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Colony Credit Real Estate, Inc. Announces Second Quarter 2018 Financial Results

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Colony Credit Real Estate, Inc. (NYSE:CLNC) ("Colony Credit Real
Estate" or the "Company") today announced its financial results for the
second quarter ended June 30, 2018.

Second Quarter 2018 Highlights and Subsequent
Events

  • Completed name change to Colony Credit Real Estate, Inc. effective
    June 25, 2018
  • Added to the U.S. Small-cap Russell 2000 Index effective June 25, 2018
  • Second quarter 2018 GAAP net income attributable to common
    stockholders of $16.0 million, or $0.12 per diluted share, and core
    earnings of $40.3 million, or $0.31 per diluted share
  • Undepreciated book value of $3.1 billion, or $23.80 per diluted share,
    as of June 30, 2018
  • Declared and paid a monthly dividend of $0.145 per share of class A
    and class B-3 common stock for April, May and June. The dividend
    represents an annualized dividend of $1.74 per share of common stock,
    equating to an 8.3% annualized dividend yield based on the $21.00
    closing price on August 3, 2018
  • Subsequent to quarter end, the Company's Board of Directors declared a
    monthly cash dividend of $0.145 per share of class A and class B-3
    common stock for July and August
  • During the second quarter of 2018, allocated and initially funded $592
    million and $460 million of capital, respectively. Funded an
    additional $18 million of capital for investments closed prior to the
    second quarter
  • Subsequent to quarter end, allocated and initially funded an
    additional $855 million and $380 million of capital, respectively,
    through closed deals or deals in advanced stages of execution
  • Subsequent to quarter end, closed first European investments, which
    includes the purchase of a triple net leased office campus and a
    preferred equity investment in a core-office development project
  • Year-to-date, allocated approximately $1.6 billion of total capital
    through closed deals or deals in advanced stages of execution, with an
    expected weighted average return on equity and total internal rate of
    return of approximately 11% and 13%, respectively
  • Increased master repurchase facility capacity by $250 million to $2.0
    billion from $1.7 billion during the second quarter of 2018
  • As of August 3, 2018, total corporate liquidity of approximately $419
    million through cash-on-hand of $39 million and availability under the
    corporate revolving credit facility of $380 million

Kevin P. Traenkle, President and Chief Executive Officer of Colony
Credit Real Estate commented, "We are pleased to report the results of
our first full quarter of operations as Colony Credit Real Estate.
During the quarter and the few weeks subsequent to quarter's end, we
have made significant progress deploying our liquidity at a pace that is
ahead of our original budgets. Due to this recent transaction volume,
our second quarter results do not reflect our run-rate earnings
primarily due to the timing of investment closings. As a result, we
believe there will be considerable earnings growth in the coming
quarters as we receive the full benefit from our robust capital
commitments and deployment."

Mr. Traenkle added, "As the global commercial real estate and economic
cycles continue to mature, we look forward to taking full advantage of
CLNC's diversified investment mandate. In addition, we are excited to
announce our first European investments, which leverage Colony Capital's
global infrastructure and provide our portfolio with further geographic
diversification coupled with long-duration stable cash flows with
attractive yields."

Common Stock and Operating Partnership Units

As of August 3, 2018, the Company had approximately 127.9 million shares
of class A and class B-3 common stock outstanding and the Company's
operating partnership had approximately 3.1 million operating
partnership units ("OP units") outstanding held by members other than
the Company or its subsidiaries.

Dividend

The Company's Board of Directors declared a monthly cash dividend of
$0.145 per share of class A and class B-3 common stock (the "common
stock") (i) for the monthly period ended April 30, 2018, which was paid
on May 10, 2018, to stockholders of record on April 30, 2018, (ii) for
the monthly period ended May 31, 2018, which was paid on June 11, 2018,
to stockholders of record on May 31, 2018, and (iii) for the monthly
period ended June 30, 2018, which was paid on July 10, 2018, to
stockholders of record on June 29, 2018.

