Exantas Capital Corp. Reports Results For Three And Nine Months Ended September 30, 2019
NEW YORK, Oct. 30, 2019 /PRNewswire/ -- Exantas Capital Corp. (NYSE: XAN) ("XAN" or the "Company") reports results for the three and nine months ended September 30, 2019.
Significant Items and Highlights
- GAAP net income allocable to common shares was $0.31 per share-diluted for the three months ended September 30, 2019.
- Core Earnings were $0.31 per common share-diluted for the three months ended September 30, 2019 (see Schedule I).
- Management anticipates the Company will declare a cash dividend of $0.275 per share on its common stock for the fourth quarter of 2019, which would be a 10.0% increase over the third quarter of 2019 dividend of $0.25 per share and a 57.1% increase over the fourth quarter of 2018 dividend of $0.175 per share.
- XAN originated or acquired $105.1 million and $739.1 million of new commercial real estate ("CRE") loans during the three and nine months ended September 30, 2019, respectively. (see Schedule III).
- GAAP book value was $14.12 per common share at September 30, 2019, up from $14.06 per common share at June 30, 2019.
- Economic book value, which adjusts for the face redemption amounts of the Company's outstanding preferred stock and convertible senior notes, was $13.71 per common share at September 30, 2019, up from $13.63 per common share at June 30, 2019 (see Schedule IV).
Three and Nine Months Ended September 30, 2019 Results
- GAAP net income allocable to common shares was $10.0 million, or $0.31 per share-diluted, and $21.8 million, or $0.69 per share-diluted, for the three and nine months ended September 30, 2019, respectively, as compared to GAAP net income allocable to common shares of $6.0 million, or $0.19 per share-diluted, and a GAAP net loss allocable to common shares of $394,000, or $(0.01) per share-diluted, for the three and nine months ended September 30, 2018, respectively.
- GAAP net income allocable to common shares for the three months ended September 30, 2019 includes a $1.1 million, or $0.04 per share-diluted, non-cash recovery on provisions for loan losses resulting substantially from the repayment in full of $72.6 million of loans that were risk rated in category 3 (behind underwritten expectations) at June 30, 2019.
- Core Earnings were $9.9 million, or $0.31 per common share-diluted, and $26.6 million, or $0.84 per common share-diluted, for the three and nine months ended September 30, 2019, respectively (see Schedule I).
- Common stock cash dividends of $0.25 and $0.675 per share were declared and have since been paid for the three and nine months ended September 30, 2019, respectively.
Additional Items
Commercial Real Estate
- Substantially all of XAN's $1.8 billion CRE loan portfolio comprised floating rate senior whole loans at September 30, 2019.
- XAN's CRE floating rate whole loan portfolio had a weighted average spread of 3.64% over the one-month London Interbank Offered Rate ("LIBOR") of 2.02% at September 30, 2019.
The following table summarizes XAN's CRE loan activities and fundings of previous commitments for the three, nine and twelve months ended September 30, 2019 (in millions, except percentages and amounts in footnotes):
Three Months Ended September 30, 2019 |
Nine Months Ended September 30, 2019 |
Twelve Months Ended September 30, 2019 |
||||||||||
New CRE loan commitments |
$ |
105.1 |
$ |
519.6 |
$ |
794.4 |
||||||
New CRE preferred equity investment |
— |
8.7 |
8.7 |
|||||||||
Total CRE loan commitments and investments |
105.1 |
528.3 |
803.1 |
|||||||||
Payoffs and paydowns (1)(2) |
(256.8) |
(461.2) |
(664.3) |
|||||||||
Previous commitments funded |
7.9 |
32.2 |
45.4 |
|||||||||
New unfunded loan commitments and investments |
(12.0) |
(39.6) |
(70.0) |
|||||||||
Net CRE loans (repaid) funded |
(155.8) |
59.7 |
114.2 |
|||||||||
Acquired CRE loans (committed balance) |
— |
210.8 |
210.8 |
|||||||||
Payoffs and paydowns (1) |
(0.1) |
(16.8) |
(16.8) |
|||||||||
Previous commitments funded |
0.2 |
0.2 |
0.2 |
|||||||||
Acquired unfunded loan commitments |
— |
(14.0) |
(14.0) |
|||||||||
Net CRE loans acquired |
0.1 |
180.2 |
180.2 |
|||||||||
Net CRE loans (repaid) funded and acquired |
$ |
(155.7) |
$ |
239.9 |
$ |
294.4 |
||||||
Weighted average one-month LIBOR floor on new originations and acquisitions (3) |
2.34 |
% |
2.28 |
% |
2.23 |
% |
||||||
Weighted average spread above one-month LIBOR (3) |
3.10 |
% |
3.42 |
% |
3.33 |
% |
||||||
Weighted average unlevered yield, including amortization of origination fees and acquisition costs |
5.75 |
% |
5.90 |
% |
5.85 |
% |
||||||
(1) |
CRE loan payoffs and extensions resulted in exit and extension fees of $741,000, $1.7 million and $2.7 million during the three, nine and twelve months ended September 30, 2019, respectively. |
(2) |
Activity excludes legacy CRE loans. |
(3) |
Applies to new floating rate CRE whole loans funded and acquired. |
Commercial Mortgage-Backed Securities
XAN's $506.0 million commercial mortgage-backed securities ("CMBS") portfolio, at par, had a carrying value of $471.8 million (due substantially to net purchase discounts) and a weighted average coupon of 4.54% at September 30, 2019.
