Thank you, Kevin and good afternoon, everyone.
As we discuss our fourth-quarter financial results, I want to draw your attention to our supplemental financial report which is available on our website. We believe this supplement will help investors and research analysts better understand our company given the additional data it provides on each of our business segments.
For the fourth quarter CLNC reported a GAAP net loss of $127.1 million or $1.00 per share and negative core earnings of $37.3 million or $0.29 per share. Fourth quarter net income and core earnings included one, $69.7 million of realized losses from mark-to-market adjustments and tax expenses on our real estate private equity investments. And two, $10.2 million of realized losses from the sale of property and resolutions of loans.
Excluding these combined losses totaling approximately $80 million, fourth quarter core earnings was $42.6 million, or $0.33 per diluted share.
For the fiscal year 2018, we reported a GAAP net loss of $168.5 million, or $1.41 per diluted share and core earnings of $86.1 million, or $0.70 per diluted share.
Excluding realized net losses 2018 core earnings was $175.8 million or $1.42 per share. Subsequent to the end of the quarter, our Board re-approved our initial $300 million stock repurchase program through March 2020. We believe the current share price is not indicative of CLNC's long-term intrinsic value.
We will continue to evaluate repurchasing shares as part of our overall capital allocation strategy, including where the return on equity is at least consistent with our new investment pipeline.
Turning to our liquidity. The company currently has access to $278 million between cash on hand and availability under a corporate revolving credit facility. We successfully upsized a corporate revolving credit facility from $400 million to $560 million providing us with additional capacity for new investments.
In addition, during the quarter we successfully closed on a new $300 million master repurchase facility, which brings our total master repurchase facility capacity to $2.1 billion across six banking relationship. I would now like to take a moment to discuss the impairments taken during the fourth quarter 2018.
First as Kevin mentioned, as part of our overall portfolio rationalization strategy, we are accelerating the sale of our real estate private equity secondary interest.
As a result of recent price discovery from this ongoing process, during the fourth quarter, we reported a mark- to- market adjustment of $35 million as well as a $35 million write-off of a related deferred tax asset, both of which impacted our reported core earnings. We still aim to utilize this deferred tax assets to offset potential future capital gains on our investment portfolio.
Second, we recorded $77 million of provisions for loan losses during the quarter related to four separate borrowers. I'd like to remind everyone as noted in our public disclosure, the reported core earnings excludes the impact of impairment of real estate and provision for loan losses until a realization event occurs. Therefore, reported fourth-quarter core earnings exclude these losses taken through GAAP net income this quarter.
So some specifics on the loan loss provision.
As Kevin mentioned, earlier Colony Credit is taking proactive steps to rotate out of certain legacy underperforming and/ or non core investment. In our call last quarter, we mentioned that we were working through the restructuring of four loans to give it by a New York City Hotel, which remain on non accrual status and are impacting our quarterly core earnings by approximately $0.04 per share.
As part of our ongoing resolution efforts, during the fourth quarter the borrower entered into a listing agreement with a real-estate brokerage firm, and as a result we believe the sale of the underlying collateral and repayment of the four loans is the most likely outcome.
As such during the fourth quarter, we recorded an additional provision for loan loss on these four related New York hospitality loans to reflect the estimated proceeds to be received from the borrower following the sale.
As New York City hotel room additions are being absorbed, we continue to be optimistic on the New York City lodging market recovery and the ability to exit this recent credit impaired asset.
Next, in January 2019, we completed foreclosure on a portfolio of senior and mezzanine loans collateralized by 28 properties to a single borrower.
During the fourth quarter, we recorded an impairment to reflect the estimated fair value of collateral, which included a provision for loan loss associated with protected advances paid by us on the borrower's behalf during 2018.
We are moving forward on these assets with a robust asset management plan to improve operating performance and have engaged new property managers, working under the diligent oversight of our portfolio management team.
We also expect to thoughtfully finance and/or dispose of certain assets within the portfolio in order to maximize value and go forward with earnings.
Finally, during the fourth quarter, two separate borrowers on three of our regional more loans notified us of the potential loss of anchor tenants.
