Finance
Novo Reports Q1 2022 Financial Results
VANCOUVER, British Columbia, Might 13, 2022 (GLOBE NEWSWIRE) — Novo Assets Corp. (“Novo” or the “Firm”) (TSX: NVO, NVO.WT & NVO.WT.A) (OTCQX: NSRPF) is happy to announce its monetary outcomes for the three-month interval ended March 31, 2022. All quantities are expressed in Canadian {dollars}, except in any other case famous.
This information launch needs to be learn along with Novo’s administration’s dialogue and evaluation (the “MD&A”) and condensed interim consolidated monetary statements (the “Monetary Statements”) for the three-month interval ended March 31, 2022 (“Q1 2022”) which can be found underneath Novo’s profile on SEDAR (www.sedar.com).
Highlights
-
Income of $31.9 million from the sale of 13,364 ounces of gold from the Firm’s Beatons Creek gold venture (the “Beatons Creek Mission”) in Q1 2022 at a median realized value1 of $2,389 / A$2,604/ US$1,887 per ounce
-
Money and money equivalents of $21.9 million as at March 31, 2022
-
Funding portfolio steadiness of $135.2 million2 as at March 31, 2022, which included a 9.13% undiluted stake in New Discovered Gold Corp. (TSXV: NFG) (“New Discovered”) value $113.9 million. Subsequent to March 31, 2022, Novo agreed to promote its stake in New Discovered for gross proceeds of C$125.9 million3
-
Persevering with concentrate on high-priority exploration targets, with exploration spend of $4.0 million
-
$4.1 million was invested in capital tasks throughout Q1 2022, together with $2.1 million on the Beatons Creek Mission Recent drill-out and feasibility research4 which is predicted to be accomplished in Q3 2022
-
Earnings earlier than curiosity, taxes, depreciation and amortization (“EBITDA”)1 of $(2.4) million and adjusted EBITDA1 of $(3.1) million
-
Complete money prices1 of $2,195 / A$2,392 / US$1,733 per ounce bought and all-in sustaining prices (“AISC”)1 of $2,842 / A$3,097 / US$2,244 per ounce bought
_______________
1 Non-IFRS measure; the definitions and reconciliations of those measures are included underneath “Non-IFRS Measures” beneath.
2 Novo’s capacity to get rid of its investments is topic to sure thresholds underneath the Sprott Facility (as outlined beneath). Please confer with the MD&A which is obtainable underneath Novo’s profile on SEDAR at www.sedar.com. Novo’s funding in New Discovered Gold Corp. is topic to escrow necessities pursuant to Nationwide Instrument 46-201 Escrow for Preliminary Public Choices. The worth of Novo’s holdings in Elementum 3D, Inc. (“E3D”) is predicated on E3D’s most up-to-date financing value of US$8.00 per unit comprised of 1 widespread share and one-half of 1 widespread share buy warrant. Apart from its funding in E3D and warrant holdings, the truthful worth of Novo’s investments is predicated on closing costs of its investments and related international exchanges price as at March 31, 2022.
3 Discuss with the Firm’s information launch dated April 12, 2022 and April 27, 2022. Pricing of the twond tranche if topic to part 4.2 of Nationwide Instrument 62-104 Take-Over Bids and Issuer Bids.
4 Discuss with the Firm’s information releases dated December 13, 2021 and April 7, 2022.
Monetary Highlights
In 1000’s of CAD, |
For the three months ended |
||||
besides the place famous |
March 31, 2022 |
March 31, 2021 |
|||
Gold bought |
Oz Au |
13,364 |
3,497 |
||
Common realized value1 |
$/oz |
2,389 |
2,205 |
||
Common realized value1 |
AUD$/oz |
2,604 |
2,254 |
||
Common realized value1 |
USD$/oz |
1,887 |
1,742 |
||
Complete income |
$ |
31,875 |
7,718 |
||
Price of products bought |
$ |
(37,375 |
) |
(7,718 |
) |
Internet (loss) / revenue from operations |
$ |
(8,039 |
) |
4,447 |
|
Different revenue / (bills), internet |
$ |
670 |
(1,903 |
) |
|
Finance objects |
$ |
(64 |
) |
(1,424 |
) |
Internet (loss) / revenue for the interval after tax |
$ |
(12,933 |
) |
1,120 |
|
Fundamental and diluted revenue / (loss) per widespread share |
$/share |
(0.05 |
) |
0.00 |
|
EBITDA1 |
$ |
(2,440 |
) |
6,208 |
|
Adjusted EBITDA1 |
$ |
(3,110 |
) |
8,111 |
|
Adjusted (loss) / earnings1 |
$ |
(13,603 |
) |
(11,917 |
) |
Adjusted (loss) / earnings per widespread share1 |
$/share |
(0.06 |
) |
(0.05 |
) |
Complete money prices1 |
$/oz |
2,195 |
1,223 |
||
Complete money prices1 |
AUD$/oz |
2,392 |
1,251 |
||
Complete money prices1 |
USD$/oz |
1,733 |
966 |
||
AISC1 |
$/oz |
2,842 |
3,429 |
||
AISC1 |
AUD$/oz |
3,097 |
3,505 |
||
AISC1 |
USD$/oz |
2,244 |
2,708 |
||
Novo generated income of $31.9 million from the sale of 13,364 ounces of gold at a median realized value1 of $2,389 / A$2,604 / US$1,887 per ounce. 394,382 tonnes of mineralized materials have been processed by means of the Golden Eagle processing facility (the “Golden Eagle Plant”) equating to an annual processing price of roughly 1.6 million tonnes every year. Processed materials had a median head grade of 1.15 g/t Au with common restoration of 91.4% leading to 13,378 ounces of gold produced in Q1 20225.
The Firm generated a internet lack of $(12.9) million or $(0.05) per share.
EBITDA1 totaled $(2.4) million Q1 2022, and adjusted EBITDA1 totaled $(3.1) million.
Complete money prices1 have been $2,195 / A$2,392 / US$1,733. AISC1 was $2,842 / A$3,097 / US$2,244. Complete money prices1 and AISC1 are closely influenced by the variety of ounces of gold bought and are larger than anticipated resulting from, amongst different issues, a decrease manufacturing base than initially forecast.
Adjusted earnings (losses)1 have been $(13.6) million or $(0.06) per share. Changes to internet earnings (losses) for the interval embrace minor non-operational revenue, non-cash international change positive factors, and non-cash positive factors ensuing from the motion within the truthful worth of sure marketable securities.
The Firm is dedicated to aggressively advancing its extremely potential exploration portfolio and devoted $4.0 million to such efforts. As well as, the Firm is advancing the Beatons Creek venture Recent feasibility research and incurred $2.1 million by means of Q1 2022, with an anticipated completion date in Q3 20224.