Subsequent to the end of the second quarter, the Company's Board of
Directors declared a monthly cash dividend of $0.145 per share of common
stock (i) for the monthly period ended July 31, 2018, which will be paid
on August 10, 2018, to stockholders of record on July 31, 2018, and (ii)
for the monthly period ended August 31, 2018, which will be paid on
September 10, 2018, to stockholders of record on August 31, 2018.

Non-GAAP Financial Measures and Definitions

Core Earnings

We present Core Earnings, which is a non-GAAP supplemental financial
measure of our performance. We believe that Core 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. This supplemental financial measure 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. We also use Core Earnings to determine
the incentive fees we pay to our Manager. For information on the fees we
pay our Manager, see Note 11, "Related Party Arrangements" to our
consolidated financial statements included in Form 10-Q to be filed with
the U.S. Securities and Exchange Commission ("SEC"). In addition, we
believe that our investors also use Core Earnings or a comparable
supplemental performance measure to evaluate and compare the performance
of us and our peers, and as such, we believe that the disclosure of Core
Earnings is useful to our investors.

We define Core 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 operating
partnership) and excluding (i) non-cash equity compensation expense,
(ii) the expenses incurred in connection with our formation, (iii) the
incentive fee, (iv) acquisition costs from successful acquisitions, (v)
depreciation and amortization, (vi) 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, (vii) one-time events
pursuant to changes in U.S. GAAP and (viii) certain material non-cash
income or expense items that in the judgment of management should not be
included in Core Earnings. For clauses (vii) and (viii), 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.

Core 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,
including our ability to make cash distributions. In addition, our
methodology for calculating Core Earnings may differ from methodologies
employed by other companies to calculate the same or similar non-GAAP
supplemental financial measures, and accordingly, our reported Core
Earnings may not be comparable to the Core Earnings reported by other
companies.

The Company calculates core earnings per share, a non-GAAP financial
measure, based on a weighted average number of class A and class B-3
common shares and operating partnership units (held by members other
than the Company or its subsidiaries).

Return on Equity

We present Return on Equity ("ROE"), which is a supplemental financial
measure that represents the initial net investment-level earnings
generated by an investment expressed as a percentage of the net equity
capital invested. The Company calculates net investment-level earnings
for investments in loans and CRE debt securities as the sum of the
stated cash coupon income and any non-cash income (such as payment
in-kind income and amortization/accretion of purchase discounts and
origination, extension and exit fees) less investment-level financing
costs. For investments in net lease real estate, the Company calculates
net investment-level earnings by subtracting investment-level financing
costs from net operating income. Net equity capital invested is
calculated by taking the gross initial invested capital less any
financing. With respect to certain loans and investment-level financing,
the Company assumes the one-month USD LIBOR as of June 30, 2018 when
calculating ROE. The Company's ROE calculation relies on a number of
assumptions and estimates that are subject to change, some of which are
outside the control of the Company. Actual results may differ materially
from the Company's expectations. As such, there can be no assurance that
the actual ROE will be equivalent to the estimated ROE. In addition, the
Company's methodology for calculating ROE may differ from methodologies
employed by other companies to calculate the same or similar
supplemental financial measures, and accordingly, the presented ROE may
not be comparable to the ROE reported by other companies.

Internal Rate of Return

We present Internal Rate of Return ("IRR"), which is a supplemental
financial measure that represents the rate of return of an investment
over a specific holding period expressed as a percentage of the net
equity capital invested. It is the discount rate that makes net present
value of all cash outflows equal to the net present value of cash
inflows. The weighted average underwritten IRR reflects the returns
underwritten and relies on a number of assumptions and estimates that
are subject to change. Such assumptions and estimates around hold
period, prepayments or defaults, cost of borrowing, cap rates, rent
increases, operating costs, and exit assumptions, among many others, may
be outside of the control of the Company. With respect to certain loans
included in the weighted average underwritten IRR shown, the calculation
assumes certain estimates with respect to the timing and magnitude of
the initial future fundings for the total loan commitment and associated
loan repayments. In addition, the Company's methodology for calculating
IRR involves subjective judgment and discretion and may differ from
methodologies used by other companies, when calculating the same or
similar supplemental financial measures and may not be comparable with
other companies. Actual results may differ materially from the Company's
expectations. As such, there can be no assurance that the actual
weighted average IRRs will be equivalent to the underwritten weighted
average IRRs presented.

