XAN - Exantas Capital Corp. Reports Results For Three And Six Months Ended June 30 2020

WESTBURY, N.Y., Aug. 5, 2020 /PRNewswire/ -- Exantas Capital Corp. (NYSE: XAN) ("Exantas" or the "Company"), 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, today reported results for the three and six months ended June 30, 2020.

Recent Acquisition and Financings

On August 3, 2020, as previously reported, Exantas's management agreement was acquired by a subsidiary of ACRES Capital Corp. (the "ACRES acquisition") from an affiliate of C-III Capital Partners LLC. In conjunction with the acquisition, new capital commitments were secured by the Company for up to $375.0 million. The capital agreements are with Oaktree Capital Management, L.P. ("Oaktree") and Massachusetts Mutual Life Insurance Company ("MassMutual") to provide a commitment of up to $125.0 million in the form of seven-year unsecured notes. The Company issued $50.0 million of unsecured notes to Oaktree and MassMutual under this commitment, leaving a balance of $75.0 million available over the next 18 months at Exantas's option. The new capital commitments include a $250.0 million seven-year senior secured financing facility with MassMutual that can be utilized to fully repay Exantas's warehouse and repurchase facilities, thereby reducing the potential for any margin calls under such facilities.

"Given the many financial challenges Exantas has faced during the year, we believe, we are at an exciting and important inflection point given ACRES Capital's acquisition of the Company's management contract. We believe this transaction will result in an exciting and unique opportunity to create meaningful value for borrowers in the middle market and ultimately all stakeholders," stated Exantas's newly appointed Chief Executive Officer and President Mark Fogel. "Our lending platform focuses on building long-term borrower relationships that now creates a one-stop solution for flexible financing solutions in the middle-market. While challenges persist in the current environment, with an enhanced financial profile and access to a deep network of borrowers, we look forward to advancing our proven lending strategies in a manner that grows book value and earnings over time."

Second Quarter Ended June 30, 2020 Results

• GAAP net loss allocable to common shares was $36.0 million, or $(1.14) per share-diluted.
  
  
• GAAP net loss allocable to common shares included $40.5 million, or $(1.28) per share-diluted, of non-cash provisions for credit losses.
  
  
• Core Earnings were $7.5 million, or $0.24 per common share-diluted (see Schedule I).
  
  
• GAAP book value was $6.01 per common share at June 30, 2020, as compared to $7.13 per common share at March 31, 2020.

Six Months Ended June 30, 2020 Results

• GAAP net loss allocable to common shares was $235.1 million, or $(7.42) per share-diluted, as compared to GAAP net income allocable to common shares of $11.8 million, or $0.38 per share-diluted, for the six months ended June 30, 2020 and 2019, respectively.
  
  
• GAAP net loss allocable to common shares included:
  
  
• $180.3 million, or $(5.69) per share-diluted, of losses on the disposition of the Company's commercial mortgage-backed securities ("CMBS") portfolio financed with repurchase agreements and $6.0 million, or $(0.19) per share-diluted, of fair value adjustments on two CMBS investments that were not financed;
      
  
• $56.6 million, or $(1.79) per share-diluted, of non-cash provisions for credit losses; and      
      
• $4.7 million, or $(0.15) per share-diluted, of fair value adjustments on the Company's remaining commercial real estate ("CRE") asset held for sale.
     
  
• Core Earnings were $(165.4) million, or $(5.21) per common share-diluted. Core Earnings, adjusted for realized losses were $14.9 million, or $0.47 per common share-diluted, after a $180.3 million, or $(5.68) per common share-diluted, adjustment for the disposition of the Company's CMBS portfolio and settlements of the repurchase agreements that financed this portfolio (see Schedule I).

Impact of COVID-19

The coronavirus ("COVID-19") pandemic produced material and previously unforeseeable liquidity shocks to the real estate credit markets. In response, Exantas took various actions to preserve liquidity and reduce credit risk exposure on its balance sheet, including the:

• Completion of the disposition of its CMBS portfolio and settlement of $175.9 million of CMBS repurchase agreements in April 2020.
  
  
• Termination of interest rate swaps on the CMBS portfolio, which had unrealized losses of $11.8 million recorded in equity at the time of termination in April 2020, of which $475,000 was recognized in the second quarter of 2020. The losses will be amortized into earnings over the remaining lives of the underlying contracts, for over seven years.
  
  
• Execution of short-term forbearance agreements and extensions on 11 CRE whole loans that provide payment timing relief to affected borrowers.
  
  
• Reduction of the aggregate balance of the CRE loan warehouse financing facilities by $50.8 million ($36.5 million from CRE loan payoff proceeds and $14.3 million from available cash).
  
  
• Entrance into a "Margin Holiday" agreement with its two largest CRE loan warehouse lenders through the end of August 2020.
  
  
• Completion of separate definitive agreements with MassMutual and a fund managed by Oaktree for new capital commitments aggregating up to $375.0 million in conjunction with the ACRES acquisition, improving the liquidity profile of the Company and reducing the Company's exposure to potential margin calls.