The following table summarizes XAN's CMBS activities, at face value, for the three, nine and twelve months ended September 30, 2019 (in millions, except percentages):
Three Months Ended September 30, 2019 |
Nine Months Ended September 30, 2019 |
Twelve Months Ended September 30, 2019 |
||||||||||
CMBS acquisitions |
$ |
33.5 |
$ |
74.2 |
$ |
157.4 |
||||||
Sales |
— |
(0.6) |
(5.6) |
|||||||||
Principal paydowns |
(9.5) |
(33.5) |
(40.2) |
|||||||||
CMBS acquisitions, net |
$ |
24.0 |
$ |
40.1 |
$ |
111.6 |
||||||
Weighted average coupon at the respective period end (1) |
4.66 |
% |
4.77 |
% |
4.57 |
% |
||||||
(1) Applies to new CMBS acquired during the respective periods. |
||||||||||||
Commercial Real Estate Securitizations
- XAN completed the liquidation of Resource Capital Corp. 2017-CRE5, Ltd. ("RCC 2017-CRE5") on July 16, 2019 by repaying the $42.0 million of remaining notes outstanding. Following the liquidation, $112.8 million of CRE loans, at par, that had been financed by RCC 2017-CRE5 were distributed to XAN.
Liquidity
- At October 30, 2019, XAN's available liquidity consisted of two primary sources:
- unrestricted cash and cash equivalents of $56.6 million; and
- approximately $126.6 million of liquidity from available financing of unlevered CRE loans and CMBS.
Common Stock Book Value, Economic Book Value and Total Stockholders' Equity
The following table rolls forward XAN's common stock book value from June 30, 2019 to September 30, 2019 and reconciles common stock book value to economic book value, a non-GAAP measure, at September 30, 2019 (see Schedule IV) (in thousands, except per share data and amounts in footnotes):
Total Amount |
Per Share Amount |
|||||||
Common stock book value at June 30, 2019 (1) |
$ |
441,996 |
$ |
14.06 |
||||
Net income allocable to common shares |
9,969 |
0.31 |
||||||
Change in other comprehensive income: |
||||||||
Available-for-sale securities |
1,387 |
0.04 |
||||||
Derivatives |
(1,908) |
(0.06) |
||||||
Common stock dividends |
(7,862) |
(0.25) |
||||||
Common stock dividends on unvested shares |
(106) |
— |
||||||
Accretion from additional shares outstanding at September 30, 2019 (2) |
594 |
0.02 |
||||||
Total net increase |
2,074 |
0.06 |
||||||
Common stock book value at September 30, 2019 (1)(3) |
$ |
444,070 |
$ |
14.12 |
||||
Reconciling items in arriving at economic book value at September 30, 2019: |
||||||||
Non-cash convertible senior notes' unamortized discounts: |
||||||||
4.50% Convertible Senior Notes |
(8,833) |
(0.28) |
||||||
8.00% Convertible Senior Notes |
(41) |
— |
||||||
Series C Preferred Stock redemption value in excess of carrying value |
(4,045) |
(0.13) |
||||||
Economic book value at September 30, 2019 |
$ |
431,151 |
$ |
13.71 |
||||
(1) |
Per share calculations exclude unvested restricted stock, as disclosed on the consolidated balance sheets, of 424,164 and 426,771 shares at September 30, 2019 and June 30, 2019, respectively. The denominators for the calculations are 31,446,738 and 31,443,123 at September 30, 2019 and June 30, 2019, respectively. |
(2) |
Per share amount calculations include 3,615 additional shares of restricted stock that vested during the three months ended September 30, 2019. |
(3) |
Common stock book value is calculated as total stockholders' equity of $560.0 million less preferred stock equity of $116.0 million at September 30, 2019. |
The following table presents the economic book value per common share at the dates presented:
At September 30, 2019 |
At June 30, 2019 |
At March 31, 2019 |
At December 31, 2018 |
At September 30, 2018 |
||||||||||||||||
Economic book value |
$ |
13.71 |
$ |
13.63 |
$ |
13.60 |
$ |
13.54 |
$ |
13.72 |
||||||||||
Investment Portfolio
The following table summarizes the amortized cost and net carrying amount of XAN's investment portfolio at September 30, 2019, classified by asset type (in thousands, except percentages and amounts in footnotes):
At September 30, 2019 |
Amortized Cost |
Net Carrying Amount |
Percent of Portfolio |
Weighted Average Coupon |
||||||||||||
Core Assets: |
||||||||||||||||
CRE whole loans (1)(2) |
$ |
1,754,797 |
$ |
1,753,337 |
76.76 |
% |
5.82% |
|||||||||
CRE mezzanine loan and preferred equity investments (2) |
30,476 |
30,476 |
1.33 |
% |
11.18% |
|||||||||||
CMBS, fixed rate (3) |
118,481 |
125,198 |
5.48 |
% |
4.10% |
|||||||||||
CMBS, floating rate (3) |
346,408 |
346,650 |
15.18 |
% |
4.75% |
|||||||||||
Total Core Assets |
2,250,162 |
2,255,661 |
98.75 |
% |
||||||||||||
Non-Core Assets: |
||||||||||||||||
Legacy CRE loans (4)(5) |
34,762 |
28,638 |
1.25 |
% |
1.51% |
|||||||||||
Total Core and Non-Core Assets |
$ |
2,284,924 |
$ |
2,284,299 |
100.00 |