_______________
5 Discuss with the Firm’s information launch dated April 7, 2022.
Monetary Place
In 1000’s of CAD, |
March 31, 2022 |
December 31, 2021 |
December 31, 2020 |
besides the place famous |
$’000 |
$’000 |
$’000 |
Money |
21,783 |
32,345 |
40,494 |
Quick-term investments |
155 |
108 |
195 |
Working capital1 |
105,063 |
3,925 |
14,071 |
Sprott Facility adjusted working capital (USD)1 |
105,237 |
23,332 |
25,089 |
Marketable securities1 |
135,164 |
156,209 |
18,770 |
Accessible liquidity1 |
99,136 |
102,868 |
59,623 |
Complete property |
427,017 |
462,682 |
456,408 |
Present liabilities excluding present portion of monetary liabilities |
18,813 |
19,805 |
12,083 |
Non-current liabilities excluding non-current portion of monetary liabilities |
35,721 |
36,342 |
28,615 |
Monetary liabilities (present and non-current) |
72,635 |
75,608 |
86,271 |
Complete liabilities |
139,665 |
148,420 |
126,969 |
Shareholders’ fairness |
287,352 |
314,262 |
329,439 |
The Firm held money and money equivalents of $21.9 million, with a working capital1 steadiness of $105.1 million. The Firm’s 9.13% undiluted stake in New Discovered was reclassified as a present asset as at March 31, 2022 pursuant to sale plans which culminated within the settlement to promote the New Discovered funding in early April 20223.
Abnormal course accounts payable and accrued liabilities totaled $14.5 million, representing a $1.5 million lower from December 31, 2022 and an extra $1.1 million improve from September 30, 2021. Extra quantities embrace $1.4 million in worker entitlements, and a $3.0 million accrual representing the Firm’s present estimate of Western Australian stamp obligation payable on the acquisition of Millennium Minerals Restricted (“Millennium”) in 20206 which is at present being reviewed by the Western Australian Division of Finance and is predicted to be confirmed and paid inside 12 months.
The farmin and three way partnership association (the “Settlement”) over the Firm’s Egina venture with Sumitomo Company of Tokyo, Japan (“Sumitomo”) was acknowledged as a set of monetary liabilities because of the Firm’s obligation to reimburse Sumitomo for exploration expenditure funded all through the tenure of the Settlement if Sumitomo didn’t elect to type a three way partnership with the Firm previous to the expiry of the Settlement. This legal responsibility is truthful valued on a quarterly foundation. The combination truthful worth of the liabilities decreased from $6.9 million as at December 31, 2021 to $4.7 million as at March 31, 2022. Subsequent to March 31, 2022, Sumitomo elected to transform its curiosity underneath the Settlement, and Novo elected to reimburse Sumitomo by means of the issuance of three,382,550 widespread shares7 with a good worth of $3.2 million based mostly on the Firm’s closing value on April 21, 2022 of $0.96 as in comparison with Sumitomo’s combination funding of A$7.8 million (roughly $7.2 million) by means of April 21, 2022.
Present and non-current lease liabilities signify the amortized price of assorted contractual obligations that are acknowledged pursuant to IFRS 16 Leases. The amortized price of such contractual obligations, which incorporates (however isn’t restricted to) the mounted price part of the Firm’s mining contract and the minimal month-to-month PhotonAssay assure underneath the Firm’s contract with Intertek8, represents the discounted current worth of contractual obligations over the life of every contract and is offset to a sure extent by proper of use non-current property. Importantly, these liabilities signify obligations that are due over time and reduce over the life of every contract as contractual provisions are delivered and utilized.
Deferred tax liabilities signify the Firm’s estimate of capital positive factors tax payable on the truthful worth of the Firm’s marketable securities, together with the funding in New Discovered. This quantity represents the perfect estimate of capital positive factors tax that will be payable if the Firm liquidated its investments.
The Firm’s rehabilitation provision of $35.7 million represents the discounted current worth of the combination rehabilitation provision on the Beatons Creek Mission and the rehabilitation provision inherited pursuant to the acquisition of Millennium6. Quantities are anticipated to be incurred between 2026 and 2036 based mostly on present lifetime of mine fashions, beginning after mining has accomplished on the Beatons Creek Mission.
The senior secured credit score facility with Sprott Non-public Useful resource Lending II (Collector), LP (the “Sprott Facility”) stays totally drawn at USD$40 million. Curiosity accrues on the excellent principal quantity of the Sprott Facility at a price of 8% every year plus the larger of (i) US three-month LIBOR and (ii) 1.00%. All curiosity is payable in money on a month-to-month foundation. As at March 31, 2022, principal is contractually repayable commencing December 2022 and quarterly thereafter till September 2024 in eight equal instalments, ensuing within the recognition of $12.5 million as present liabilities to replicate the truth that two principal funds are contracted to be made throughout the 12 months subsequent to March 31, 2022. The provision of the Sprott Facility is topic to sure situations and covenants, together with the upkeep of minimal unrestricted money and dealing capital balances after sure changes. These covenants have been not too long ago adjusted on account of the Firm’s sale of its New Discovered funding3. As at March 31, 2022 and the date of this information launch, the Firm is in compliance with Sprott Facility situations and covenants, as amended or waived.
_______________
6 Discuss with the Firm’s information releases dated August 4, 2020 and September 8, 2020.
7 Discuss with the Firm’s information launch dated April 21, 2022.
8 Discuss with the Firm’s information launch dated Might 18, 2021.
Outlook
The Firm reiterates its earlier manufacturing forecast for the primary half of 2022 of 27 koz – 30 koz Au5 assuming receipt of requisite approvals and talent to handle any additional influence to operations from COVID-19.
Non-IFRS Measures
Sure non-IFRS measures have been included on this information launch. The Firm believes that these measures, along with measures ready in accordance with Worldwide Monetary Reporting Requirements (“IFRS”), present readers with an improved capacity to judge its underlying efficiency and to match it to data reported by different firms. The non-IFRS measures are meant to offer further data and shouldn’t be thought of in isolation or as an alternative choice to measures of efficiency ready in accordance with IFRS. These measures don’t have any standardized which means prescribed underneath IFRS, and due to this fact is probably not similar to related measures introduced by different firms.
Common Realized Value
The Firm makes use of the typical realized value per ounce of gold bought to higher perceive the gold value and, as soon as relevant, money margin realized all through a interval.
Common realized value is calculated as income from contracts with clients plus therapy and refinery costs included in dore income much less silver income divided by gold ounces bought.
The next desk reconciles this non-IFRS measure to probably the most immediately comparable IFRS measure disclosed within the Monetary Statements and MD&A.
