For Immediate Release
Contact: Investor Relations
Owens Realty Mortgage, Inc.
www.owensmortgage.com
(925) 239-7001
Owens Realty Mortgage, Inc. Reports Third Quarter 2014 Financial Results
WALNUT CREEK, CA. – November 13, 2014 – Owens Realty Mortgage, Inc. (the “Company”) (NYSE MKT: ORM) today reported financial results for the third quarter ended September 30, 2014.
Third Quarter 2014 Financial Highlights
| · | Net income attributable to common stockholders of $783,823, or $0.07 per diluted common share |
| · | Book value attributable to common stockholders of $16.93 per common share at September 30, 2014 as compared to $16.91 per common share at June 30, 2014 |
| · | Declared quarterly dividends of $0.05 per share of common stock |
| · | FFO of $1,390,887, or $0.13 per diluted common share (see Non-GAAP Financial Measures) |
Third Quarter 2014 Operational Highlights
| · | Substantially completed the construction of the retail portion of the Chateau at Lake Tahoe project |
| o | Executed triple net lease agreements for approximately 75% of the currently available space as of the date of this release, with potential leases in negotiation for one of the four remaining spaces |
| · | Originated seven new loans and rewrote one loan in the quarter totaling $6,975,000 and received full or partial payoffs on five loans totaling $4,491,000 |
| · | Net increase in loan investments from 29 to 34 with an average loan balance of $1,830,000 |
“We are pleased with the positive results achieved in the third quarter,” said William Owens, the Company’s Chairman and CEO. “We remain focused on growing the loan portfolio and maximizing the value of our real estate assets. We completed eight new loan transactions and made substantial progress on our development projects at Lake Tahoe and Miami. We expect to continue increasing our loan investment portfolio in the near-term as we continue to position certain real estate assets in our portfolio for sale beginning in the second quarter of 2015.”
Summary of Third Quarter 2014 Financial Results
The Company reported net income attributable to common stockholders of $783,823, or $0.07 per basic and diluted common share, for the quarter ended September 30, 2014 as compared to a net income of $701,074, or $0.06 per basic and diluted common share, for the quarter ended September 30, 2013. The increase was primarily a result of:
| · | An increase in interest income on loans of $649,000 primarily due to an increase in the average balance of performing loans of approximately 23% and an increase in interest income collected on delinquent/impaired loans of approximately $350,000 during the quarter ended September 30, 2014 as compared to 2013; |
| · | An increase in rental and other income from real estate properties of $375,000 primarily due to increased rental rates and/or occupancy on certain of our properties and increased income from properties obtained via foreclosure in 2013 and 2014, net of reduced revenue as a result of the sale of three operating properties during 2013. |
The increases in income were partially offset by the following:
| · | An increase in provision for loan losses of $538,000 from a reversal of $420,000 for the quarter ended September 30, 2013 to a provision of $118,000 for the quarter ended September 30, 2014. During the quarter ended September 30, 2014, the Company increased the general allowance by $110,000 due to an increase in the balance of non-delinquent loans during the quarter and increased the specific allowance by $8,000 on two impaired loans. During the quarter ended September 30, 2013, the Company decreased the general allowance by $409,000 due to a decrease in the historical loss factor utilized and decreased the specific allowance by $11,000; |
| · | An increase in impairment losses on real estate of $124,000 as a result of a reduction in the fair market value recently estimated by management on one property held for sale during the quarter ended September 30, 2014; |
| · | An increase in interest expense of $209,000 due to interest incurred on the Company’s new lines of credit and the amortization of deferred financing costs on the lines of credit to interest expense during the quarter ended September 30, 2014; and |
| · | A decrease in gain on sale of real estate of $139,000. During the quarter ended September 30, 2014, one improved, residential lot was sold for $175,000, resulting in a gain of $105,000. During the quarter ended September 30, 2013, one office condominium unit was sold and deferred gains were recognized on a property sold during the second quarter of 2013 in the total amount of $252,000. |
Quarter End Loan Portfolio Summary
The following tables set forth certain information regarding the Company’s loan portfolio at September 30, 2014 and December 31, 2013.