% |
||||||||||
(1) |
Net carrying amount includes an allowance for loan losses of $1.5 million at September 30, 2019. |
(2) |
Classified as CRE loans on the consolidated balance sheet. |
(3) |
Classified as investment securities available-for-sale on the consolidated balance sheet. |
(4) |
Includes one legacy CRE loan with an amortized cost of $11.5 million classified as a CRE loan on the consolidated balance sheet as XAN intends to hold this loan to maturity. |
(5) |
Net carrying amount includes a lower of cost or market value adjustment at September 30, 2019. |
Strategic Plan Update
In November 2016, XAN's board of directors approved the strategic plan (the "Plan"). The Plan contemplated disposing of certain loans underwritten prior to 2010, exiting non-core businesses and investments, and maintaining a dividend policy based on sustainable earnings. XAN has substantially completed the execution of the Plan.
At September 30, 2019, XAN had approximately $28.6 million, composed of two legacy CRE loans, remaining of the $480.1 million of identified Plan assets.
Supplemental Information
The following schedules of reconciliations and supplemental information at September 30, 2019 are included at the end of this release:
- Schedule I - Reconciliation of GAAP Net Income (Loss) to Core Earnings;
- Schedule II - Summary of Securitization Performance Statistics;
- Schedule III - CRE Loan Activities;
- Schedule IV - Economic Book Value Per Share; and
- Schedule V - Supplemental Information.
About Exantas Capital Corp.
Exantas Capital Corp. is a real estate investment trust that is primarily focused on originating, holding and managing commercial real estate mortgage loans and other commercial real estate-related debt investments.
The Company is externally managed by Exantas Capital Manager Inc. (the "Manager"), which is an indirect wholly-owned subsidiary of C-III Capital Partners LLC, a leading commercial real estate investment management and services company engaged in a broad range of activities.
For more information, please visit XAN's website at www.exantas.com or contact investor relations at [email protected].
Safe Harbor Statement
Statements made in this release may include forward-looking statements, which involve substantial risks and uncertainties. XAN's actual results, performance or achievements could differ materially from those expressed or implied in this release. The risks and uncertainties associated with forward-looking statements contained in this release include those related to:
- fluctuations in interest rates and related hedging activities;
- the availability of debt and equity capital to acquire and finance investments;
- defaults or bankruptcies by borrowers on XAN's loans or on loans underlying its investments;
- adverse market trends that have affected and may continue to affect the value of real estate and other assets underlying XAN's investments;
- increases in financing or administrative costs; and
- general business and economic conditions that have in the past impaired and may in the future impair the credit quality of borrowers and XAN's ability to originate loans.
For further information concerning these and other risks pertaining to the forward-looking statements contained in this release, and to the general risks to which XAN is subject, see Item 1A, "Risk Factors," included in its Annual Report on Form 10-K for the year ended December 31, 2018 and the risks expressed in its other public filings with the Securities and Exchange Commission (the "SEC").
XAN cautions you not to place undue reliance on any forward-looking statements contained in this release, which speak only as of the date of this release. All subsequent written and oral forward-looking statements attributable to XAN or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, XAN undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
Furthermore, certain non-GAAP financial measures are discussed in this release. XAN's presentation of this information is not intended to be considered in isolation of or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP are set forth in Schedule I and Schedule IV of this release and can be accessed through XAN's filings with the SEC at www.sec.gov.
The remainder of this release contains XAN's unaudited (2019) and audited (2018) consolidated balance sheets, unaudited consolidated statements of operations, a reconciliation of GAAP net income (loss) to Core Earnings, a summary of securitization performance statistics, a summary of XAN's CRE loan activities, a reconciliation of XAN's common stock book value to its economic book value and supplemental information regarding XAN's CRE loan portfolio.
EXANTAS CAPITAL CORP. AND SUBSIDIARIES |
||||||||
CONSOLIDATED BALANCE SHEETS |
||||||||
(in thousands, except share and per share data) |
||||||||
September 30, 2019 |
December 31, 2018 |
|||||||
(unaudited) |
||||||||
ASSETS (1) |
||||||||
Cash and cash equivalents |
$ |
51,286 |
$ |
82,816 |
||||
Restricted cash |
16,614 |
12,658 |
||||||
Accrued interest receivable |
8,647 |
8,198 |
||||||
CRE loans, net of allowances of $1,460 and $1,401 |
1,795,310 |
1,551,967 |
||||||
Investment securities available-for-sale |
471,848 |
418,998 |
||||||
Principal paydowns receivable |
105,464 |
32,083 |
||||||
Investments in unconsolidated entities |
1,548 |
1,548 |
||||||
Derivatives, at fair value |
— |
985 |
||||||
Other assets |
4,069 |
4,015 |
||||||
Assets held for sale (amounts include $17,141 and $17,000 of legacy CRE loans held for sale in continuing operations) |
17,407 |
17,645 |
||||||
Total assets |
$ |
2,472,193 |
$ |
2,130,913 |
||||
LIABILITIES (2) |
||||||||
Accounts payable and other liabilities |
$ |
3,229 |
$ |
7,550 |
||||
Management fee payable |
1,142 |
938 |
||||||
Accrued interest payable |
2,523 |
4,224 |
||||||
Borrowings |
1,887,426 |
1,554,223 |
||||||
Distributions payable |
9,693 |
7,265 |
||||||
Derivatives, at fair value |
6,355 |
1,043 |
||||||
Accrued tax liability |
33 |
31 |
||||||
Liabilities held for sale |
1,766 |
1,820 |
||||||
Total liabilities |
1,912,167 |
1,577,094 |
||||||
STOCKHOLDERS' EQUITY |
||||||||
Preferred stock, par value $0.001: 10,000,000 shares authorized 8.625% Fixed-to-Floating Series C Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share; 4,800,000 and 4,800,000 shares issued and outstanding |
5 |
5 |
||||||
Common stock, par value $0.001: 125,000,000 shares authorized; 31,870,902 and 31,657,499 shares issued and outstanding (including 424,164 and 422,671 of unvested restricted shares) |
32 |
32 |
||||||
Additional paid-in capital |
1,084,365 |
1,082,677 |
||||||
Accumulated other comprehensive income (loss) |
1,156 |
(3,057) |
||||||
Distributions in excess of earnings |
(525,532) |
(525,838) |
||||||
Total stockholders' equity |
560,026 |
553,819 |
||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
2,472,193 |
$ |
2,130,913 |
||||
EXANTAS CAPITAL CORP. AND SUBSIDIARIES |
||||||||
CONSOLIDATED BALANCE SHEETS - (Continued) |
||||||||
(in thousands, except share and per share data) |
||||||||
September 30, 2019 |
December 31, 2018 |
|||||||
(unaudited) |
||||||||
(1) Assets of consolidated variable interest entities ("VIEs") included in total assets above: |
||||||||
Restricted cash |
$ |
5,808 |
$ |
6,189 |
||||
Accrued interest receivable |
4,308 |
3,548 |
||||||
CRE loans, pledged as collateral and net of allowances of $895 and $763 |
1,080,532 |
700,223 |
||||||
Principal paydowns receivable |
26,308 |
31,914 |
||||||
Other assets |
95 |
157 |
||||||
Total assets of consolidated VIEs |
$ |
1,117,051 |
$ |
742,031 |
||||
(2) Liabilities of consolidated VIEs included in total liabilities above: |
||||||||
Accounts payable and other liabilities |
$ |
137 |
$ |
75 |
||||
Accrued interest payable |
1,053 |
709 |
||||||
Borrowings |
882,510 |
501,045 |
||||||
Total liabilities of consolidated VIEs |
$ |
883,700 |
$ |
501,829 |
||||
EXANTAS CAPITAL CORP. AND SUBSIDIARIES |
||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||||||||||||||
(in thousands, except share and per share data) |
||||||||||||||||
(unaudited) |
||||||||||||||||
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
September 30, |
September 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
REVENUES |
||||||||||||||||
Interest income: |
||||||||||||||||
CRE loans |
$ |
32,558 |
$ |
26,496 |
$ |
90,289 |
$ |
74,314 |
||||||||
Securities |
6,596 |
5,217 |
19,562 |
12,878 |
||||||||||||
Other |
138 |
123 |
511 |
261 |
||||||||||||
Total interest income |
39,292 |
31,836 |
110,362 |
87,453 |
||||||||||||
Interest expense |
22,712 |
17,322 |
63,688 |
47,865 |
||||||||||||
Net interest income |
16,580 |
14,514 |
46,674 |
39,588 |
||||||||||||
Other revenue |
25 |
25 |
77 |
82 |
||||||||||||
Total revenues |
16,605 |
14,539 |
46,751 |
39,670 |
||||||||||||
OPERATING EXPENSES |
||||||||||||||||
Management fees |
2,528 |
2,813 |
6,862 |
8,438 |
||||||||||||
Equity compensation |
552 |
757 |
1,647 |
2,383 |
||||||||||||
General and administrative |
2,086 |
2,336 |
7,158 |
7,943 |
||||||||||||
Depreciation and amortization |
8 |
36 |
39 |
68 |
||||||||||||