Additional Items

Commercial Real Estate

• Substantially all of XAN's $1.8 billion CRE loan portfolio comprises floating-rate senior whole loans at June 30, 2020.
  
  
• Exantas's CRE floating-rate whole loan portfolio had a weighted average spread of 3.41% over the weighted average one-month London Interbank Offered Rate ("LIBOR") floor of 1.92% at June 30, 2020.
  
  
• All but two of the Company's CRE loans were current on debt service due through July 2020, including seven loans that are performing in accordance with forbearance agreements.
  
  
• In June 2020, the Company sold one unlevered CRE whole loan for $17.4 million (approximately 95% of the par value), which resulted in a realized loss of $1.0 million recorded in the provision for credit losses during the three and six months ended June 30, 2020.
  
  
• The Company received CRE loan payoffs and paydowns of $117.3 million and $207.5 million for the three and six months ended June 30, 2020, respectively.
  
  
• Non-recourse, non-mark-to-market collateralized loan obligation financings comprised approximately $1.1 billion, or 82%, of the approximately $1.3 billion of outstanding asset-specific borrowings at July 31, 2020.

CECL Allowance

In January 2020, the Company adopted new accounting guidance that transitioned the allowance for credit losses to a current expected credit losses ("CECL") model. The following table rolls forward XAN's allowance for credit losses (in thousands):

Liquidity

At July 31, 2020, the Company's available liquidity was $164.9 million, which consisted of $89.9 million in unrestricted cash and cash equivalents and $75.0 million of availability under the Oaktree and MassMutual unsecured notes. In addition, the Company had unencumbered real estate assets of approximately $61.1 million.

Common Stock Book Value, Economic Book Value and Total Stockholders' Equity

The following table rolls forward the Company's common stock book value from March 31, 2020 to June 30, 2020 and reconciles common stock book value to economic book value, a non-GAAP measure, at June 30, 2020 (see Schedule IV) (in thousands, except per share data and amounts in footnotes):

Investment Portfolio

The following table summarizes the amortized cost and net carrying amount of the Company's investment portfolio at June 30, 2020, classified by asset type (in thousands, except percentages and amounts in footnotes):

Supplemental Information

The following schedules of reconciliations and supplemental information at June 30, 2020 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 - Economic Book Value Per Share; and
   
• Schedule IV - Supplemental Information.

Earnings Call Details

Exantas will host a live conference call on August 6, 2020 at 8:30 a.m. Eastern Time to discuss its second quarter 2020 operating results. The conference call can be accessed by dialing +1 (888) 895-3561 (U.S. domestic) or +1 (904) 685-6494 (International) with the passcode 2858441 or from the investor relations section of the Company's website at https://exantas.investorroom.com/. For those unable to listen to the live conference call, a replay will be available on the Company's website and telephonically from 11:30 a.m. Eastern Time on August 6, 2020 until 12:00 a.m. Eastern Time on August 14, 2020 by dialing +1 (855) 859-2056 (U.S. domestic) or +1 (404) 537-3406 (International), passcode 2858441.

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 ACRES Capital, LLC (the "Manager"), a subsidiary of ACRES Capital Corp.

For more information, please visit the Company's website at www.exantas.com or contact investor relations at IR@exantas.com or ocouture@acrescap.com.

Safe Harbor Statement

Statements made in this release may include forward-looking statements, which involve substantial risks and uncertainties. The Company'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:

• the economic impact of the COVID-19 pandemic, including but not limited to:
    
• the availability of debt and equity capital to acquire and finance investments;
   
• defaults or bankruptcies by borrowers on the Company'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 the Company's investments;
   
• fluctuations in interest rates and related hedging activities;
   
• 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 the Company'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 the Company is subject, see Item 1A, "Risk Factors," included in its Annual Report on Form 10-K for the year ended December 31, 2019 and the risks expressed in its other public filings with the Securities and Exchange Commission (the "SEC").

The Company 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 the Company 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, The Company 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. The Company'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 III of this release and can be accessed through the Company's filings with the SEC at www.sec.gov.

The remainder of this release contains the Company's unaudited (2020) and audited (2019) 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 reconciliation of the Company's common stock book value to its economic book value and supplemental information regarding the Company's CRE loan portfolio.

Contact:
David J. Bryant
Chief Financial Officer
Exantas Capital Corp.
215-546-5005
IR@exantas.com

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 the Company uses to evaluate its operating performance.

Core Earnings exclude the effects of certain transactions and GAAP adjustments that the Company 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 assets 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 credit 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 Fourth Amended and Restated Management Agreement the Company calculates incentive compensation using Core Earnings that exclude incentive compensation payable to the Manager, the Company 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 the Company's operating performance. Core Earnings Adjusted exclude certain non-recurring items and the results of certain transactions that are not indicative of the Company'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. The Company'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):

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 the Company and coverage test summaries for its active securitizations for the periods presented (in thousands):

The following table sets forth the distributions received by the Company and liquidation details for its liquidated securitizations for the periods presented (in thousands):

SCHEDULE III

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 the Company's common stock book value per share to its economic book value per share at the dates presented: