borrower meeting certain conditions. As of December 31, 2018, TRMT
had not advanced any of the future funding allowance.

In January 2019, TRMT closed a $24.6 million first mortgage bridge loan
to finance the acquisition of a 432 unit apartment community located in
Rochester, NY at an as is 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 bridge 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 $20.1 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.

TRMT has entered into loan application with a borrower for a first
mortgage bridge loan for a total commitment of $11.9 million to
refinance a 174,000 square foot, four building office portfolio located
in Dallas, TX.

Recent Financing Activities:

In November 2018, TRMT amended its master repurchase agreement with
Citibank, N.A., or Citibank, to increase the maximum amount of available
advancements under the facility from $100.0 million to $135.0 million
and to extend the facility’s expiration date to November 6, 2021.

During the quarter ended December 31, 2018, Citibank advanced to TRMT
$51.0 million under the master repurchase facility with respect to four
mortgage bridge loans. This advance represented 75% of the aggregate
outstanding principal of those loans. In connection with the loans
closed in 2019, Citibank advanced to TRMT an additional $31.4 million
under the facility.

In February 2019, TRMT entered into a credit agreement with its manager,
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 may borrow up to $25.0 million in unsecured loans at a rate of
6.50% per annum. TRMT intends to use the proceeds of any such borrowings
to principally fund additional investments in first mortgage bridge
loans consistent with TRMT’s business strategy and approved by its Board
of Trustees.

In February 2019, in connection with the RMR Credit Agreement, TRMT
amended its master repurchase agreement with Citibank to increase the
maximum amount available for advancement under its master repurchase
facility from $135.0 million to $210.0 million, with the additional
advancements becoming available for borrowing under the facility if and
as TRMT borrows under the RMR Credit Agreement, as provided for in
TRMT’s master repurchase facility agreement. In addition, certain other
provisions of TRMT’s master repurchase facility agreement were amended
to accommodate TRMT entering into the RMR Credit Agreement.

Distribution:

On January 18, 2019, TRMT declared a distribution payable to common
shareholders of record on January 28, 2019 of $0.11 per common share, or
approximately $350,000. TRMT expects to pay this distribution on or
about February 21, 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 fourth quarter and
full year 2018 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 Thursday,
February 14, 2019. To access the replay, dial (412) 317-0088. The replay
pass code is 10127675.

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 fourth quarter conference call are strictly prohibited without
the prior written consent of TRMT.

Supplemental Data:

A copy of TRMT’s Fourth Quarter 2018 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 loans secured by middle
market and transitional commercial real estate. TRMT is managed by
Tremont Realty Advisors LLC, an SEC registered investment adviser and an
indirect subsidiary of The RMR Group Inc.

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 U.S. generally accepted
accounting principles, or GAAP to that amount.

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 AS A RESULT
OF VARIOUS FACTORS. FOR EXAMPLE:

  • MR. BLACKMAN STATES THAT TRMT HAS DECLARED ITS FIRST DISTRIBUTION OF
    $0.11 PER COMMON SHARE, AND THAT TRMT EXPECTS TO DECLARE A
    DISTRIBUTION OF BETWEEN $0.20 AND $0.24 PER COMMON SHARE IN THE SECOND
    QUARTER OF 2019. THESE STATEMENTS MAY IMPLY THAT TRMT WILL DECLARE A
    DISTRIBUTION IN THE SECOND QUARTER OF 2019 AND THAT THE AMOUNT OF SUCH
    DISTRIBUTION WILL BE AT LEAST $0.20 PER COMMON SHARE. THESE STATEMENTS
    MAY FURTHER IMPLY THAT TRMT WILL CONTINUE TO DECLARE AND PAY QUARTERLY
    DISTRIBUTIONS AT THESE AMOUNTS IN THE FUTURE; HOWEVER, ANY
    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, TRMT MAY NOT DECLARE A DISTRIBUTION OF BETWEEN $0.20 AND
    $0.24 PER COMMON SHARE IN THE SECOND QUARTER OF 2019, OR AT ALL, AND
    ANY FUTURE DISTRIBUTIONS BY TRMT COULD DECLINE IN AMOUNT OR BE
    SUSPENDED OR DISCONTINUED.
  • MR. BLACKMAN STATES THAT TRMT’S ORIGINATION ACTIVITY REMAINS ROBUST,
    WITH TRMT’S MANAGER HAVING COMMITTED TO TRMT $25.0 MILLION OF
    ADDITIONAL CAPITAL AND THAT, WITH LEVERAGE, THIS ADDITIONAL CAPITAL
    WILL SUPPORT APPROXIMATELY $100.0 MILLION OF ADDITIONAL LOAN
    ORIGINATIONS. THESE STATEMENTS 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
    ADDITIONAL 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 ADDITIONAL CAPITAL COMMITMENT.
  • MR. BLACKMAN STATES THAT TRMT REMAINS CONFIDENT IN ITS BUSINESS MODEL
    AND LONG TERM PROSPECTS. THIS MAY IMPLY THAT TRMT WILL IN FACT
    SUCCESSFULLY EXECUTE ITS BUSINESS STRATEGY AND THAT TRMT’S FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS WILL CONTINUE TO IMPROVE AS A
    RESULT. HOWEVER, TRMT’S BUSINESS STRATEGY IS SUBJECT TO EXECUTION RISK
    AND 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, MAY BE DELAYED OR THEIR TERMS MAY CHANGE.