Following this notification, we concluded that the foreclosure or sale of the underlying collateral and repayment of each of these loans is the most likely outcome.
As such we recorded a provision for loan lost for these loans.
While the impairments and their impact on our operating results for this quarter were meaningful, we believe they are comprehensive and complete and that we are now well-positioned to move forward with our business plan.
Turning to deployment.
Our fourth quarter was once again a productive quarter.
Specifically, we allocated and initially funded $561 million and $531 million of capital during the fourth quarter, including five senior loans totaling $486 million including a $163 million investment in Dublin. And two mezzanine loans for $75 million. Total expected return on equity for these fourth quarter investments is approximately 14%.
In addition, in the first quarter to date, we've already deployed an additional $199 million of capital. The full benefits of which will be realized in our core earnings in the coming quarters.
We expect that brief this recent deployment of approximately $730 million, coupled with the redeployment of capital from the portfolio rationalization strategy that Kevin previously discussed, will allow us to achieve our projected run rate dividend coverage during 2019.
For the fiscal year 2018, we successfully allocated approximately $2.2 billion in capital, and funded $2 billion across 38 individual investments.
Our average transaction size exceeded $50 million with an expected weighted average return on equity of 12%. The mix of these investments is approximately 58% senior loans; 28% net lease; 6% mezzanine loans; 5% preferred equity and 3% CMBS. Approximately 74% of these investments are in the US and 26% in Europe. The property type makes it approximately 40% office, 23% hospitality, 13% industrial, 11% multifamily and 13% mixed-use. We increased our office and industrial exposure from 41% of our portfolio at the end of the first quarter to 53% at year-end.
While at the same time, we reduced our exposure to hospitality of retail assets from 39% to 29%.
Taken together, this exemplifies the breath and execution capabilities of Colony's origination platform.
Looking at our in-place investment portfolio, our loan book continues to be the largest segment within our portfolio for the carrying value of $2.8 billion at quarter end. Over 85% of our senior loan portfolio and approximately 65% of our total loan portfolio is floating rate, and thus we see accretive returns despite the increases in LIBOR. With an average loan size of $36 million, the portfolio remains well diversified across collateral type and geography.
Our second largest segment remains our triple net lease portfolio with an un-depreciated carrying value of $1.3 billion as of December 31st, 2018. This portfolio consists primarily of industrial and office properties with a high single digits weighted average return on equity and a weighted average lease term of 9.3 years. We view net lease statement as a core business of CLNC providing long duration and stable cash flows with a potential for capital appreciation.
Moving to CRE debt securities.
Our portfolio had a carrying value of $371 million at quarter end. And is predominantly investment grade rated.
In addition to generating attractive yields and poised for growth, our CRE debt securities portfolio also provides CLNC with additional liquidity options within our investment portfolio and access to efficient borrowing.
Turning to our other real estate segment, which predominantly consists of cash flowing operating real estate, we've brought our exposure down from 24% to 16%. This segment had an underappreciated carrying value of $715 million as of quarter end. This declined by over a $160 million in the third quarter.
As a result of the sale of our largest non core office portfolio during the fourth quarter.
In addition, non core holdings in real estate private equity fund had a total carrying value of $161 million at quarter end, net of the $35 million mark- to- market adjustment recognized during the quarter.
Given our passive secondary interest in these funds and the volatility and timing of cash flows, we are now exploring sales and other strategic alternatives for these interests.
Moving on to our balance sheet.
Our total share assets stand at approximately $5.5 billion at year-end 2018.
Our debt to assets ratio increased to 46% at the end of the quarter, but still remains lower than our peer group and our expected long-term target of 50% to 55%.
As mentioned earlier, our current liquidity stands at approximately $278 million between cash on hand and availability under our revolving credit facility. Overall, we are optimistic as we look towards 2019. We've accomplished a lot during 2018 and we look forward to updating you on our progress on future calls as we continue to monetize certain lower yielding and non core legacy assets and deploy additional liquidity into higher yielding targeted investments.
Our portfolio rationalization and resolution strategy is well defined. And our pipeline and new investment execution should follow the successes about 2018 investment activity. I'd like to thank you for your time today. I will now ask the operator to please open the line for question.