In 1000’s of CAD, |
For the three months ended |
||||
besides the place famous |
March 31, 2022 |
March 31, 2021 |
|||
Income from contracts with clients |
$ |
31,875 |
7,718 |
||
Therapy and refining costs |
$ |
106 |
13 |
||
Much less: Silver income (Notice 17 of the Monetary Statements) |
$ |
(54 |
) |
(19 |
) |
Gold income |
$ |
31,927 |
7,712 |
||
Gold bought |
oz |
13,364 |
3,497 |
||
Common realized value |
$/oz |
2,389 |
2,205 |
||
International change price |
CAD:AUD |
1.0898 |
1.0223 |
||
Common realized value |
AUD$/oz |
2,604 |
2,254 |
||
International change price |
CAD:USD |
0.7898 |
0.7899 |
||
Common realized value |
USD$/oz |
1,887 |
1,742 |
||
Complete Money Prices
The Firm experiences complete money prices on a per gold ounce bought foundation. Along with measures ready in accordance with IFRS, equivalent to income, the Firm believes this data can be utilized to judge its efficiency and talent to generate working earnings and money movement from its mining operations. The Firm makes use of this metric to observe working price efficiency.
Complete money prices embrace price of gross sales equivalent to mining, processing, mine basic and administrative prices, royalties, promoting prices, and modifications in inventories much less non-cash depreciation and depletion, write-down of inventories and web site share-based funds the place relevant, and silver income divided by gold ounces bought to reach at complete money prices per ounce of gold bought.
The next desk reconciles this non-IFRS measure to probably the most immediately comparable IFRS measure disclosed within the Monetary Statements and MD&A.
In 1000’s of CAD, |
For the three months ended |
||||
besides the place famous |
March 31, 2022 |
March 31, 2021 |
|||
Gold bought |
Oz Au |
13,364 |
3,497 |
||
Complete money price reconciliation |
|||||
Price of gross sales |
$ |
37,375 |
7,718 |
||
Much less: Depreciation and depletion* |
$ |
(7,989 |
) |
(3,421 |
) |
Much less: Silver Income (Notice 17 of the Monetary Statements) |
$ |
(54 |
) |
(19 |
) |
Complete money prices |
$ |
29,332 |
4,278 |
||
Money prices per oz of gold bought |
$/oz |
2,195 |
1,223 |
||
International change price |
CAD:AUD |
1.0898 |
1.0223 |
||
Money prices per oz of gold bought |
AUD$/oz |
2,392 |
1,251 |
||
International change price |
CAD:USD |
0.7898 |
0.7899 |
||
Money prices per oz of gold bought |
USD$/oz |
1,733 |
966 |
||
*Depreciation and depletion are reconciled to combination depreciation and depletion within the working changes within the condensed interim consolidated statements of money flows within the Monetary Statements.
All-in Sustaining Prices
The Firm believes that AISC extra totally defines the full prices related to producing gold. AISC is calculated based mostly on the definitions printed by the World Gold Council (“WGC”). The WGC isn’t a regulatory group. The Firm calculates AISC because the sum of complete money prices (as described above), sustaining capital expenditures (excluding important tasks thought of expansionary in nature), accretion on decommissioning and restoration provisions, therapy and refinery costs, funds on lease obligations, web site share-based funds the place relevant, and company administrative prices much less any share-based funds immediately attributable to exploration and non-operating funds on lease obligations, all divided by gold ounces bought through the interval to reach at a per ounce quantity.
Different firms could calculate this measure otherwise on account of variations in underlying rules and insurance policies utilized. Variations may come up resulting from a distinct definition of sustaining versus enlargement capital.
The next desk reconciles this non-IFRS measure to probably the most immediately comparable IFRS measure disclosed within the Monetary Statements and MD&A.
In 1000’s of CAD, |
For the three months ended |
||||
besides the place famous |
March 31, 2022 |
March 31, 2021 |
|||
Gold bought |
Oz Au |
13,364 |
3,497 |
||
All-in sustaining price reconciliation |
|||||
Complete money prices |
$ |
29,332 |
4,278 |
||
Sustaining capital expenditures |
$ |
1,930 |
– |
||
Accretion on rehabilitation provision (Notice 21 of the Monetary Statements) |
$ |
146 |
68 |
||
Therapy and refinery costs |
$ |
106 |
13 |
||
Funds on lease obligations (Notice 13 of the Monetary Statements) |
$ |
2,786 |
2,208 |
||
Much less: non-operating funds on lease obligations* |
$ |
(112 |
) |
(154 |
) |
Website share-based compensation |
$ |
– |
– |
||
Company administrative prices (Notice 19 of the Monetary Statements) |
$ |
4,001 |
7,645 |
||
Much less: exploration share-based funds** |
$ |
(213 |
) |
(2,068 |
) |
Complete all-in sustaining prices |
$ |
37,976 |
11,990 |
||
AISC per oz of gold bought |
$/oz |
2,842 |
3,429 |
||
International change price |
CAD:AUD |
1.0898 |
1.0223 |
||
AISC per oz of gold bought |
AUD$/oz |
3,097 |
3,505 |
||
International change price |
CAD:USD |
0.7898 |
0.7899 |
||
AISC per oz of gold bought |
USD$/oz |
2,244 |
2,708 |
||
*The non-operating funds on lease obligations adjustment contains lease quantities which aren’t immediately associated to the Firm’s operations on the Beatons Creek Mission. This determine isn’t individually disclosed within the Monetary Statements.
**Share-based fee bills immediately attributable to the Firm’s exploration workers are excluded from the calculation of AISC. This determine isn’t individually disclosed within the Monetary Statements and is a subset of the share-based funds expense outlined in Notice 19 of the Monetary Statements.
EBITDA
The Firm makes use of EBITDA to higher perceive its capacity to generate liquidity by producing working money movement to fund working capital wants, service debt obligations, and fund capital expenditures.
EBITDA is outlined as internet earnings earlier than curiosity and finance expense/revenue, present and deferred revenue tax bills and depreciation and depletion. EBITDA can also be adjusted for non-recurring transactions such because the change in truthful worth of by-product devices, international exchanges positive factors and losses, positive factors and losses on the disposal of property, impairment, and different revenue.
The next desk reconciles this non-IFRS measure to probably the most immediately comparable IFRS measure disclosed within the Monetary Statements and MD&A.
