TRMT - Earnings call transcript Q4 2020

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Operator

Good morning, and welcome to the Tremont Mortgage Trust Fourth Quarter 2020 Financial Results Conference Call [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Kevin Berry, Manager of Investor Relations. Please go ahead.

Kevin Berry

Thank you, and good morning, everyone. today. us joining for Thanks With me Chief Tom and are the Officer and call Financial President, Treasurer, Lorenzini; on Doug Lanois. moment, performance quarter In business a they details provide just about and our XXXX. for of fourth the will our

We session sell will side question-and-answer with then call a the open to analysts.

within The based are undertakes of revise note contains the to First, consent publicly actual prior statements conference today, to retransmission of the meaning that may is call call statements no Monday, release and the the XX, or recording that of any today's in like conference the Private statements and strictly Reform on forward-looking forward-looking Also call. today's the written project. forward-looking conference expectations of the I'd Act results and These as other those of company. revision Securities company Tremont's note today's beliefs made from of to differ prohibited obligation without and laws. securities XXXX, Litigation materially results February we XXXX that

Web website cautioned in forward-looking or factors reliance statements. can Additional contained differences be is SEC, Securities filings from any Commission, with cause not the accessed to our those place concerning that and SEC's which are could the Exchange information site. upon our Investors or trmtreit.com undue

In addition, we distributable will be discussing non-GAAP including earnings. numbers during this call,

determined with now release, to over GAAP will accordance in Tom. call distributable see net site. For available is which earnings to a on our the please income quarterly of our reconciliation turn I earnings, Web

Tom Lorenzini

Friday, expertise portfolio team liquidity the of we manage year the of unprecedented value over results the XXX% everyone, and with our and our uncertainty economic of the our performance resiliency Tremont's and our underscores of actively thank past the Thank stability experience balance for fourth debt our RMR strength current investment loans, proactive you, on us. loans reflect our for this stable you morning, delivered period solid relationship with sheet. our enhance preserve during service. Kevin. On The remaining measures joining of and reported to quarter and that portfolio Good of the Group.

Our Realty enhanced conditions, CRE to Capital collateral. of investment Tremont plans provides national program depth of ability borrowers' RMR's platform activities resources an ongoing business loan evaluate the our understand our collective knowledge and with and our and across the repositioning market monitor

During fully remained the committed, eliminated Tremont's originate fourth capital ability new loans. our which to quarter,

our continue their portfolio our We communicating and they execute as are borrowers to managing plans. focused on with actively business

end. None and our representing from weigh with the tenants, some their risk On implementing While of to one quarter. performance of We at our at from perform improved a not of five loan risk risk, borrowers' five average rating ratings business quarter. loans fourth better and portfolio a The two downgrades their on to borrowers' X.X We result continue the upgraded weighted pandemic year of on as representing scale, X.X the of loans rating to underlying did QX rated collateral average lowest our progress risk plans. our during weighted continues in have improved the loans point well ongoing the are with five. our highest the any strong during support sponsors.

by economic to brought have calls, our protect quarterly we on we XXXX, As Tremont's disruption early the sheet uncertainty dividend discussed crisis. and on health prior the reduced balance in amid

business our has remained disruption, this During stable.

of quarterly in I Board announce be pleased result, the reinstate our declared to will amount a which dividend, intends to am As April. that a

to further further we board we scheduled time. are the remains dividend this While to regularly providing at and compared not increase dividend, it to expect last guidance year's discussion, subject

at Turning end. portfolio loan year to our

loan average had X.X%. aggregate when coupon yield million mortgage The consisted X.X X.X% average XX portfolio a of XX% extension of to weighted including of a value and whole loan years of loans in with an $XXX assets approximately of all a commitments average options. first maximum weighted Our weighted with maturity and

exposure XX% by with industrial, diverse of demonstrate real commercial geographically are are office continue nationwide. secured solid loans Approximately to our estate multifamily which properties, investments fundamentals. Our to and

Our by are are one secured loans that grocery retail or anchored as hotel. as remaining assets drugstore either well

in a in quarter. right loans and terms Valley, scheduled loan of met The Arizona, Paradise the financing extended exercised for fourth November the borrower one extension until recent of by year XXXX loan In for XXXX. activity, of November a during retail two center to were and our its all conditions mature secured

our amended property by multifamily a also financing We secured in Houston.