Second Quarter 2018 Conference Call

The Company will conduct a conference call to discuss the financial
results on August 7, 2018 at 7:00 a.m. PT / 10:00 a.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 August 7, 2018, at 10:00 a.m. PT / 1:00 p.m. ET,
through August 14, 2018, at 8:59 p.m. PT / 11:59 p.m. ET. To access the
replay, dial (844) 512-2921 (U.S.), and use passcode 13681027.
International callers should dial (412) 317-6671 and enter the same
conference ID number.

Supplemental Financial Report

A Second Quarter 2018 Supplemental Financial Report will be available on
the Company's website at www.clncredit.com.
This information will be furnished to the SEC in a Current Report on
Form 8-K.

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 intends to elect to
be taxed as a REIT for U.S. federal income tax purposes for its taxable
year ending 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; the Company's operating results
may differ materially from the pro forma information presented in the
Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2017; 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, yields and/or internal rates of return on
investments; and the impact of legislative, regulatory and competitive
changes. 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, 2017, as well as in Colony Credit Real Estate's other
filings with the Securities and Exchange Commission.

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 was formed on January 31, 2018, through the
combination of a select commercial real estate debt and credit real
estate portfolio of Colony Capital, Inc. ("Colony Capital Investment
Entities") with substantially all of the assets and liabilities of
NorthStar Real Estate Income Trust, Inc. and all of the assets and
liabilities of NorthStar Real Estate Income II, Inc. For the period
ending and prior to December 31, 2017, the following financial
statements represent only the results of operations for the Colony
Capital Investment Entities, the Company's accounting predecessor, on a
stand-alone basis. As a result, comparisons of the Company's period to
period accompanying consolidated financial information may not be
meaningful.

           
COLONY CREDIT REAL ESTATE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
June 30, 2018
(Unaudited)       December 31, 2017
Assets
Cash and cash equivalents $ 155,377 $ 25,204
Restricted cash 116,466 41,901
Loans and preferred equity held for investment, net 2,079,134 1,300,784
Real estate securities, available for sale, at fair value 198,151 -
Real estate, net 1,485,557 219,740
Investments in unconsolidated ventures ($241,453 and $24,417 at fair
value, respectively)
731,642 203,720
Receivables, net 35,861 35,512
Deferred leasing costs and intangible assets, net 102,426 11,014
Other assets 95,215 1,527
Mortgage loans held in securitization trusts, at fair value   3,154,112           -
Total assets $ 8,153,941         $ 1,839,402
Liabilities
Securitization bonds payable, net $ 126,256 $ 108,679
Mortgage and other notes payable, net 884,729 280,982
Credit facilities 800,545 -
Due to related party 14,513 -
Accrued and other liabilities 46,814 5,175
Intangible liabilities, net 17,789 36
Escrow deposits payable 71,529 36,960
Dividends payable 18,993 -
Mortgage obligations issued by securitization trusts, at fair value   3,010,636           -
Total liabilities   4,991,804           431,832
Commitments and contingencies
Equity
Stockholders' equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no
shares issued and outstanding as of June 30, 2018 and December 31,
2017
- -
Common stock, $0.01 par value per share
Class A, 905,000,000 shares authorized, 83,487,352 and 100 shares
issued and outstanding as of June 30, 2018 and December 31, 2017,
respectively
835 -
Class B-3, 45,000,000 shares authorized, 44,399,444 and no shares
issued and outstanding as of June 30, 2018, and December 31, 2017,
respectively
444 -
Additional paid-in capital 2,896,695 821,031
Retained earnings 97,715 258,777
Accumulated other comprehensive loss   (2,778 )         -
Total stockholders' equity 2,992,911 1,079,808
Noncontrolling interests in investment entities 96,953 327,762
Noncontrolling interests in the Operating Partnership   72,273           -
Total equity   3,162,137           1,407,570
Total liabilities and equity $ 8,153,941         $ 1,839,402
 