In 1000’s of CAD, |
For the three months ended |
|||
besides the place famous |
March 31, 2022 |
March 31, 2021 |
||
$’000 |
$’000 |
|||
Internet (loss) / revenue for the interval |
(12,933 |
) |
1,120 |
|
Curiosity and finance expense |
2,514 |
1,676 |
||
Curiosity and finance revenue |
(10 |
) |
(9 |
) |
Present revenue tax expense / (revenue) |
– |
– |
||
Deferred revenue tax expense |
– |
– |
||
Depreciation and depletion* |
7,989 |
3,421 |
||
EBITDA |
(2,440 |
) |
6,208 |
|
Different (revenue) / bills (Notice 22 of the Monetary Statements) |
(670 |
) |
1,903 |
|
Adjusted EBITDA |
(3,110 |
) |
8,111 |
|
*Depreciation and depletion is reconciled to combination depreciation and depletion within the working changes within the consolidated statements of money flows within the Audited Monetary Statements.
Adjusted Earnings and Adjusted Fundamental and Diluted Earnings per Share
The Firm makes use of adjusted earnings and adjusted primary and diluted earnings per share to measure its underlying working and monetary efficiency.
Adjusted earnings are outlined as internet earnings adjusted to exclude particular objects which might be important, however not reflective of the Firm’s underlying operations, together with: international change (acquire) loss, (acquire) loss on monetary devices at truthful worth, impairment, and non-recurring positive factors and losses on therapy of marketable securities, sale of exploration and analysis property, and related tax impacts. Adjusted primary and diluted earnings per share are calculated utilizing the weighted common variety of shares excellent underneath the fundamental and diluted methodology of earnings per share as decided underneath IFRS.
The next desk reconciles this non-IFRS measure to probably the most immediately comparable IFRS measure disclosed within the Monetary Statements and MD&A.
In 1000’s of CAD, |
For the three months ended |
||||
besides the place famous |
March 31, 2022 |
March 31, 2021 |
|||
Fundamental weighted common shares excellent |
245,939,504 |
231,144,281 |
|||
Adjusted earnings and adjusted primary earnings per share reconciliation |
|||||
Internet earnings / (loss) for the interval |
$ |
(12,933 |
) |
1,120 |
|
Adjusted for: |
|||||
Different (revenue) / bills (Notice 22 of the Monetary Statements) |
$ |
(670 |
) |
1,903 |
|
Revenue on disposal of exploration asset |
$ |
– |
(14,940 |
) |
|
Adjusted earnings |
$ |
(13,603 |
) |
(11,917 |
) |
Adjusted primary earnings per share |
$ |
(0.06 |
) |
(0.05 |
) |
Accessible Liquidity
The Firm believes that obtainable liquidity offers an correct measure of the Firm’s capacity to liquidate property in an effort to fulfill its liabilities. The Firm makes use of this metric to assist monitor its threat profile.
Accessible liquidity contains money, short-term investments, and property that are readily saleable throughout the subsequent 12 months, together with gold in circuit and stockpiles, receivables, marketable securities (to the extent that a longtime market exists for such marketable securities, they’re freed from any long-term buying and selling restrictions, and ample historic quantity exists to liquidate holdings inside 12 months), and gold specimens. The market worth of sure marketable securities has been used within the calculation of obtainable liquidity which can not reconcile to the accounting therapy of such marketable securities. Discuss with the MD&A and Notes 5 and 10 of the Monetary Statements.
The next desk reconciles this non-IFRS measure to probably the most immediately comparable IFRS measure disclosed within the Monetary Statements and MD&A.
March 31, 2022 |
December 31, 2021 |
|||
$’000 |
$’000 |
|||
Money |
21,783 |
32,345 |
||
Quick-term investments |
155 |
108 |
||
Gold in circuit |
1,434 |
788 |
||
Stockpiles |
3,321 |
4,732 |
||
Receivables |
5,188 |
6,127 |
||
Marketable securities |
67,178 |
58,691 |
||
Gold specimens |
77 |
77 |
||
Accessible liquidity |
99,136 |
102,868 |
||
March 31, 2022 |
||||||||
# of shares |
Share value |
International change |
Adjusted worth |
|||||
Kalamazoo Assets Restricted Abnormal Shares |
10,000,000 |
$ |
0.35 |
0.936 |
3,230 |
|||
GBM Assets Ltd Abnormal Shares |
11,363,637 |
$ |
0.13 |
0.936 |
1,331 |
|||
New Discovered Gold Corp Frequent Shares * |
8,250,000 |
$ |
7.59 |
1 |
62,618 |
|||
67,178 |
||||||||
*A number of the Firm’s New Discovered shares stay topic to escrow restrictions pursuant to Nationwide Instrument 46-201 Escrow for Preliminary Public Choices. As at March 31, 2022, 8,250,000 of the Firm’s 15,000,000 New Discovered shares had been launched from escrow. The Firm’s remaining 6,750,000 New Discovered shares shall be launched from escrow semi-annually, with 2,250,000 New Discovered Shares being launched in February and August of every 12 months.
December 31, 2021 |
||||||||
# of shares |
Share value |
International change |
Adjusted worth |
|||||
Kalamazoo Assets Restricted Abnormal Shares |
10,000,000 |
$ |
0.38 |
0.942 |
3,579 |
|||
GBM Assets Ltd Abnormal Shares |
11,363,637 |
$ |
0.12 |
0.942 |
1,232 |
|||
New Discovered Gold Corp Frequent Shares * |
6,000,000 |
$ |
8.98 |
1 |
53,880 |
|||
58,691 |
||||||||
Working Capital
Working capital is outlined as present property much less present liabilities and is used to observe the Firm’s liquidity.
The next desk reconciles this non-IFRS measure to probably the most immediately comparable IFRS measure disclosed within the Monetary Statements and MD&A.
March 31, 2022 |
December 31, 2021 |
|
$’000 |
$’000 |
|
Present property |
152,064 |
49,385 |
Present liabilities |
47,001 |
45,460 |
Working capital |
105,063 |
3,925 |
Sprott Facility Adjusted Working Capital
Sprott Facility adjusted working capital is a derivation of working capital with a collection of changes as permitted pursuant to the Sprott Facility. The Firm makes use of Sprott Facility adjusted working capital to observe its compliance in opposition to sure covenants throughout the Sprott Facility.
The next desk reconciles this non-IFRS measure to probably the most immediately comparable IFRS measure disclosed within the Monetary Statements and MD&A.