the in the of by maturity term. funded more the interest of loan extended remaining cash November than debt six flow Coppell, rate, date amendment, run one maturity by reserve extended until year was and adequate and a As part to loan also to August interest XXXX. should to loan At related of an for maintain months Subsequent property the $XXX,XXX reserve we of the be amended service Texas XXXX. until borrower the retail end, current the our quarter

of repaid $XXX,XXX reserve sponsor the $XXX,XXX million. the part principal of the amendment, of $XX.X loan and outstanding to As reduced the funded interest commitment total balance, an which

of should such The the Atlanta, loans more investment sweeps in with individual reserves our our protect help the losses. for with reminder, than flow interest structured of current are loan a XX to each interest cash flows cash risk and mechanisms, As on as exception next all reserves against us structured sufficient to maintain Georgia. hospitality and of our service months loans be debt mitigation

has loan to service debt investments the However, maintain sponsor for equity support operations. and hotel asset additional continued to with this

by have proceeds during our facility repurchase we the $X.X repayment million. week, our multifamily New these loan $XX.X the and not we loan retained repayments term York, quarter, approximately liquidity we received purposes last million the early short of Rochester, down any totaling did In fourth million. While in $XX.X housing proceeds for from Citi paid with

entered to sell borrower agreement we under In aware the New loan, that has property industrial an of $XX.X underlying loan prepay in Jersey accordingly that addition, are our and into may April. Barrington, million our

a portfolio opportunities as committed. to repurchase our are remain We with robust master strong. our we facility loans capital with potential relationship active fully forward, plan remains lender repaid. this reinvest The of to Going pipeline keep

status during consistent Tremont's course maintained year our and receive loans, us this of We proceeds advanced our and have by liquidity our from one which regarding XXXX, positions November loan normal quarter. fourth of extended in to and portfolio confidence reinvest fund dialog mutual we facility We in borrowers to our the the Citi commitments has to reflects repayments. loan money the until

future are we the lending CRE ahead, about strength platform. our of and the Looking excited

capital and opportunities As a of normal improves for to more lenders to creative will business returns like there the a and circumstances state, plans. flexible array economy debt be provide alternative wide for significant us

We and are turn capital well that, shareholders. generate our our to for over preserve results. positioned it Doug? I'll review invested risk navigate adjusted financial continue And to to returns to current economic attractive the climate, with Doug

Doug Lanois

morning, Thank everyone. Tom, and you, good

This noncash like metric recent terminology in REIT earnings First, have that our we the non-GAAP and is I potential better income what GAAP to a this alter to is represents, earnings the industry with our from be quarter, across This this beginning note this start of net terminology certain of that our reflects results measure context mortgage to does a change core our earnings. for adjusted that only transition distribution. performance in and calculation non-GAAP adopt would is changed to distributable items a more of a metric. describes which not of on indicative terminology

per our to results and $X.XX now or compared $X.XX fourth Distributable financial to at Turning in earnings share quarter. quarter. for average per last the $X.XX year in weighted came diluted $X.X share prior million the period

income historically rate was from facility environment. stable at on repurchase Income million related Our million. master in and interest floors the $X.X from investments $X.X from over interest of fourth $X.X of this quarter. loans expenses million continue quarter from from net low LIBOR reflects related to This during borrowings our and quarter benefit our investments interest

all our of fees. X.X%. of our This of LIBOR As investments XXst, points, weighted our average includes and presented amortization as supplemental basis weighted December was XXX financial yield spread average on weighted in package, points of our a loan average XXX basis in floor

and $X.X state debt our year in the have of prior quarter. the end. remain This in were driven on costs. was well to public taxes All losses had million at Total as loan increase expenses services sequential we no service and primarily current fourth shared $XXX,XXX other investments company quarter compared by as

quarter, our rate run services the declined fourth the it in for year-over-year. While approximately full expense XX% year, for above shared came

our sheet. fourth cash. Turning end we quarter, the $XX.X in of had balance the to million At

million, $XXX last from an loans of of we was for had million total net $XXX $XX.X million held commitments Our million, loan of increase investment quarter and which unfunded. totaled $X

was value December share. book of as GAAP XXst Our per $XX.XX

we $XX.X million XXst, $XXX.X had which December capacity on was million total of undrawn. our of repurchase of facility, As master

maintain of our York are ensure tax proceeds our the reinvest. of satisfied principal we In million We prior $X.XX received under cash million After Rochester, quarter. paying a paid to to Board approximately $XX last million the to available. per have an requirements portfolio January, we of minimum slightly and levered capital with from our we approximately onetime outstanding we down with common December, on New We loan REIT status. balance unchanged share early ended declared the with quarter currently our week, $XXX.X facility distribution $X.X in distribution the repayment from our of

per declared we full paid or the $X.XX share. For common year,

we our liquidity expect Looking healthy. remain and ahead, to cash flows

our dividend our discussed, Board Tom XXXX. plans quarterly regular reinstate As to in

our the fee XXXX, to As first an basis. Beginning in of at we payable fee management waiver X.X% base a equity, end for on or modeling required reminder are Tremont's mange annual on of purposes, quarterly of quarter pay expired of a the XXXX.