     
COLONY CREDIT REAL ESTATE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
Three Months Ended June 30,
2018       2017
Net interest income      
Interest income $ 36,795 $ 36,904
Interest expense (9,703 ) (5,647 )
Interest income on mortgage loans held in securitization trusts 39,496 -
Interest expense on mortgage obligations issued by securitization
trusts
  (36,459 )         -  
Net interest income   30,129           31,257  
 
Property and other income
Property operating income 39,477 5,762
Other income   899           390  
Total property and other income   40,376           6,152  
 
Expenses
Management fee expense 11,791 -
Property operating expense 16,256 1,857
Transaction, investment and servicing expense 3,497 709
Interest expense on real estate 9,850 1,066
Depreciation and amortization 23,359 2,745
Administrative expense (including $1,798 and $0 of equity-based
compensation expense, respectively)
  6,884           3,729  
Total expenses   71,637           10,106  
 
Other income (loss)
Unrealized gain on mortgage loans and obligations held in
securitization trusts, net
3,696 -
Realized loss on mortgage loans and obligations held in
securitization trusts, net
(2,203 ) -
Other gain (loss) on investments, net   10           (313 )
Income before equity in earnings of unconsolidated ventures and
income taxes
371 26,990
Equity in earnings of unconsolidated ventures 15,661 6,219
Income tax expense   (158 )         (885 )
Net income 15,874 32,324
Net (income) loss attributable to noncontrolling interests:
Investment entities 470 (9,375 )
Operating Partnership   (336 )         -  
Net income attributable to Colony Credit Real Estate, Inc. common
stockholders
$ 16,008         $ 22,949  
 
Net income per common share – basic and diluted $ 0.12         $ 0.48  
 
Weighted average shares of common stock outstanding – basic and
diluted
  127,887           44,399  
 
Dividends declared per share of common stock $ 0.44         $ -  
 
               
COLONY CREDIT REAL ESTATE, INC.
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(In thousands, except per share data)
(Unaudited)
 

GAAP Net Income to Core Earnings

Three Months Ended

June 30, 2018

Net income attributable to Colony Credit Real Estate, Inc. common
stockholders
$ 16,008
Adjustments:
Net income attributable to noncontrolling interest of the Operating
Partnership
336
Non-cash equity compensation expense 1,798
Transaction costs 2,342
Depreciation and amortization 24,321
Net unrealized gain on investments (2,898 )
Adjustments related to noncontrolling interests   (1,657 )
Core earnings attributable to Colony Credit Real Estate, Inc. common
stockholders and noncontrolling interest of the Operating Partnership
$ 40,250  
Core earnings per share(1) $ 0.31  
Weighted average number of common shares and OP units(1)   130,962  

__________________________________________________

(1)

The Company calculates core earnings per share, a non-GAAP
financial measure, based on a weighted average number of common
shares and OP units (held by members other than the Company or its
subsidiaries). For the second quarter 2018, the weighted average
number of common shares and OP units was approximately 131.0
million

 
         

GAAP Book Value to Undepreciated Book
Value

As of June 30, 2018
GAAP book value (excluding noncontrolling interests in investment
entities)
$ 3,065,184
Accumulated depreciation and amortization   51,440
Undepreciated book value $ 3,116,624
Undepreciated book value per share(1) $ 23.80
Total common shares and OP units outstanding(1)   130,962

__________________________________________________

(1)

The Company calculates undepreciated book value per share, a
non-GAAP financial measure, 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 June 30, 2018, the total number of common shares and OP units
outstanding was approximately 131.0 million

 

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