Lument Finance Trust(US:LFT)2025-05-12 21:20markdown [Company Overview](index=3&type=section&id=Company%20Overview) [Company Profile and Strategy](index=3&type=section&id=Company%20Profile%20and%20Strategy) LFT is an externally-managed REIT focused on commercial real estate debt, primarily multifamily, leveraging Lument's origination platform - The Company is an externally-managed REIT focused on investing in, financing, and managing a portfolio of commercial real estate debt investments[7](index=7&type=chunk) - LFT is managed by Lument Investment Management, LLC, an affiliate of ORIX Corporation USA, which is a subsidiary of the publicly traded ORIX Corporation[6](index=6&type=chunk)[7](index=7&type=chunk) - Key investment highlights include access to Lument's loan origination platform, a focus on middle-market multifamily debt, and the use of match-term, non-recourse, non-mark-to-market financing[6](index=6&type=chunk) [Q1 2025 Updates](index=4&type=section&id=Q1%202025%20Updates) LFT reported a Q1 2025 GAAP net loss of **$(0.03) per share**, with Distributable Earnings of **$0.08 per share** matching the dividend Q1 2025 Key Metrics | Category | Metric | Value | | :--- | :--- | :--- | | **Financial Results** | GAAP net loss per share | $(0.03) | | | Distributable Earnings per share | $0.08 | | | Quarterly dividend per common share | $0.08 | | | Book Value Per Share of Common Stock | $3.29 | | **Portfolio** | Loan Payoffs | $54.7 million | | | Multifamily Asset Concentration | 91.7% | | | Loan Portfolio Value | $1.0 billion | | | Weighted Average Risk Rating | 3.5 | | **Capitalization** | Leverage Ratio (Total Liabilities / Total Equity) | 3.6x | | | Cash and Cash Equivalents | $63.5 million | - The floating-rate CRE loan portfolio is primarily financed through two non-mark-to-market secured financings: the 2021-FL1 CLO and LMF 2023-1[8](index=8&type=chunk) [Financial Performance](index=5&type=section&id=Financial%20Performance) [Q1 2025 Balance Sheet Summary](index=5&type=section&id=Q1%202025%20Balance%20Sheet%20Summary) As of March 31, 2025, total assets were approximately **$1.06 billion**, liabilities stood at **$829.5 million**, and equity was **$232.0 million**, resulting in a **3.6x** leverage ratio Balance Sheet Summary (as of March 31, 2025) | (in thousands) | Amount | | :--- | :--- | | **Total assets** | **$1,061,517** | | Commercial mortgage loans held-for-investment (net) | $988,781 | | Cash and cash equivalents | $63,520 | | **Total liabilities** | **$829,469** | | Secured financings | $772,285 | | **Total equity** | **$232,048** | | **Total liabilities / total equity** | **3.6x** | | **Book Value Per Share of Common Stock** | **$3.29** | [Q1 2025 Income Statement Summary](index=6&type=section&id=Q1%202025%20Income%20Statement%20Summary) For Q1 2025, the company reported a GAAP net loss of **$1.7 million** or **$(0.03) per share**, with Distributable Earnings of **$4.0 million** or **$0.08 per share** covering the quarterly dividend Income Statement & Distributable Earnings (Three Months Ended March 31, 2025) | (in thousands, except per share data) | Amount | | :--- | :--- | | Net interest income | $7,735 | | Total other income (loss) | $(5,655) | | Net income attributable to common stockholders | $(1,708) | | **Net income per share** | **$(0.03)** | | **Distributable Earnings** | **$4,021** | | **Distributable Earnings per share** | **$0.08** | | **Dividend per share** | **$0.08** | [Earnings and Book Value Per Share Trends](index=7&type=section&id=Earnings%20and%20Book%20Value%20Per%20Share%20Trends) In Q1 2025, Distributable Earnings per share decreased to **$0.08** but covered the dividend, while book value per share continued its gradual decline to **$3.29** Quarterly Per Share Performance | Quarter | Distributable EPS | Dividends Per Share | Book Value Per Share | | :--- | :--- | :--- | :--- | | Q3 2024 | $0.10 | $0.08 | $3.48 | | Q4 2024 | $0.10 | $0.08 | $3.40 | | Q1 2025 | $0.08 | $0.08 | $3.29 | [Investment Portfolio](index=8&type=section&id=Investment%20Portfolio) [Portfolio Composition](index=8&type=section&id=Portfolio%20Composition) As of March 31, 2025, the **$1.0 billion** investment portfolio is **91.7%** concentrated in multifamily assets, with no hospitality, retail, or office loan exposure - The portfolio consists of floating-rate CRE loans with a carrying value of **$1.0 billion**[19](index=19&type=chunk) Portfolio Composition by Property Type (by Carrying Value) | Property Type | Percentage | | :--- | :--- | | Multifamily | 91.7% | | Seniors Housing & Healthcare | 7.7% | | Self Storage | 0.6% | - The company anticipates continuing its focus on investment opportunities within multifamily credit and does not currently own any hospitality, retail, or office loan assets[19](index=19&type=chunk) [Q1 2025 Loan Activity](index=9&type=section&id=Q1%202025%20Loan%20Activity) In Q1 2025, the company saw **$54.7 million** in multifamily loan payoffs and a **$5.7 million** provision for loan losses, decreasing the portfolio's carrying value to **$988.2 million** - The company experienced **$54.7 million** of loan payoffs during the quarter, entirely from the multifamily sector[20](index=20&type=chunk)[21](index=21&type=chunk) Q1 2025 Portfolio Activity (by Carrying Value) | (in millions) | Amount | | :--- | :--- | | Q4 2024 Portfolio | $1,048.8 | | Q1 2025 Payoffs / Sales | $(54.7) | | Provision for Loan Losses | $(5.7) | | Other Activity | $0.4 | | **Q1 2025 Portfolio** | **$988.2** | [Portfolio Credit](index=10&type=section&id=Portfolio%20Credit) As of March 31, 2025, performing loans decreased to **89.3%**, with the weighted average risk rating stable at **3.5**, and seven loans totaling **$108.4 million** assigned a high-risk '**5**' rating - As of March 31, 2025, **89.3%** of the company's portfolio was performing, with **59.9%** of the portfolio rated '**3**' (Moderate Risk) or better[25](index=25&type=chunk) Portfolio Credit Trends | Metric | Q4 2024 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | % Performing | 90.8% | 89.3% | Down | | Weighted Avg Risk Rating | 3.5 | 3.5 | Stable | - During Q1 2025, management applied a '**5**' risk-rating (highest risk) to seven loans with an aggregate principal value of **$108.4 million**[25](index=25&type=chunk) [Capital Structure and Interest Rate Sensitivity](index=11&type=section&id=Capital%20Structure%20and%20Interest%20Rate%20Sensitivity) [Q1 2025 Capital Structure Overview](index=11&type=section&id=Q1%202025%20Capital%20Structure%20Overview) The company's **$1.05 billion** capital structure is primarily composed of secured, non-recourse financing (**73.5%**) and equity (**22.0%**), avoiding margin call risk from warehouse facilities Capital Structure Composition as of 3/31/2025 | Component | Amount (in millions) | Percentage | | :--- | :--- | :--- | | Secured Financing | $822.1 | 73.5% | | Term Loan | $47.8 | 5.7% | | Preferred Equity | $60.0 | 5.7% | | Common Equity | $171.9 | 16.3% | | **Total Capitalization** | **$1,054.0** | **100.0%** | - The company does not utilize repurchase or warehouse facility financing, avoiding margin call risk from such lenders[28](index=28&type=chunk) - Primary financing sources are two secured financings (2021-FL1 CLO and LMF 2023-1), preferred stock, and a corporate term loan[28](index=28&type=chunk) [Net Interest Income Sensitivity](index=12&type=section&id=Net%20Interest%20Income%20Sensitivity) The company's **$1.01 billion** floating-rate loan portfolio has a net floating-rate asset exposure of **$237 million**, making net interest income sensitive to SOFR changes - The company has a net floating-rate asset exposure of **$237 million**, as its **$1.011 billion** in floating-rate assets exceeds its **$774 million** in floating-rate liabilities[30](index=30&type=chunk) Sensitivity of Net Interest Income Per Share to SOFR Changes | Change in SOFR | Impact on NII Per Share | | :--- | :--- | | +25 bps | +$0.01 | | -25 bps | -$0.01 | | -50 bps | -$0.02 | | -75 bps | -$0.03 | | -100 bps | -$0.03 | - **100%** of the loan portfolio is floating-rate and indexed to 30-day term SOFR[31](index=31&type=chunk) [Appendix](index=13&type=section&id=Appendix) [CRE Loan Portfolio Details](index=14&type=section&id=CRE%20Loan%20Portfolio%20Details) The appendix details the **61** CRE loans as of March 31, 2025, with a total unpaid principal balance of **$1,010.9 million** and an average LTV at origination of **72.43%** CRE Loan Portfolio Summary (as of 3/31/2025) | Metric | Value | | :--- | :--- | | Number of Loans | 61 | | Total Unpaid Principal Balance | $1,010,888,938 | | Weighted Average Note Spread | 3.55% | | Average Initial Term (months) | 40 | | Average As-Is LTV at Origination | 72.43% | [Consolidated Financial Statements](index=16&type=section&id=Consolidated%20Financial%20Statements) This section provides detailed consolidated financial statements, including balance sheets, income statements, and allowance for loan losses, for a comprehensive financial overview [Consolidated Balance Sheets](index=16&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2025, total assets