In 1000’s of CAD, besides the place famous |
March 31, 2022 |
December 31, 2021 |
|||
Working capital |
$ |
105,063 |
3,925 |
||
Credit score Facility (present) |
$ |
12,496 |
6,339 |
||
Lease liabilities (present) |
$ |
11,015 |
12,453 |
||
Sumitomo funding legal responsibility |
$ |
3,575 |
5,780 |
||
Sumitomo written name choice |
$ |
1,102 |
1,083 |
||
Sprott Facility working capital |
$ |
133,251 |
29,580 |
||
International change price |
CAD:USD |
0.7898 |
0.7888 |
||
Sprott Facility working capital |
USD$ |
105,237 |
23,332 |
||
CAUTIONARY STATEMENT
The choice by the Firm to supply on the Beatons Creek Mission was not based mostly on a feasibility research of mineral reserves demonstrating financial and technical viability and, consequently, there may be an elevated uncertainty of attaining any explicit degree of restoration of minerals or the price of such restoration, together with elevated dangers related to growing a commercially mineable deposit. Manufacturing has not achieved forecast so far. Traditionally, such tasks have a a lot larger threat of financial and technical failure. There is no such thing as a assure that anticipated manufacturing prices shall be achieved. Failure to realize the anticipated manufacturing prices would have a fabric hostile influence on the Firm’s money movement and future profitability.
The Firm cautions that its declaration of economic manufacturing efficient October 1, 20219 solely signifies that the Beatons Creek venture was working at anticipated and sustainable ranges and it doesn’t point out that financial outcomes shall be realized.
_______________
9 Discuss with the Firm’s information launch dated October 12, 2021.
QP STATEMENT
Dr. Quinton Hennigh (P.Geo.) is the certified individual, as outlined underneath Nationwide Instrument 43-101 Requirements of Disclosure for Mineral Initiatives, accountable for, and having reviewed and authorised, the technical data contained on this information launch. Dr. Hennigh is the non-executive co-chairman and a director of Novo.
ABOUT NOVO
Novo operates its flagship Beatons Creek Mission whereas exploring and growing its potential land bundle overlaying roughly 12,500 sq. kilometres within the Pilbara area of Western Australia. Along with the Firm’s major focus, Novo seeks to leverage its inside geological experience to ship value-accretive alternatives to its shareholders. For extra data, please contact Leo Karabelas at (416) 543-3120 or e-mail leo@novoresources.com.
On Behalf of the Board of Administrators,
Novo Assets Corp.
“Michael Spreadborough”
Michael Spreadborough
Govt Co-Chairman
Ahead-looking data
Some statements on this information launch comprise forward-looking data (throughout the which means of Canadian securities laws) together with, with out limitation, manufacturing forecast for the primary half of 2022. These statements tackle future occasions and situations and, as such, contain identified and unknown dangers, uncertainties and different components which can trigger the precise outcomes, efficiency or achievements to be materially completely different from any future outcomes, efficiency or achievements expressed or implied by the statements. Such components embrace, with out limitation, customary dangers of the useful resource trade and the chance components recognized within the MD&A which is obtainable underneath Novo’s profile on SEDAR at www.sedar.com. Ahead-looking statements converse solely as of the date these statements are made. Besides as required by relevant regulation, Novo assumes no obligation to replace or to publicly announce the outcomes of any change to any forward-looking assertion contained or integrated by reference herein to replicate precise outcomes, future occasions or developments, modifications in assumptions or modifications in different components affecting the forward-looking statements. If Novo updates any forward-looking assertion(s), no inference needs to be drawn that the Firm will make further updates with respect to these or different forward-looking statements.
Finance
Aadhar HFL IPO day 3: GMP, subscription status to review. Apply or not?
Aadhar Housing Finance IPO Day 3: The initial Public Offering (IPO) of Aadhar Housing Finance Limited hit the Indian primary market on 8th May 2024 and bidding for this public issue will end today evening. This means investors have just one day in hand to apply for the public offer. The company has fixed Aadhar Housing Finance IPO price band at ₹300 to ₹315 per equity share. The book build issue is a mix of fresh shares and OFS (Offer For Sale). The company aims to raise ₹1000 crore from fresh shares while the rest ₹2000 crore is reserved for the OFS route. Meanwhile, premium of the Aadhar Housing Finance shares have surged in the grey market after the bidding began for the book build issue. According to stock market observers, shares of the company are available at a premium of ₹70 in the grey market today. They said that rise in the Aadhar Housing Finance IPO grey market premium (GMP) can be attributed to the strong Aadhar Housing Finance IPO subscription status after two days of bidding.
Aadhar Housing Finance IPO GMP today
Market observers have noted that the Aadhar Housing Finance IPO grey market premium (GMP) today is ₹70, a significant increase from Thursday’s GMP of ₹52. This rise, despite weak trends on Dalal Street, is a testament to the positive sentiments surrounding the IPO. They anticipate a strong debut of shares on the listing date, further fueling optimism.
Aadhar Housing Finance IPO subscription status
By 11:06 AM on day 3 of bidding, the public issue was subscribed 1.92 times while the retail portion of the book build issue was booked 1.22 times. The NII portion was booked 3.35 times whereas its QIB segment got subscribed 2.05 times.
Aadhar Housing Finance IPO review
BP Equities, a leading financial institution, has given a ‘subscribe’ rating to the Aadhar Housing Finance IPO. They believe that the stock, valued at 3.1x P/BVPS on FY23 book value, is fairly priced compared to its peers. They recommend subscribing to the issue based on this valuation. This positive review adds to the overall positive sentiment around the IPO.
Advising investors to apply for the public issue, Marwadi Shares and Finance said, “Considering the Book Value of ₹52,492 mn on a post issue basis, the company is going to list at a P/B of 2.56x with a market cap of Rs. 1,34,348 mn, whereas its peers namely Aptus Value Housing Finance India Limited, Aavas Financiers Limited, Home First Finance Company India Limited, India Shelter Finance Corporation Limited are trading at a P/B of 4.65x, 3.36x, 4.05x, 4.59x. We assign “Subscribe” rating to this IPO as company has a seasoned business model with strong resilience through business cycles and robust processes for underwriting, collections and monitoring asset quality. Also, it is available at reasonable valuation as compared to its peers.”
Aditya Birla Ltd, Ashika Research, Canara Bank Securities, Nirmal Bang, and SMIFS, all reputable financial firms, have given a ‘subscribe’ tag to the book build issue. This collective endorsement should provide potential investors with a sense of confidence in the IPO’s potential.
Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, and not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.
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Published: 10 May 2024, 09:56 AM IST
Finance
Lument Finance Trust Reports First Quarter 2024 Results
NEW YORK, May 9, 2024 /PRNewswire/ — Lument Finance Trust, Inc. (NYSE: LFT) (“we”, “LFT” or “the Company”) today reported its first quarter results. Distributable earnings for the first quarter were $7.6 million, or $0.15 per share of common stock. GAAP net income attributable to common shareholders for the first quarter was $5.8 million, or $0.11 per share of common stock. The Company has also issued a detailed presentation of its results, which can be viewed at www.lumentfinancetrust.com.