| | | September 30, 2014 | | | December 31, 2013 | |
| By Property Type: | | | | | | |
| Commercial | | $ | 43,965,785 | | | $ | 26,158,878 | |
| Residential | | | 16,257,359 | | | | 27,461,913 | |
| Land | | | 2,010,068 | | | | 5,175,502 | |
| | | $ | 62,233,212 | | | $ | 58,796,293 | |
| By Position: | | | | | | | | |
| Senior loans | | $ | 56,313,212 | | | $ | 52,876,293 | |
| Junior loans* | | | 5,920,000 | | | | 5,920,000 | |
| | | $ | 62,233,212 | | | $ | 58,796,293 | |
* The junior loans in our portfolio at September 30, 2014 and December 31, 2013 are junior to existing senior loans held by us and are secured by the same collateral. | |
The types of property securing the Company’s commercial real estate loans are as follows:
| | | September 30, 2014 | | December 31, 2013 | |
| Commercial Real Estate Loans: | | | | | | | |
| Retail | | $ | 4,156,000 | | $ | 4,140,000 | |
| Assisted care | | | 4,021,946 | | | 4,021,946 | |
| Office | | | 19,405,335 | | | 15,484,932 | |
| Industrial | | | 3,070,000 | | | 1,245,000 | |
| Marina | | | 3,200,000 | | | — | |
| Apartment | | | 8,038,800 | | | — | |
| Restaurant | | | 1,037,679 | | | — | |
| Golf course | | | 1,036,025 | | | 1,267,000 | |
| | | $ | 43,965,785 | | $ | 26,158,878 | |
Loans by geographic location:
| | | September 30, 2014 | | Portfolio | | December 31, 2013 | | Portfolio | |
| | | Balance | | Percentage | | Balance | | Percentage | |
| Arizona | | $ | 7,535,000 | | 12.11% | | $ | 7,535,000 | | 12.81% | |
| California | | | 42,982,316 | | 69.07% | | | 39,862,058 | | 67.80% | |
| Hawaii | | | 1,450,000 | | 2.33% | | | 1,450,000 | | 2.47% | |
| Louisiana | | | 1,320,000 | | 2.12% | | | 1,520,000 | | 2.58% | |
| Oregon | | | 1,250,000 | | 2.01% | | | — | | —% | |
| Pennsylvania | | | 4,021,946 | | 6.46% | | | 4,021,946 | | 6.84% | |
| Utah | | | 1,813,882 | | 2.91% | | | 2,391,286 | | 4.07% | |
| Washington | | | 1,860,068 | | 2.99% | | | 2,016,003 | | 3.43% | |
| | | $ | 62,233,312 | | 100.00% | | $ | 58,796,293 | | 100.00% | |
Quarter End Real Estate Property Portfolio
The following tables set forth certain information regarding the Company’s real estate portfolio at September 30, 2014 and December 31, 2013.
Real Estate Held for Investment:
| | | September 30, 2014 | | December 31, 2013 | |
| Land (including land under development) | | $ | 68,407,529 | | $ | 46,873,135 | |
| Residential | | | 47,466,560 | | | 47,037,370 | |
| Retail | | | 3,890,967 | | | 15,588,452 | |
| Office | | | 9,199,850 | | | 9,348,331 | |
| Industrial | | | 4,516,541 | | | 4,605,910 | |
| Storage | | | 3,871,858 | | | 3,943,780 | |
| Marina | | | 3,186,967 | | | 2,028,855 | |
| | | $ | 140,540,272 | | $ | 129,425,833 | |
Real Estate Held for Sale:
| | | September 30, 2014 | | December 31, 2013 | |
| Residential | | $ | 93,647 | | $ | 93,647 | |
| Land | | | 1,527,360 | | | 3,427,200 | |
| Retail | | | 11,534,319 | | | — | |
| Golf course | | | 2,011,685 | | | 1,961,284 | |
| Marina | | | 236,500 | | | 408,000 | |
| | | $ | 15,403,511 | | $ | 5,890,131 | |
Non-GAAP Financial Measures
Funds from Operations
We utilize supplemental non-GAAP measures of operating performance, including funds from operations (“FFO”), an industry-wide standard measure of REIT operating performance. We believe FFO provides investors with additional information concerning our operating performance and a basis to compare our performance with that of other REITs. We determine FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), as net income (loss) attributable to common stockholders (computed in accordance with GAAP), plus depreciation and amortization of real estate and other assets, amortization of deferred financing costs, impairments of real estate assets, provisions for loan losses and losses from sales of real estate, reduced by gains from sales of real estate and foreclosure of loans, accretion of discounts on loans and extraordinary items, and after adjustments for unconsolidated ventures.