THE INFORMATION CONTAINED IN TRMT’S FILINGS WITH THE SECURITIES AND
EXCHANGE COMMISSION, OR 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.

       

Tremont Mortgage Trust
Consolidated Statements of
Operations

(Amounts in thousands, except per share
data)

(unaudited)

 

Three Months Ended
December 31,

For the Year
Ended
December 31,

June 1, 2017
(inception)
through
December
31,

2018   2017 2018 2017
Income from Investments:
Interest income from investments $ 1,778 $ 199 $ 3,891 $ 222
Less: Interest and related expenses (825 )   (1,491 )  
Income from investments, net 953   199   2,400   222  
 
Other Expenses:
Management fees (1) 228 447 260
General and administrative expenses 433 654 2,101 830
Reimbursement of shared service expenses 335   375   1,460   428  
Total expenses 768   1,257   4,008   1,518  
Net income (loss) $ 185   $ (1,058 ) $ (1,608 ) $ (1,296 )
 
Weighted average common shares outstanding – basic 3,135   3,106   3,124   1,524  
Weighted average common shares outstanding – diluted 3,138   3,106   3,124   1,524  
 
Net income (loss) per common share – basic and diluted $ 0.06   $ (0.34 ) $ (0.51 ) $ (0.85 )
 
(1)     In June 2018, Tremont Realty Advisors LLC, 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 December 31, 2018. If TRMT’s
Manager had not agreed to waive these base management fees, TRMT
would have recognized additional base management fees of $223 and
$445 for the quarter and year ended December 31, 2018, respectively.
 
       

Tremont Mortgage Trust
Calculation and
Reconciliation of Core Earnings

(amounts in thousands,
except per share data)

(unaudited)

 

Three Months Ended
December 31,

For the Year
Ended
December 31,

June 1, 2017
(inception)
through
December
31,

2018   2017 2018 2017
 
Reconciliation of net income (loss) to core earnings (loss): (1)
Net income (loss) $ 185 $ (1,058 ) $ (1,608 ) $ (1,296 )
Non-cash equity compensation expense 81   187   430   187  
Core earnings (loss) $ 266   $ (871 ) $ (1,178 ) $ (1,109 )
 
Weighted average common shares outstanding – basic 3,135   3,106   3,124   1,524  
Weighted average common shares outstanding – diluted 3,138   3,106   3,124   1,524  
 
Core earnings (loss) – basic and diluted $ 0.08   $ (0.28 ) $ (0.38 ) $ (0.73 )
 
(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).
 
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
adjusted measure helps TRMT to evaluate its performance excluding
the effects of certain transactions and GAAP adjustments that TRMT
believes are not necessarily indicative of its 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.
 
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.
 
   

Tremont Mortgage Trust
Consolidated Balance Sheets
(dollars
in thousands, except share data)

(unaudited)

 
December 31,
2018   2017
Assets
Cash and cash equivalents $ 27,024 $ 61,666
Restricted cash 311
Loans held for investment, net (includes $137,129 and $0,
respectively, pledged as collateral under master repurchase
agreement and note payable)
135,844
Accrued interest receivable 344
Prepaid expenses and other assets 390   259  
Total assets $ 163,913   $ 61,925  
 
Liabilities and Shareholders’ Equity
Accounts payable, accrued liabilities and deposits $ 935 $ 301
Master repurchase agreement (net of deferred financing costs of $891
and $0, respectively)
71,691
Note payable (net of deferred financing costs of $205 and $0,
respectively)
31,485
Due to related persons 134   754  
Total liabilities 104,245 1,055
 
Commitments and contingencies
 
Shareholders’ equity:
Common shares of beneficial interest, $0.01 par value per share;
25,000,000 shares authorized; 3,178,817 and 3,126,439 shares issued
and outstanding at December 31, 2018 and December 31, 2017,
respectively
32 31
Additional paid in capital 62,540 62,135
Cumulative net loss (2,904 ) (1,296 )
Total shareholders’ equity 59,668   60,870  
Total liabilities and shareholders’ equity $ 163,913   $ 61,925  
 

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, Director, Investor Relations
(617) 796-7651