Conference Call and Webcast Information
The Company will also host a conference call on Friday, May 10, 2024, at 8:30 a.m. ET to provide a business update and discuss the financial results for the first quarter of 2024. The conference call may be accessed by dialing 1-800-836-8184 (U.S.) or 1-646-357-8785 (international). Note: there is no passcode; please ask the operator to be joined into the Lument Finance Trust call. A live webcast, on a listen-only basis, is also available and can be accessed through the URL:
https://app.webinar.net/Mdk5ymjEwRV
For those unable to listen to the live broadcast, a recorded replay will be available for on-demand viewing approximately one hour after the end of the event through the Company’s website https://lumentfinancetrust.com/ and by telephone dial-in. The replay call-in number is 1-888-660-6345 (U.S.) or 1-646-517-4150 (international) with passcode 31313.
Non-GAAP Financial Measures
In this release, the Company presents certain financial measures that are not calculated according to generally accepted accounting principles in the United States (“GAAP”). Specifically, the Company is presenting distributable earnings, which constitutes a non-GAAP financial measure within the meaning of Item 10(e) of Regulation S-K and is net income under GAAP. While we believe the non-GAAP information included in this press release provides supplemental information to assist investors in analyzing our results, and to assist investors in comparing our results with other peer issuers, these measures are not in accordance with GAAP, and they should not be considered a substitute for, or superior to, our financial information calculated in accordance with GAAP. The methods of calculating non-GAAP financial measures may differ substantially from similarly titled measures used by other companies. Our GAAP financial results and the reconciliations from these results should be carefully evaluated.
Distributable Earnings
Distributable Earnings is a non-GAAP measure, which we define as GAAP net income (loss) attributable to holders of common stock computed in accordance with GAAP, including realized losses not otherwise included in GAAP net income (loss) and excluding (i) non-cash equity compensation, (ii) depreciation and amortization, (iii) any unrealized gains or losses or other similar non-cash items that are included in net income for that applicable reporting period, regardless of whether such items are included in other comprehensive income (loss) or net income (loss), and (iv) one-time events pursuant to changes in GAAP and certain material non-cash income or expense items after discussions with the Company’s board of directors and approved by a majority of the Company’s independent directors. Distributable Earnings mirrors how we calculate Core Earnings pursuant to the terms of our management agreement between our manager Lument Investment Management, LLC (“Manager”) and us, or our management agreement, for purposes of calculating the incentive fee payable to our Manager.
While Distributable Earnings excludes the impact of any unrealized provisions for credit losses, any loan losses are charged off and realized through Distributable Earnings when deemed non-recoverable. Non-recoverability is determined (i) upon the resolution of a loan (i.e. when the loan is repaid, fully or partially, or in the case of foreclosures, when the underlying asset is sold), or (ii) with respect to any amount due under any loan, when such amount is determined to be non-collectible.
We believe that Distributable Earnings provides meaningful information to consider in addition to our net income (loss) and cash flows from operating activities determined in accordance with GAAP. We believe Distributable Earnings is a useful financial metric for existing and potential future holders of our common stock as historically, over time, Distributable Earnings has been a strong indicator of our dividends per share of common stock. As a REIT, we generally must distribute annually at least 90% of our taxable income, subject to certain adjustments, and therefore we believe our dividends are one of the principal reasons stockholders may invest in our common stock. Furthermore, Distributable Earnings help us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations and is a performance metric we consider when declaring our dividends.
Distributable Earnings does not represent net income (loss) or cash generated from operating activities and should not be considered as an alternative to GAAP net income (loss), or an indication of GAAP cash flows from operations, a measure of our liquidity, or an indication of funds available for our cash needs.
GAAP to Distributable Earnings Reconciliation
Three Months Ended |
||
March 31, 2024 |
||
Reconciliation of GAAP to non-GAAP Information |
||
Net Income attributable to common shareholders |
$ 5,795,183 |
|
Adjustments for non-Distributable Earnings |
||
Unrealized loss (gain) on mortgage servicing rights Unrealized provision for credit losses |
(4,627) 1,776,873 |
|
Subtotal |
1,772,246 |
|
Other Adjustments |
||
Adjustment for income taxes |
10,892 |
|
Subtotal |
10,892 |
|
Distributable Earnings |
$ 7,578,321 |
|
Weighted average shares outstanding – Basic and Diluted |
52,249,299 |
|
Distributable Earnings per weighted share outstanding – Basic and Diluted |
$ 0.15 |
About LFT
LFT is a Maryland corporation focused on investing in, financing and managing a portfolio of commercial real estate debt investments. The Company primarily invests in transitional floating rate commercial mortgage loans with an emphasis on middle-market multi-family assets.
LFT is externally managed and advised by Lument Investment Management LLC, a Delaware limited liability company.
Additional Information and Where to Find It
Investors, security holders and other interested persons may find additional information regarding the Company at the SEC’s Internet site at http://www.sec.gov/ or the Company website www.lumentfinancetrust.com or by directing requests to: Lument Finance Trust, 230 Park Avenue, 20th Floor, New York, NY 10169, Attention: Investor Relations.
Forward-Looking Statements
Certain statements included in this press release constitute forward-looking statements intended to qualify for the safe harbor contained in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. Forward-looking statements are subject to risks and uncertainties. You can identify forward-looking statements by use of words such as “believe,” “expect,” “anticipate,” “project,” “estimate,” “plan,” “continue,” “intend,” “should,” “may,” “will,” “seek,” “would,” “could,” or similar expressions or other comparable terms, or by discussions of strategy, plans or intentions. Forward-looking statements are based on the Company’s beliefs, assumptions and expectations of its future performance, taking into account all information currently available to the Company on the date of this press release or the date on which such statements are first made. Actual results may differ from expectations, estimates and projections. You are cautioned not to place undue reliance on forward-looking statements in this press release and should consider carefully the factors described in Part I, Item IA “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which is available on the SEC’s website at www.sec.gov, and in other current or periodic filings with the SEC, when evaluating these forward-looking statements. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond the Company’s control. Except as required by applicable law, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE Lument Finance Trust, Inc.
Finance
Spring Finance Forum 2024: CRE Financiers Eye Signs of Recovery
The weather in Manhattan was sunny with temperatures in the 70s on May 7 during Commercial Observer’s eighth annual Spring Finance CRE Forum, which attendees no doubt hope signals brighter days ahead for a commercial real estate market that has battled icy conditions the last two years.
The annual CO event was held six days after the Federal Reserve held interest rates steady with no indication of when borrowing conditions may begin to ease after 12 hikes were implemented by the central bank from March 2022 to July 2023. However, lenders and brokers who spoke at the forum inside the Metropolitan Club of New York voiced plenty of optimism that a recovery for the CRE market was around the corner.
