XAN - Exantas Capital Corp. Reports Results For Three And Six Months Ended June 30 2019

NEW YORK, July 31, 2019 /PRNewswire/ -- Exantas Capital Corp. (NYSE: XAN) ("XAN" or the "Company") reports results for the three and six months ended June 30, 2019.

Significant Items and Highlights

• GAAP net income allocable to common shares of $0.20 per share-diluted for the three months ended June 30, 2019.
  
  
• Core Earnings were $0.28 per common share-diluted for the three months ended June 30, 2019 (see Schedule I).
  
  
• Management anticipates the Company will declare a cash dividend of $0.25 per share on its common stock for the third quarter of 2019, which would be an 11.1% increase over the second quarter of 2019 dividend of $0.225 per share and a 66.7% increase over the third quarter of 2018 dividend of $0.15 per share.
  
  
• XAN originated $252.1 million of new commercial real estate ("CRE") loans and acquired a $210.8 million portfolio (including $14.0 million of unfunded commitments) of CRE loans during the three months ended June 30, 2019 (see Schedule III).
  
  
• Book value was $14.06 per common share at June 30, 2019 and March 31, 2019.
  
  
• Economic book value, which adjusts for the face redemption amounts of the Company's outstanding preferred stock and convertible senior notes, was $13.63 per common share at June 30, 2019 as compared to $13.60 per common share at March 31, 2019 (see Schedule IV).

Three and Six Months Ended June 30, 2019 Results

• GAAP net income allocable to common shares was $6.3 million, or $0.20 per share-diluted, and $11.8 million, or $0.38 per share-diluted, for the three and six months ended June 30, 2019, respectively, as compared to GAAP net income allocable to common shares of $6.2 million, or $0.20 per share-diluted, and a GAAP net loss allocable to common shares of $6.4 million, or $(0.21) per share-diluted, for the three and six months ended June 30, 2018, respectively.
  
  
• GAAP net income allocable to common shares for the three and six months ended June 30, 2019 includes a $1.3 million, or $(0.04) per share-diluted, fair value adjustment on the Company's remaining CRE loan classified as an asset held for sale.
  
  
• Core Earnings of $8.8 million, or $0.28 per common share-diluted, and $16.7 million, or $0.53 per common share-diluted, for the three and six months ended June 30, 2019, respectively (see Schedule I).
  
  
• Common stock cash dividends of $0.225 and $0.425 per share were declared and have since been paid for the three and six months ended June 30, 2019, respectively.
  
  

Additional Items

Commercial Real Estate

• In May 2019, XAN acquired a $210.8 million portfolio (including $14.0 million of unfunded commitments) of floating-rate CRE loans, with $196.8 million of principal outstanding at closing, from C-III Commercial Mortgage LLC, which is an affiliate of the Company's external manager.
  
  
• Substantially all of XAN's $2.0 billion CRE loan portfolio comprised floating rate senior whole loans at June 30, 2019.
  
  
• XAN's CRE floating rate whole loan portfolio had a weighted average spread of 3.75% over the one-month London Interbank Offered Rate ("LIBOR") of 2.40% at June 30, 2019.

The following table summarizes XAN's CRE loan activities and fundings of previous commitments for the three, six and twelve months ended June 30, 2019 (in millions, except percentages and amounts in footnotes):

Commercial Mortgage-Backed Securities

XAN's $482.1 million commercial mortgage-backed securities ("CMBS") portfolio, at par, had a carrying value of $445.7 million and a weighted average coupon of 4.76% at June 30, 2019.

The following table summarizes XAN's CMBS activities, at face value, for the three, six and twelve months ended June 30, 2019 (in millions, except percentages):

Commercial Real Estate Securitizations

• XAN closed a CRE debt securitization that financed CRE loans of $687.2 million on April 17, 2019 and issued $585.8 million of non-recourse, floating-rate notes, of which the Company purchased $10.0 million of the Class D notes rated BBB(low)(sf), at a weighted average cost of one-month LIBOR plus 1.32%.
  
  
• XAN completed the liquidation of Resource Capital Corp. 2017-CRE5, Ltd. ("RCC 2017-CRE5") on July 16, 2019 by repaying the 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 July 30, 2019, XAN's available liquidity consisted of two primary sources:
  
  
• unrestricted cash and cash equivalents of $53.0 million; and
  
  
• approximately $100.9 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 March 31, 2019 to June 30, 2019 and reconciles common stock book value to economic book value, a non-GAAP measure, at June 30, 2019 (see Schedule IV) (in thousands, except per share data and amounts in footnotes):

The following table presents the economic book value per common share at the dates presented:

Investment Portfolio

The following table summarizes the amortized cost and net carrying amount of XAN's investment portfolio at June 30, 2019, classified by asset type (in thousands, except percentages and amounts in footnotes):

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 June 30, 2019, XAN had approximately $27.6 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 June 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 IR@exantas.com.

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 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.

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 its 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):

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):