(Recovery of) provision for loan losses, net |
(1,137) |
(461) |
58 |
(1,260) |
||||||||||||
Total operating expenses |
4,037 |
5,481 |
15,764 |
17,572 |
||||||||||||
12,568 |
9,058 |
30,987 |
22,098 |
|||||||||||||
OTHER INCOME (EXPENSE) |
||||||||||||||||
Equity in earnings of unconsolidated entities |
— |
454 |
— |
231 |
||||||||||||
Net realized and unrealized gain on investment securities available-for-sale and loans and derivatives |
— |
279 |
4 |
569 |
||||||||||||
Net realized and unrealized gain on investment securities, trading |
— |
— |
— |
53 |
||||||||||||
Fair value adjustments on financial assets held for sale |
(55) |
(1,588) |
(1,457) |
(6,244) |
||||||||||||
Other income |
107 |
57 |
259 |
574 |
||||||||||||
Total other income (expense) |
52 |
(798) |
(1,194) |
(4,817) |
||||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE TAXES |
12,620 |
8,260 |
29,793 |
17,281 |
||||||||||||
Income tax benefit |
— |
— |
— |
31 |
||||||||||||
NET INCOME FROM CONTINUING OPERATIONS |
12,620 |
8,260 |
29,793 |
17,312 |
||||||||||||
NET (LOSS) INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX |
(63) |
364 |
(212) |
161 |
||||||||||||
NET INCOME |
12,557 |
8,624 |
29,581 |
17,473 |
||||||||||||
Net income allocated to preferred shares |
(2,588) |
(2,588) |
(7,763) |
(10,385) |
||||||||||||
Consideration paid in excess of carrying value of preferred shares |
— |
— |
— |
(7,482) |
||||||||||||
NET INCOME (LOSS) ALLOCABLE TO COMMON SHARES |
$ |
9,969 |
$ |
6,036 |
$ |
21,818 |
$ |
(394) |
||||||||
NET INCOME (LOSS) PER COMMON SHARE - BASIC: |
||||||||||||||||
CONTINUING OPERATIONS |
$ |
0.32 |
$ |
0.18 |
$ |
0.70 |
$ |
(0.02) |
||||||||
DISCONTINUED OPERATIONS |
— |
0.01 |
(0.01) |
0.01 |
||||||||||||
TOTAL NET INCOME (LOSS) PER COMMON SHARE - BASIC |
$ |
0.32 |
$ |
0.19 |
$ |
0.69 |
$ |
(0.01) |
||||||||
NET INCOME (LOSS) PER COMMON SHARE - DILUTED: |
||||||||||||||||
CONTINUING OPERATIONS |
$ |
0.31 |
$ |
0.18 |
$ |
0.70 |
$ |
(0.02) |
||||||||
DISCONTINUED OPERATIONS |
— |
0.01 |
(0.01) |
0.01 |
||||||||||||
TOTAL NET INCOME (LOSS) PER COMMON SHARE - DILUTED |
$ |
0.31 |
$ |
0.19 |
$ |
0.69 |
$ |
(0.01) |
||||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC |
31,445,492 |
31,229,969 |
31,421,294 |
31,186,057 |
||||||||||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED |
31,714,755 |
31,477,398 |
31,634,371 |
31,186,057 |
||||||||||||
SCHEDULE I
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS) TO CORE EARNINGS
(unaudited)
Core Earnings is a non-GAAP financial measure that XAN uses to evaluate its operating performance.
Core Earnings exclude the effects of certain transactions and GAAP adjustments that XAN believes are not indicative of its current CRE loan portfolio and other CRE-related investments and operations. Core Earnings exclude income (loss) from all non-core assets, such as commercial finance, middle market lending, residential mortgage lending, certain legacy CRE loans and other non-CRE assets designated as assets held for sale at the initial measurement date of December 31, 2016.
Core Earnings, for reporting purposes, is defined as GAAP net income (loss) allocable to common shares, excluding (i) non-cash equity compensation expense, (ii) unrealized gains and losses, (iii) non-cash provisions for loan losses, (iv) non-cash impairments on securities, (v) non-cash amortization of discounts or premiums associated with borrowings, (vi) net income or loss from a limited partnership interest owned at the initial measurement date, (vii) net income or loss from non-core assets,(1)(2) (viii) real estate depreciation and amortization, (ix) foreign currency gains or losses and (x) income or loss from discontinued operations. Core Earnings may also be adjusted periodically to exclude certain one-time events pursuant to changes in GAAP and certain non-cash items.
Although pursuant to the Third Amended and Restated Management Agreement XAN calculates incentive compensation using Core Earnings that exclude incentive compensation payable to the Manager, XAN includes incentive compensation payable to the Manager in calculating Core Earnings for reporting purposes.
Core Earnings allocable to common shares, adjusted ("Core Earnings Adjusted") is a non-GAAP financial measure used to evaluate XAN's operating performance. Core Earnings Adjusted exclude certain non-recurring items and the results of certain transactions that are not indicative of XAN's ongoing operating performance.