“You’re starting to see the early signs of recovery within the real estate capital markets,” said Tim Johnson, global head of real estate debt strategies at Blackstone (BX) during opening remarks discussion moderated by Cathy Cunningham, CO’s executive editor. “It feels to me and to us at Blackstone that we’re generally on a path toward recovery.”
While the Fed is expected to keep interest rates higher for longer than what was initially anticipated entering 2024, Johnson stressed that market confidence of rates peaking has helped spur more financing activity this year, as evident by credit spreads tightening with commercial mortgage-backed securities (CMBS) deals. He added that a prolonged period of owners holding onto assets will likely result in more transaction volume as investors seek some for opportunities for “capital recycling”
Among asset classes, Blackstone is sticking to its high conviction themes of industrial and multifamily lending with a particular focus of late on data centers given technological demands like artificial intelligence driving the sector, according to Johnson. He noted though that, even with healthy performing sectors, Blackstone is careful to “pick and choose” which properties to target based on geographic areas with strong population drivers.
The office sector remains severely challenged four years after the COVID-19 pandemic unleashed increasing remote-work trends, but Johnson said there are pockets of opportunities on the lending side in certain submarkets like Manhattan’s Park Avenue, where occupancy levels are strong for newer Class A properties.
“I think you could see us dip our toes a bit more into lending on high-quality office buildings in geographies where fundamentals are pretty strong given a lack of supply in some of these core markets,” Johnson said. “There is clearly a subset of tenants out there that feel like they need to be in the office and are gravitating toward some of these high-performing submarkets.”
While some modern office buildings are managing to thrive despite continued headwinds from COVID, there remains a myriad of challenges for the overall market with older Class B properties resulting in wider bid-ask spreads.
Indeed, the uncertainty around valuations in office and other property types is one of the biggest differences between the current market location and what transpired with the CRE industry during the Global Financial Crisis, according to Rob Verrone, principal at Iron Hound Management, which specializes in CMBS restructurings.
“Back then there wasn’t as much of a gray area on what the property is worth,” said Verrone during a fireside chat moderated by Tony Fineman, head of originations at Acore Capital. “Now with remote work and with taxes and insurance through the roof, and then the politics that are going on and no-eviction [rules], no one knows what the property is worth and it’s hard to convince someone unless they have a real upside-down tax position to throw a bunch of money in on black and restructure a deal.”
Verrone, who was previously a CMBS lender at Wachovia before co-founding Iron Hound with Chris Herron in 2009, said workouts have become harder to get done in the current market due to bid-ask spread dynamics, with the process now taking around nine months for the average deal. He said he prefers to close modifications with a private individual or family office than the larger firms that have third-party investors that can often complicate ironing out key details.
There has been some progress of late in steering the CRE market toward a better future, but not enough to open the floodgates due to persistent elevated interest rates and a “steeper” forward curve, according to Dennis Schuh, chief originations officer at Starwood Capital Group.
“You are only selling if you are forced to sell right now,” said Schuh during the third session panel titled “Real Estate Finance Forecast: Comfort Levels Amidst New Changes.”
“I think people do think real estate is for sale right now and they want to get in, but there’s still a pretty big bid-ask,” Schuh added.
Lauren Hochfelder, co-CEO and head of Americas at Morgan Stanley Real Estate Investments, said while the majority of sellers now are “forced,” her platform has managed to sell some multifamily assets with interest rates between 4 and 5 percent. She also noted that some industrial properties along the southern border are also attracting investor interest due to nearshoring trends.
“Where you have secular trends or mega trends repelling demand, I think you are seeing capital really go there,” Hochfelder said. “But the aperture of what people want to invest in has narrowed.”
The panel — moderated by Jay Neveloff, partner and chair, real estate, at Kramer Levin Naftalis & Frankel — also featured Morris Betesh, senior managing director at Meridian Capital, and Sten Sandlund, CEO of Willowbrook Partners, a newly formed private credit lending arm launched by Peebles Corporation.
Hochfelder stressed the importance of not painting every asset class with a “broad brush,” noting there are bright spots in the office sector globally such as Tokyo, which has an 88 percent utilization rate, and Seoul at 94 percent. She said even struggling office markets in the U.S. have some positive characteristics, with San Francisco having higher rents today than before the COVID pandemic.
The panelists concurred that financing sources for deal flow in 2024 will largely be centered around private lenders given the highly regulated environment facing banks coupled with higher interest rates.
“After coming out of a crisis, usually the water has to be really warm for some of those traditional sort of lenders to creep back in, so I think they will be slow like they were coming out of the GFC,” Schuh said.
Insurance capital is undoubtedly playing an increased role filling the lending void of late with the line between debt funds and insurance companies becoming increasingly “blurred,” according to Nishant Nadella, head of single-asset, single-borrower and transitional lending at 3650 REIT. Nadella noted that Insurance funds managed by asset management firms have soared from $200 billion to $800 billion in the last six years, which does not even account for 3 percent of the global insurance market.
“If you look at where the market is going, it seems like it’s going to be insurance dominated and it’s going to be run by folks who get large insurance allocations or reinsurance allocations, and allocate 20 percent to real estate,” Nadella said during the forum’s fourth session in a panel titled “Shifting Lender-Borrower Dynamics & Getting Capital Stacks in Line”
Matt Pestronk, co-managing partner at Post Brothers, noted that insurance companies have an advantage now over banks in terms of driving more CRE capital in the current climate since they can sell five-year annuities that are attractive to investors amid higher interest rates. He said the trend is in the “early stages” and is “growing at an incredibly fast pace.”
The panel — moderated by Kathleen Mylod, partner at Dechert — also included Elliot Markus, vice president in the real estate private credit group at Cerberus Capital Management; Adam Schwartz, senior managing director at Walker & Dunlop; and Adam Piekarski, co-head of real estate credit at BDT & MSD Partners.
Piekarski stressed that with around $900 million in looming CRE loan maturities on tap this year, surviving for another day is the key, but comes with risks if interest rates aren’t reduced soon.
“Everyone is trying to survive to buy time and hope that rate cuts come so they can salvage some equity,” Piekarski said. “The game theory of that isn’t it doesn’t come. What ends up happening is that sponsors think their equity is sunk cost and they move on, or is there opportunity for people who’ve been patient with the capital? And all of that is TBD.”
After a short networking break, Goldman Sachs (GS)’ Siddharth Shrivastava, managing director of investment banking, held court during a fireside chat where he made it clear to attendees that much of the pain commercial real estate has experienced since 2020 is now largely in the rearview mirror.