Our calculation of FFO may not be comparable to similar measures reported by other REITs. This non‐GAAP financial measure should not be considered as an alternative to net income as a measure of our operating performance or to cash flows computed in accordance with GAAP as a measure of liquidity, nor is it indicative of cash flows from operating and financial activities.
We urge investors to carefully review the GAAP financial information included as part of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and quarterly earnings releases.
The following table reconciles FFO to comparable GAAP financial measures:
| | For the Three Months Ended | | For the Nine Months Ended | |
| | | September 30, 2014 | | | September 30, 2013 | | | September 30, 2014 | | | September 30, 2013 | |
| Funds from Operations | | | | | | | | | | | | |
| Net income attributable to common stockholders | $ | 783,823 | | $ | 701,074 | | $ | 4,355,270 | | $ | 8,562,023 | |
| Adjustments: | | | | | | | | | | | | |
| Depreciation and amortization of real estate and other assets | | 549,189 | | | 539,532 | | | 1,642,922 | | | 1,941,887 | |
| Amortization of deferred financing costs | | 42,335 | | | — | | | 78,261 | | | — | |
| Depreciation allocated to non-controlling interests | | (32,241 | ) | | (31,404 | ) | | (96,806 | ) | | (151,919 | ) |
| Accretion of discount on loan to interest income | | (36,600 | ) | | — | | | (85,403 | ) | | — | |
| Provisions for impairment of real estate assets | | 123,500 | | | — | | | 179,040 | | | — | |
| Provision for (reversal of) loan losses | | 117,680 | | | (419,860 | ) | | 141,032 | | | (7,376,344 | ) |
| Gain on sales of real estate assets | | (113,113 | ) | | (251,887 | ) | | (2,740,105 | ) | | (2,712,096 | ) |
| Gain on foreclosure of loan | | — | | | — | | | (257,020 | ) | | (952,357 | ) |
| Adjustments for unconsolidated ventures | | (43,686 | ) | | (38,946 | ) | | (42,357 | ) | | (38,572 | ) |
| FFO attributable to common stockholders | $ | 1,390,887 | | $ | 498,509 | | $ | 3,174,834 | | $ | (727,378 | ) |
| Basic and diluted FFO per common share | $ | 0.13 | | $ | 0.04 | | $ | 0.29 | | $ | (0.06 | ) |
| | | | | | | | | | | | | |
Conference Call
The Company will host a conference call to discuss the results on Thursday, November 13, 2014, at 10:00 a.m. PT / 1:00 p.m. ET.
To participate in the call, please dial (877) 407-0784 (United States) or (201) 689-8560 (International) and request the Owens Realty Mortgage call. A live webcast of the call will also be available on the Company’s website at www.owensmortgage.com. Please allow 10 minutes prior to the call to visit this site to download and install any necessary audio software.
An archive of the webcast will be available approximately one hour after completion of the live event and will be accessible on the Company's website at www.owensmortgage.com for 30 days. A dial-in replay of the call will also be available to those interested until December 13th. To access the replay, dial (877) 870-5176 (United States) or (858) 384-5517 (International) and enter code: 13592599.
About Owens Realty Mortgage, Inc.
Owens Realty Mortgage, Inc., a Maryland corporation, is a specialty finance mortgage company organized to qualify as a real estate investment trust (“REIT”) that focuses on the origination, investment, and management of small balance and middle-market commercial real estate loans. We provide customized, short-term acquisition and transition capital to commercial real estate investors that require speed and flexibility. Our primary objective is to provide investors with attractive current income and long-term shareholder value. Owens Realty Mortgage, Inc., is headquartered in Walnut Creek, California, and is externally managed and advised by Owens Financial Group, Inc.
Additional information can be found on the Company’s website at www.owensmortgage.com.
Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements about Owens Realty Mortgage Inc.'s plans, strategies, prospects, and anticipated events, including the maximum borrowings available under its credit facilities, anticipated construction progress and completion, potential leasing activities, and repositioning of real estate assets, are based on current information, estimates, and projections; they are subject to, risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as "expect," "target," "assume," "estimate," "project," "budget," "forecast," "anticipate," "intend," "plan," "may," "will," "could," "should," "believe," "predicts," "potential," "continue," and similar expressions are intended to identify such forward-looking statements.
Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The Company does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in the Company's most recent filings with the Securities and Exchange Commission. All subsequent written and oral forward-looking statements concerning the Company or matters attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.
Selected Financial Data:
OWENS REALTY MORTGAGE, INC.
Consolidated Balance Sheets
(UNAUDITED)
| | | September 30, | | December 31, | |
| | | 2014 | | 2013 | |
| ASSETS | | | | | | | |
| Cash and cash equivalents | | $ | 4,060,675 | | $ | 8,158,734 | |
| Restricted cash | | | 5,580,485 | | | 4,095,435 | |
| Loans, net of allowance for losses of $4,880,120 and $4,739,088, respectively | | | 57,353,092 | | | 54,057,205 | |
| Interest and other receivables | | | 1,953,562 | | | 1,673,978 | |
| Other assets, net of accumulated depreciation and amortization of $1,042,776 and $976,090, respectively | | | 1,104,797 | | | 1,102,683 | |
| Deferred financing costs, net of accumulated amortization of $147,376 | | | 922,563 | | | 95,000 | |
| Investment in limited liability company | | | 2,184,939 | | | 2,142,582 | |
| Real estate held for sale | | | 15,403,511 | | | 5,890,131 | |
| Real estate held for investment, net of accumulated depreciation of $5,992,168 and $9,599,719, respectively | | | 140,540,272 | | | 129,425,833 | |
| Total Assets | | $ | 229,103,896 | | $ | 206,641,581 | |
| LIABILITIES AND EQUITY | | | | | | | |
| LIABILITIES: | | | | | | | |
| Dividends payable | | $ | 538,400 | | $ | 180,000 | |
| Due to Manager | | | 195,615 | | | 293,776 | |
| Accounts payable and accrued liabilities | | | 3,350,699 | | | 2,710,745 | |
| Deferred gains | | | 687,207 | | | 3,313,169 | |
| Lines of credit payable | | | 20,852,700 | | | — | |
| Notes payable | | | 14,579,543 | | | 13,917,585 | |
| Total Liabilities | | | 40,204,164 | | | 20,415,275 | |
| Commitments and Contingencies (Note 13) | | | | | | | |
| EQUITY: | | | | | | | |
| Stockholders’ equity: | | | | | | | |
| Preferred stock, $.01 par value per share, 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2014 and December 31, 2013 | | | — | | | — | |
| Common stock, $.01 par value per share, 50,000,000 shares authorized, 11,198,119 shares issued, 10,768,001 and 10,794,209 shares outstanding at September 30, 2014 and December 31, 2013, respectively | | | 111,981 | | | 111,981 | |
| Additional paid-in capital | | | 182,437,522 | | | 182,437,522 | |
| Treasury stock, at cost – 430,118 and 403,910 shares at September 30, 2014 and December 31, 2013, respectively | | | (5,349,156 | ) | | (5,023,668 | ) |
| Retained earnings | | | 5,089,312 | | | 2,348,575 | |
| Total stockholders’ equity | | | 182,289,659 | | | 179,874,410 | |
| Noncontrolling interests | | | 6,610,073 | | | 6,351,896 | |
| Total Equity | | | 188,899,732 | | | 186,226,306 | |
| Total Liabilities and Equity | | $ | 229,103,896 | | $ | 206,641,581 | |
OWENS REALTY MORTGAGE, INC.