Core Earnings and Core Earnings Adjusted do not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income or as measures of liquidity under GAAP. XAN's methodology for calculating Core Earnings and Core Earnings Adjusted may differ from methodologies used by other companies to calculate similar supplemental performance measures, and, accordingly, its reported Core Earnings and Core Earnings Adjusted may not be comparable to similar performance measures used by other companies.
The following table provides a reconciliation from GAAP net income (loss) allocable to common shares to Core Earnings allocable to common shares and Core Earnings allocable to common shares, adjusted for the periods presented (in thousands, except per share data and the amount in the footnotes):
For the Three Months Ended |
For the Nine Months Ended |
|||||||||||||||
September 30, |
September 30, |
|||||||||||||||
2019 |
2018 |
2019 |
2018 |
|||||||||||||
Net income (loss) allocable to common shares - GAAP |
$ |
9,969 |
$ |
6,036 |
$ |
21,818 |
$ |
(394) |
||||||||
Adjustment for realized gains on CRE assets (3) |
— |
(450) |
— |
(450) |
||||||||||||
Net income (loss) allocable to common shares - GAAP, adjusted |
9,969 |
5,586 |
21,818 |
(844) |
||||||||||||
Reconciling items from continuing operations: |
||||||||||||||||
Non-cash equity compensation expense |
552 |
757 |
1,647 |
2,383 |
||||||||||||
Non-cash (recovery of) provision for CRE loan losses |
(1,137) |
(293) |
58 |
(1,092) |
||||||||||||
Litigation settlement expense (4) |
— |
— |
— |
(2,167) |
||||||||||||
Non-cash amortization of discounts or premiums associated with borrowings |
722 |
815 |
2,107 |
2,389 |
||||||||||||
Income tax benefit from non-core investments (1)(2) |
— |
— |
— |
(31) |
||||||||||||
Net realized gain on non-core assets (1)(2) |
(108) |
— |
(123) |
(476) |
||||||||||||
Net (income) loss from non-core assets (2) |
(2) |
(456) |
24 |
(9) |
||||||||||||
Reconciling items from discontinued operations and CRE loans: |
||||||||||||||||
Net interest income on legacy CRE loans |
(170) |
(352) |
(586) |
(1,013) |
||||||||||||
Realized gain on liquidation of legacy CRE loans |
— |
— |
— |
(1,000) |
||||||||||||
Operating expenses on legacy CRE loans |
— |
— |
— |
187 |
||||||||||||
Fair value adjustments on legacy CRE loans |
55 |
1,588 |
1,457 |
6,260 |
||||||||||||
Net loss from other non-CRE investments held for sale |
— |
2 |
— |
508 |
||||||||||||
Loss (income) from discontinued operations, net of taxes |
63 |
(364) |
212 |
(161) |
||||||||||||
Core Earnings before net realized loss on CRE assets |
9,944 |
7,283 |
26,614 |
4,934 |
||||||||||||
Adjustment for realized loss on CRE loan |
— |
(2,332) |
— |
(2,332) |
||||||||||||
Adjustment for realized gain on CRE-related investment |
— |
282 |
— |
282 |
||||||||||||
Core Earnings allocable to common shares |
9,944 |
5,233 |
26,614 |
2,884 |
||||||||||||
Reconciling items in arriving at Core Earnings allocable to common shares, adjusted: |
||||||||||||||||
Realized loss on sale of a previously impaired CRE loan |
— |
2,332 |
— |
2,332 |
||||||||||||
Loss on redemption of Series B Preferred Stock |
— |
— |
— |
7,482 |
||||||||||||
Litigation settlement expense |
— |
— |
— |
2,167 |
||||||||||||
Core Earnings allocable to common shares, adjusted (5)(6) |
$ |
9,944 |
$ |
7,565 |
$ |
26,614 |
$ |
14,865 |
||||||||
Weighted average common shares - diluted |
31,715 |
31,477 |
31,634 |
31,186 |
||||||||||||
Core Earnings per common share - diluted |
$ |
0.31 |
$ |
0.17 |
$ |
0.84 |
$ |
0.09 |
||||||||
Core Earnings per common share, adjusted - diluted (5)(6) |
$ |
0.31 |
$ |
0.24 |
$ |
0.84 |
$ |
0.48 |
||||||||
(1) |
Income tax benefit from non-core investments and net realized gain on non-core assets are components of net income or loss from non-core assets. |
(2) |
Non-core assets are investments and securities owned by XAN at the initial measurement date in (i) commercial finance, (ii) middle market lending, (iii) residential mortgage lending, (iv) legacy CRE loans designated as held for sale and (v) other non-CRE assets included in assets held for sale. |
(3) |