Shrivastava noted that capital markets in 2024 have seen “a lot of activity in CMBS markets.” Yet despite only $40 billion in CMBS securitization originating across the system in 2023, the first quarter of 2024 saw $20 billion, he said, and “in one quarter we traded half of what was done last year.”
He also pointed out that while refinancings have dominated Goldman Sachs’ real estate activity thus far in 2024, some of the nation’s biggest asset managers — Blackstone, Brookfield (BN) and KKR (KKR) — have made major acquisitions in recent months, and that his own bank is providing an increased amount of credit financed compared to 2023.
“You’re seeing acquisitions start with clients requiring commitments, and now you’re seeing an environment where commitments can once again be done,” Shrivastava said. “The overarching thing in all of these is we’re doing it for our best sponsors, our best clients, and so [for them] we’re certainly open to deploying our balance sheet and that’s how we’re thinking about opportunities that come to us.”
He even hinted that office — no joke — is now attracting CMBS financing after carrying the scarlet letter of shame across CRE since the pandemic hit.
“We are getting office deals in the CMBS market, there’s conduit deals, there’s been SASB, so that’s been a change in the office side,” Shrivastava said. “The environment for office financing is slightly better than it was last year. And if rates come down and keep coming down, the spigot of office that’s financeable will open up more and more.”
The optimism about the market continued during the next panel, where four executives at top investment firms pondered whether the pullback of the traditional banking sector away from CRE lending has inaugurated a golden age of private credit.
“Time will tell,” said Yorick Starr, managing director and investment officer at Invesco. “The retrenchment of banks and some other capital that’s provided here has made the setup an interesting one to sort of be lending at overleverage with great sponsors in great markets.”
Starr noted that his firm originated $900 million in CRE loans last year but has already hit that total in the first quarter of 2024. “We’re looking at the more distress opportunities out there, not that there’s a whole lot of them, but that’s kind of the opportunity set we’ve found that’s interesting and available to be putting out a lot of capital for use,” he added.
Mark Silverstein, senior managing director at NewPoint Real Estate Capital, oversees the firm’s proprietary lending products. He said agency lending has increased during a time of high interest rates, as agencies are willing to lend at rates even lower than attractive CMBS financing. And if you can lend at a low rate, he noted, you can obviously lend with a little more leverage.
“Agencies have been very stable, and they’ve been available for large deals and small deals,” said Silverstein. “They love affordable [housing] and if there’s some affordable component or a green component [in there], the agencies will lean in and drive pricing that will be significantly better.”
Robert Rothschild, senior vice president at InterVest Capital Partners, added that while the current market has good fundamentals, there’s been a break in the capital stack for many assets. With the increase in interest rates, sponsors aren’t able to refinance on deals that they put out in 2021 — creating sizable holes in loans where agencies might have lent at 55 percent loan-to-value, and debt funds might have lent at a 75 percent loan-to-value clip, he said.
“There’s an opportunity to provide gap finance, to fill that hole between refinancing a floating-rate multifamily loan into an agency deal,” said Rothschild. “That opportunity won’t be around forever. As interest rates ultimately start to come down, those borrowers will get bailed out and be able to refinance and put in only a little bit of equity as opposed to 20 percent of the capital stack.”
Finally, Laura Rapaport, CEO and founder of North Bridge, broke down the intricacies of C-PACE lending, a form of fixed-rate lending that has historically been used to pay for energy-efficient improvements in commercial buildings.
Today, Rapaport noted, C-PACE lending has been turned into “a very effective credit product,” as its priced off the 10-Year Treasury at a fixed rate upon closing and usually carries a duration of 20 to 30 years, which allows it to be flexibly used not just for green renovations, but also to finance construction loans, refinancings, rescue capital, and synthetic A notes.
“We’re coming in and working with lenders at TCO [total cost of ownership] takeouts as an alternative to bridge financing,” she said. “Our biggest hurdle is lack of knowledge of how to use it. People are still figuring it out.”
The final panel of the morning examined lender appetite across asset classes. Contrary to popular opinion, there is an appetite out there to lend on older assets, even office.
Michael Hoffenberg, founder and managing principal of Trevian Capital, said his firm “loves the `70s and `80s vintage stuff that no one else wants,” namely vintage workforce housing, strategic retail, older student housing and medical office.
“We’ll take what’s boring and falls into our space,” he said. “We’re going where others won’t, we’re charging a modest premium for it, and we’re helping borrowers get from point A to point B.”
Zach Hoffman, director of AllianceBernstein, admitted that his firm is spending time in the office space, as he views it as overlooked, but stressed that he’d rather place capital into the ever-dependable multifamily space.
“Relative to office, we’re spending time, as everyone else is, in the multifamily space,” he said. “We have a fixed-rate mandate from our parent, Equitable, and so we put out a significant amount of capital in that asset class. Most of that is kind of a bridge to a better capital markets environment.”
Catherine Chen, managing director of real estate assets at Apollo Global Management (APO), reminded the audience that while her private equity firm’s loans run the spectrum of $30 million to $900 million (and even $1 billion), every deal and transaction is nuanced due to lending ratios and property types. Citing an example, Chen said a $40 million fixed-rate loan with a longer duration is far different than a $40 million loan carrying binary leasing risk, where if things go great the lender gets repaid in 18 months, but if they don’t then they’re stuck with the property for five years.
To this end, her team originates across multiple vehicles that can do a combination of fixed-rate and floating-rate debt, where she’s found a healthy appetite for multifamily, industrial and retail lending in 2024. However, she caveated this binary lending strategy by emphasizing that base rates haven’t yet hit that anticipated forward curve that makes floating-rate debt so attractive.
“If you have the cash flow to support debt service, even if it’s interest-only, I think the cost to get that financing done in our fixed-rate bucket is much more attractive than on the floating-rate side,” she said. “If you look at relative value where we can offer on a portfolio side, as well as pricing from a borrower perspective, fixed-rate ends up being more attractive from a relative value, if you have the asset that can qualify for it.”
Max Herzog, executive managing director IPA Capital Markets, said there’s liquidity in the market today for “all asset classes,” even hospitality, which he described as “overlooked, more expensive capital.”
However, Herzog put a damper on the idea that office conversions will be the white knight for a beleaguered sector struggling with millions of square feet of antiquated, out-of-date space threatened by record vacancies.
“There’s going to be more conversions than we’ve ever seen over these next two years, but not as many as people think,” said Herzog. “You need to have the right layout, you have to be vacant, a lot needs to make sense for these conversions to happen — it might take care of some part of the office problem, but nowhere near as much as we might hope.”
Andrew Coen can be reached at acoen@commercialobserver.com and Brian Pascua can be reached at bpascus@commercialobserver.com
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