Consolidated Statements of Operations
(UNAUDITED)
| | | For the Three Months Ended | | For the Nine Months Ended | |
| | | September 30, 2014 | | September 30, 2013 | | September 30, 2014 | | September 30, 2013 | |
| Revenues: | | | | | | | | | | | | | |
| Interest income on loans | | $ | 1,399,122 | | $ | 749,929 | | $ | 3,564,842 | | $ | 2,360,891 | |
| Gain on foreclosure of loan | | | — | | | — | | | 257,020 | | | 952,357 | |
| Rental and other income from real estate properties | | | 3,262,549 | | | 2,887,984 | | | 8,936,923 | | | 8,408,351 | |
| Income from investment in limited liability company | | | 43,686 | | | 38,946 | | | 126,357 | | | 118,572 | |
| Other income | | | — | | | 98 | | | 19 | | | 1,620 | |
| Total revenues | | | 4,705,357 | | | 3,676,957 | | | 12,885,161 | | | 11,841,791 | |
| Expenses: | | | | | | | | | | | | | |
| Management fees to Manager | | | 435,652 | | | 373,067 | | | 1,275,901 | | | 1,264,668 | |
| Servicing fees to Manager | | | 39,605 | | | 33,915 | | | 115,991 | | | 115,333 | |
| General and administrative expense | | | 285,669 | | | 496,088 | | | 1,090,876 | | | 1,193,954 | |
| Rental and other expenses on real estate properties | | | 2,061,330 | | | 2,071,900 | | | 5,953,775 | | | 6,403,757 | |
| Depreciation and amortization | | | 549,189 | | | 539,532 | | | 1,642,922 | | | 1,941,887 | |
| Interest expense | | | 338,225 | | | 129,229 | | | 718,707 | | | 385,064 | |
| Provision for (reversal of) loan losses | | | 117,680 | | | (419,860 | ) | | 141,032 | | | (7,376,344 | ) |
| Impairment losses on real estate properties | | | 123,500 | | | — | | | 179,040 | | | — | |
| Total expenses | | | 3,950,850 | | | 3,223,871 | | | 11,118,244 | | | 3,928,319 | |
| Operating income | | | 754,507 | | | 453,086 | | | 1,766,917 | | | 7,913,472 | |
| Gain on sales of real estate, net | | | 113,113 | | | 251,887 | | | 2,740,105 | | | 2,712,096 | |
| Net income | | | 867,620 | | | 704,973 | | | 4,507,022 | | | 10,625,568 | |
| Less: Net income attributable to non-controlling interests | | | (83,797 | ) | | (3,899 | ) | | (151,752 | ) | | (2,063,545 | ) |
| Net income attributable to common stockholders | | $ | 783,823 | | $ | 701,074 | | $ | 4,355,270 | | $ | 8,562,023 | |
| | | | | | | | | | | | | | |
| Per common share data: | | | | | | | | | | | | | |
| Basic and diluted earnings per common share | | $ | 0.07 | | $ | 0.06 | | $ | 0.40 | | $ | 0.76 | |
| Basic and diluted weighted average number of common shares outstanding | | | 10,768,001 | | | 11,196,646 | | | 10,768,495 | | | 11,197,622 | |
| Dividends declared per share of common stock | | $ | 0.05 | | $ | 0.05 | | $ | 0.15 | | $ | 0.20 | |
| | | | | | | | | | | | | | |