Includes a realized gain of $282,000, or $0.01 per common share-diluted, in connection with the sale of CMBS and a realized recovery of CRE loan loss provision of $168,000, or $0.01 per common share-diluted, in connection with the sale of a previously impaired, 2013 vintage CRE loan for the three and nine months ended September 30, 2018. |
(4) |
Reflects the payment of the settlement of a securities litigation, previously accrued in 2017, for the nine months ended September 30, 2018. |
(5) |
Core Earnings, adjusted exclude a realized loss of $2.3 million, or $(0.07) per common share-diluted, for the three and nine months ended September 30, 2018 in connection with the sale of a previously impaired, 2013 vintage CRE loan. |
(6) |
Core Earnings, adjusted exclude a non-recurring charge of $7.5 million, or $(0.24) per common share-diluted, for the nine months ended September 30, 2018 in connection with the redemption of the Company's 8.25% Series B Cumulative Redeemable Preferred Stock. |
SCHEDULE II
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
SUMMARY OF SECURITIZATION PERFORMANCE STATISTICS
(unaudited)
Distributions, Coverage Tests and Liquidations
The following table sets forth the distributions received by XAN and coverage test summaries for its active securitizations for the periods presented (in thousands):
Cash Distributions |
Overcollateralization Cushion (1) |
|||||||||||||||||
Name |
For the Nine |
For the Year |
At |
At the Initial |
End of Designated |
|||||||||||||
XAN 2018-RSO6 (2) |
$ |
14,254 |
$ |
8,323 |
$ |
42,739 |
$ |
25,731 |
December 2020 |
|||||||||
XAN 2019-RSO7 (2) |
$ |
6,183 |
$ |
— |
$ |
34,352 |
$ |
34,341 |
April 2022 |
|||||||||
Apidos CDO I, Ltd. (3) |
$ |
708 |
$ |
— |
N/A |
$ |
17,136 |
N/A |
||||||||||
Apidos CDO III, Ltd. (3) |
$ |
— |
$ |
618 |
N/A |
$ |
11,269 |
N/A |
||||||||||
(1) |
Overcollateralization cushion represents the amount by which the collateral held by the securitization issuer exceeds the minimum amount required. |
(2) |
The designated principal reinvestment period for Exantas Capital Corp. 2018-RSO6, Ltd. and Exantas Capital Corp. 2019-RSO7, Ltd. is the period in which principal repayments can be utilized to purchase loans held outside of the respective securitization that represent the funded commitments of existing collateral in the respective securitization that were not funded as of the date the respective securitization was closed. Additionally, the indenture for each securitization does not contain any interest coverage test provisions. |
(3) |
Apidos CDO I, Ltd. and Apidos CDO III, Ltd. were substantially liquidated in October 2014 and June 2015, respectively. |
The following table sets forth the distributions received by XAN and liquidation details for its liquidated securitizations for the periods presented (in thousands):
Cash Distributions |
Liquidation Details |
|||||||||||||
Name |
For the Nine |
For the Year |
Liquidation Date |
Remaining Assets |
||||||||||
RCC 2015-CRE3 |
$ |
— |
$ |
3,529 |
August 2018 |
$ |
80,632 |
|||||||
RCC 2015-CRE4 |
$ |
— |
$ |
4,487 |
July 2018 |
$ |
97,825 |
|||||||
RCC 2017-CRE5 |
$ |
12,551 |
$ |
22,843 |
July 2019 |
$ |
112,753 |
|||||||
Whitney CLO I, Ltd. (2) |
$ |
68 |
$ |
— |
January 2019 |
$ |
— |
|||||||
(1) |
The remaining assets at the liquidation date were distributed to XAN in exchange for its preference shares and equity notes in the securitization. |
(2) |
Whitney CLO I, Ltd. was substantially liquidated in September 2013. |
SCHEDULE III
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
CRE LOAN ACTIVITIES
(unaudited)
The following table summarizes XAN's CRE loan activities and fundings of previous commitments for the periods then ended (in millions):
For the Three Months Ended |
||||||||||||||||||||
September 30, 2019 |
June 30, 2019 |
March 31, 2019 |
December 31, 2018 |
September 30, 2018 |
||||||||||||||||
New CRE loan commitments |
$ |
105.1 |
$ |
243.4 |
$ |
171.0 |
$ |
274.9 |
$ |
245.1 |
||||||||||
New CRE preferred equity investment |
— |
8.7 |
— |
— |
— |
|||||||||||||||
Total CRE loan commitments and investments |
105.1 |
252.1 |
171.0 |
274.9 |
245.1 |
|||||||||||||||
Sales, payoffs and paydowns (1) |
(256.8) |
(136.9) |
(67.4) |
(203.1) |
(171.2) |
|||||||||||||||
Previous commitments funded |
7.9 |
11.3 |
13.0 |
13.3 |
15.5 |
|||||||||||||||
New unfunded loan commitments and investments |
(12.0) |
(21.3) |
(6.3) |
(30.5) |
(20.6) |