decreased to **$1.06 billion** and liabilities to **$829.5 million**, while the allowance for credit losses significantly increased to **$17.1 million** Balance Sheet Comparison (in millions) | Account | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Assets | $1,061.5 | $1,128.6 | | Commercial mortgage loans, net | $988.8 | $1,048.8 | | Allowance for credit losses | $(17.1) | $(11.3) | | Total Liabilities | $829.5 | $890.7 | | Total Equity | $232.0 | $237.9 | [Consolidated Statement of Income](index=17&type=section&id=Consolidated%20Statement%20of%20Income) For Q1 2025, the company reported a net loss of **$0.5 million**, a significant decline from Q1 2024's **$7.0 million** net income, driven by lower net interest income and higher credit loss provisions Statement of Income Comparison (Three Months Ended) | (in millions) | March 31, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Net interest income | $7.7 | $13.0 | | Provision for credit losses, net | $(5.7) | $(1.8) | | Net (loss) income | $(0.5) | $7.0 | | Net (loss) income attributable to common stockholders | $(1.7) | $5.8 | | Basic and diluted (loss) income per share | $(0.03) | $0.11 | [Detailed Walk of Allowance for Loan Losses](index=18&type=section&id=Detailed%20Walk%20of%20Allowance%20for%20Loan%20Losses) The allowance for credit losses increased by **$5.7 million** in Q1 2025, rising from **$11.3 million** to **$17.1 million**, a significant increase in provisions year-over-year Allowance for Credit Losses (in millions) | | Three months ended March 31, 2025 | | :--- | :--- | | Beginning Balance | $11.32 | | Provision for credit losses | $5.74 | | **Ending Balance** | **$17.06** | [Reconciliation of Net Income to Distributable Earnings](index=19&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Distributable%20Earnings) This table reconciles the GAAP net loss of **$1.7 million** to Distributable Earnings of **$4.0 million** for Q1 2025, primarily by adding back the **$5.7 million** unrealized provision for credit losses Q1 2025 GAAP to Distributable Earnings Reconciliation (in thousands) | Line Item | Mar 31, 2025 | | :--- | :--- | | Net income attributable to common stockholders | $(1,708) | | Unrealized provision for credit losses | $5,698 | | Other Adjustments | $31 | | **Distributable Earnings** | **$4,021** | | **Distributable Earnings per share** | **$0.08** | [Capitalization and Book Value Reconciliation](index=20&type=section&id=Capitalization%20and%20Book%20Value%20Reconciliation) This section provides detailed calculations for the company's total capitalization and book value per common share as of March 31, 2025 [Detailed Walk of Capitalization](index=20&type=section&id=Detailed%20Walk%20of%20Capitalization) The reconciliation adjusts total GAAP liabilities and equity of **$1.061 billion** to arrive at the company's total capitalization of **$1.054 billion**, with specific adjustments for payables and capitalized costs - Total GAAP liabilities and equity of **$1.061 billion** are reconciled to a total capitalization figure of **$1.054 billion** by adjusting for certain payables and capitalized costs[42](index=42&type=chunk) [Book Value Per Share of Common Stock](index=21&type=section&id=Book%20Value%20Per%20Share%20of%20Common%20Stock) Book value per common share is calculated by subtracting preferred equity from total stockholders' equity and dividing by common shares outstanding, resulting in **$3.29 per share** Book Value Per Common Share Calculation (as of 3/31/2025) | (in thousands, except share data) | Amount | | :--- | :--- | | Total stockholders' equity | $232,048 | | ( - ) Preferred equity | $(60,000) | | Common equity | $171,949 | | Shares outstanding | 52,324,472 | | **Book Value Per Share of Common Stock** | **$3.29** | [Key Definitions](index=22&type=section&id=Key%20Definitions) This section defines "Book Value Per Share of Common Stock" and "Distributable Earnings," a non-GAAP measure excluding non-cash items used for performance evaluation and dividend determination - "Book Value Per Share of Common Stock" is defined as total stockholders' equity less the liquidation preference of preferred stock, divided by the number of common shares outstanding[46](index=46&type=chunk) - "Distributable Earnings" is a non-GAAP measure that adjusts GAAP net income by excluding non-cash items such as unrealized gains/losses and provisions for credit losses. It is a key metric for management and the board in evaluating performance and considering dividends[47](index=47&type=chunk)[48](index=48&type=chunk)