expect profitability trailing our recognize fee incentive level to also an XX of based over on months. We the

ended recognized is year not would weighed had calculation fee we base over fees, fee for these recognized December $XXX,XXX ratably incentive the incentive context, and of manager XX through of management trailing fees is and year our The XXXX. For months. the million of the fee not reduced payments $X.X incentive XX, have by

in margin has that mind from floors. keep benefited our interest substantially net Finally, LIBOR

forward, to net off remarks. prevailing loans interest market floors. new maturity this narrow prepared come concludes expect we pay at on prepay spreads loans our and at Going as Operator, our LIBOR or

sell We take analysts. side from will questions now

Operator

is question Delaney from Securities. first The Instructions] from Steve JMP [Operator

Steven Delaney

an pipeline think also, active Tom, this mentioned obviously the Tremont? to pipeline. just that coincidence. you is comment relative Could you're you seeing And I on

you. I a the actually had two take and Thank structure February as that companies a possible it large another. curious, loan targeted I'm the in of for is under primarily part and off was And pay participation made pipeline, could RMR that loan You in of Tremont mortgage your had in believe fairly where January a a RMR?

Tom Lorenzini

in in have correct our you're that in I and is have transactions inside have you various transactions been roughly with narrowing diligence, pipeline, transactions the process. stages of from that application do that that are stage dollars. RMR, active to couple Regarding closing that through pipeline initial tell right million those or $XXX are we now quoted in of hundred the down -- of pipeline a million the diligence stage vehicle. an through would XX closing current we

So York capital have loans, loan. as repaid is the New ability Rochester, TRMT we replace such as into to would the the

that entities. your two the that go of loans, route, that between something REITS, going keep would whole that there's likely each sure investments something certainly prefer we documentation or the of decided that I'm of the that required is participation some to additional could sharing it we Regarding do of most necessarily the certainly could entertain. if be that question a are about is we not do route. but loans to And inside that would to we

Steven Delaney

concern Well, I'm have for that matter that there? the I you you $XX pipeline is redeploying hearing that a of sizable I million months. much it doesn't say about of Tremont, hearing TRMT, sound couple targeted like in Am enough the think correctly too you

Tom Lorenzini

to want that transition have of We capital as loan smoothly originating back to sure we uninvested into additional left payoffs the too we'll in, to be able with because to becomes to We a go or certainly And think have less look work putting a Advisors some I come that the make with fair that's rightsized of inside we do TRMT. capital Tremont of Realty have should be small TRMT. transaction uncommitted. issue and But that additional that's to don't an both capacity. entities for pretty into for us statement.

Operator

Instructions] [Operator from question next from Vandervliet The UBS. is Brock

Brock Vandervliet

here fees respects? should quarter. the Just or QX. be has in in one-time base, Was expecting there been incentive that anything of wondering in forward talk G&A total going about expense we understand well if telegraphed in what you those related expense the starts dynamic the terms But could QX? fourth I in

Doug Lanois

run Our expenses full year. did bit QX the little in higher than a

view So forward of in is I indicator terms terms the were some going a way there year items. G&A, it, of the good full onetime in

year the pace to to And full to shared our regard similar that XXXX XXXX. think we'll as is a so expectation indicator. did from I service best is a reduce at it continue expense, With

Brock Vandervliet

be at do or And can hold, any expenses at? what year be a those on could relatively you level full negative think incentive total I they you payments flat even guess, ex basis? Should

Doug Lanois

rate. our inflation is typical G&A, expectation it's that In that I of again, a shared And similar terms services, And year-over-year increase a decrease. again, with would they'll think oriented. again at

Brock Vandervliet

can. And secondly, if I

for new LIBOR Can you more mentioned may these that be floors. You yields dimension with pressure us? under loan

Doug Lanois

think of X.X% shouldn't floors weighted going our X.X% that different. dramatically if the that be based at you currently, average of on I Yes, forward. look and is with portfolio LIBOR Spreads

However, the basis of the less certainly will loans, floors overall reset yield those loans. impact on to new points on the or XX

Operator

like the questions remarks. I in This our session. to over Tom the would conference are Lorenzini for back concludes turn queue. closing to no There any more question-and-answer

Tom Lorenzini

Thank for our This you, joining Jason, call. us and thanks, today. everyone, concludes

Operator

presentation. has attending for The today's now you conference Thank concluded.

now may You disconnect.

Tremont Mortgage Trust (TRMT) 22 Feb 212020 Q4 Earnings call transcript