|||||||||||||||
Net CRE loans (repaid) funded |
(155.8) |
105.2 |
110.3 |
54.6 |
68.8 |
|||||||||||||||
Acquired CRE loans (committed balance) |
— |
210.8 |
— |
— |
— |
|||||||||||||||
Payoffs and paydowns |
(0.1) |
(16.7) |
— |
— |
— |
|||||||||||||||
Previous commitments funded |
0.2 |
— |
— |
— |
— |
|||||||||||||||
Acquired unfunded loan commitments |
— |
(14.0) |
— |
— |
— |
|||||||||||||||
Net CRE loans acquired |
0.1 |
180.1 |
— |
— |
— |
|||||||||||||||
Net CRE loans (repaid) funded and acquired |
$ |
(155.7) |
$ |
285.3 |
$ |
110.3 |
$ |
54.6 |
$ |
68.8 |
||||||||||
(1) Activity excludes legacy CRE loans. |
||||||||||||||||||||
SCHEDULE IV
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
ECONOMIC BOOK VALUE PER SHARE
(unaudited)
Management views economic book value, a non-GAAP measure, as a useful and appropriate supplement to GAAP stockholders' equity and common stock book value because it adjusts GAAP common stock book value to account for the face redemption amounts of the Company's outstanding preferred stock and convertible senior notes. The following table reconciles XAN's common stock book value per share to its economic book value per share at the dates presented:
At September 30, 2019 |
At June 30, 2019 |
At March 31, 2019 |
At December 31, 2018 |
At September 30, 2018 |
||||||||||||||||
Common stock book value |
$ |
14.12 |
$ |
14.06 |
$ |
14.06 |
$ |
14.02 |
$ |
14.23 |
||||||||||
Non-cash convertible senior notes' unamortized discounts |
(0.28) |
(0.30) |
(0.33) |
(0.35) |
(0.38) |
|||||||||||||||
Preferred stock redemption values in excess of carrying values |
(0.13) |
(0.13) |
(0.13) |
(0.13) |
(0.13) |
|||||||||||||||
Economic book value |
$ |
13.71 |
$ |
13.63 |
$ |
13.60 |
$ |
13.54 |
$ |
13.72 |
||||||||||
SCHEDULE V
EXANTAS CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
Certain Loan Statistics
The following table presents information on XAN's allowance for CRE loan losses, which excludes fair value adjustments on a legacy CRE loan classified as assets held for sale, at the dates indicated (amounts in thousands, percentages based on amortized cost):
September 30, 2019 |
December 31, 2018 |
|||||||
(unaudited) |
||||||||
Allowance for loan losses: |
||||||||
General allowance: |
||||||||
CRE whole loans |
$ |
1,460 |
$ |
1,401 |
||||
Total general allowance |
1,460 |
1,401 |
||||||
Total allowance for loans |
$ |
1,460 |
$ |
1,401 |
||||
Allowance as a percentage of total loans |
0.1 |
% |
0.1 |
% |
||||
There was no specific allowance for loan losses at September 30, 2019 or December 31, 2018.
The following table presents unaudited CRE loan portfolio statistics at September 30, 2019, excluding a legacy CRE loan classified as assets held for sale (percentages based on carrying value at September 30, 2019):
Loan type: |
|||||||
Whole loans |
98.3 |
% |
|||||
Preferred equity investments |
1.4 |
% |
|||||
Mezzanine loan |
0.3 |
% |
|||||
Total |
100.0 |
% |
|||||
Collateral type: |
|||||||
Multifamily |
54.7 |
% |
|||||
Office |
13.5 |
% |
|||||
Hotel |
12.3 |
% |
|||||
Retail |
8.5 |
% |
|||||
Self-Storage |
6.2 |
% |
|||||
Manufactured Housing |
3.7 |
% |
|||||
Industrial |
1.1 |
% |
|||||
Total |
100.0 |
% |
|||||
Collateral by NCREIF U.S. region: |
|||||||
Mountain (1) |
22.1 |
% |
|||||
Southwest (2) |
19.7 |
% |
|||||
Southeast (3) |
16.4 |
% |
|||||
Pacific (4) |
13.4 |
% |
|||||
Mid Atlantic (5) |
11.8 |
% |
|||||
Northeast (6) |
10.5 |
% |
|||||
East North Central |
5.0 |
% |
|||||
West North Central |
1.1 |
% |
|||||
Total |
100.0 |
% |
(1) |
CRE loans in Arizona and Nevada represent 12.0% and 6.6%, respectively, of the total loan portfolio. |
|
(2) |
CRE loans in Texas represent 17.8% of the total loan portfolio. |
|
(3) |
CRE loans in Florida and Georgia represent 9.7% and 6.4%, respectively, of the total loan portfolio. |
|
(4) |
CRE loans in California represent 12.0% of the total loan portfolio. |
|
(5) |
CRE loans in South Carolina represent 5.2% of the total loan portfolio. |
|
(6) |
CRE loans in New York represent 5.1% of the total loan portfolio. |
CONTACT: |
DAVID J. BRYANT |
CHIEF FINANCIAL OFFICER |
|
EXANTAS CAPITAL CORP. |
|
717 Fifth Avenue |
|
New York, NY 10022 |
|
212-621-3210 |
SOURCE Exantas Capital Corp.
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