NEW YORK, May 1 /PRNewswire-FirstCall/ -- Capital Trust, Inc. today reported results for the quarter ended March 31, 2007.
Highlights included:
* Strong Operating Results: reported net income of $0.84 per share
(diluted) for the first quarter, an increase of 18% year over year.
* Record Originations: originated over $477 million of new investment
commitments for the balance sheet during the period, a record first
quarter for the Company.
* Continued Portfolio Performance: recorded no losses or reserves for
losses during the quarter in any portfolio.
* Capital Markets Access: raised $75 million of new trust preferred
securities (junior subordinated debentures), increased committed
repurchase facilities to $1.6 billion and closed a new $50 million
senior unsecured credit facility.
* Dividend Growth: raised the regular quarterly dividend during the
quarter from $0.75 per share to $0.80 per share, an increase of 7%.
Compared to the first quarter of 2006 ($0.60), the Company's regular
quarterly dividend has increased by 33% year over year.
"We are proud to report another solid quarter of results," said John Klopp, Capital Trust's CEO. "In an increasingly volatile market, we continue to have success in executing all facets of our business plan."
The Company will conduct a management conference call at 10:00 A.M. Eastern Time on Wednesday, May 2, 2007 to discuss first quarter 2007 results. Interested parties can access the call toll free by dialing 800-896-8445 or 785-830-1916 for international participants. The conference ID is "CAPITAL." A recorded replay will be available from noon on May 2, 2007 through midnight on May 16, 2007. The replay call number is 800-839-1246 or 402-220-0464 for international callers.
Balance Sheet
Total assets were $2.9 billion at March 31, 2007, reflecting a $291 million (11%) net increase from December 31, 2006. The primary driver of asset growth was the origination of new Interest Earning Assets, as summarized below:
New Gross Originations
* Interest Earning Assets (CMBS, loans and total return swaps) originated
for the balance sheet during the quarter totaled $477 million ($100
million unfunded) and had a weighted average all-in effective rate of
7.76%.
* CMBS investments closed during the quarter totaled $36 million and had a
weighted average all-in effective rate of 7.06% and a weighted average
rating of BBB-.
* Loan investments originated during the quarter totaled $442 million
($100 million unfunded) and had a weighted average all-in effective rate
of 7.82% and a weighted average last dollar loan to value of 64.4%.
Interest Earning Assets
* Interest Earning Assets totaled $2.85 billion at March 31, 2007 and had
a weighted average all-in effective rate of 8.31%, representing growth
of $287 million (11%) from December 31, 2006.
* $840 million (29%) of the balance sheet portfolio were CMBS investments
with a weighted average all-in effective rate of 7.16% and a weighted
average rating of BB+.
* $2.0 billion (71%) of the balance sheet portfolio were loan investments
with a weighted average all-in effective rate of 8.79% and a weighted
average last dollar loan-to-value of 69.1%.
During the quarter ended March 31, 2007, the Company received repayments of Interest Earning Assets totaling $117 million, comprised of full repayments on 8 investments totaling $85 million, and partial repayments of $32 million. In addition, $26 million of previously unfunded commitments were advanced during the period.
In addition to Interest Earning Assets, at March 31, 2007, the Company had two Equity Investments in Unconsolidated Subsidiaries. One of these investments, with a total carrying value of $3 million, represents the remaining co-investment in CT Mezzanine Partners III, Inc. ("Fund III"), a private equity fund that the Company manages. The second is the Company's investment in Bracor Investimentos Imobiliarios Ltda., a Brazilian commercial real estate company, with a carrying value at quarter end of $7 million (versus a total equity commitment of $15 million).
Total Interest Bearing Liabilities (repurchase financings, CDOs, senior unsecured credit facility, and junior subordinated debentures) were $2.2 billion at March 31, 2007, of which $1.2 billion (54%) were comprised of CDOs that provide the Company with non-recourse, non-mark-to-market, indexed matched financing. The balance of the Company's outstanding Interest Bearing Liabilities were in the form of repurchase financings totaling $881 million (39%), a new senior unsecured credit facility totaling $25 million (1%), and junior subordinated debentures totaling $129 million (6%). At quarter end, the Company's $2.2 billion of Interest Bearing Liabilities carried a weighted average cash coupon of 6.02% and a weighted average all-in effective rate of 6.22%.
At March 31, 2007, the Company's GAAP shareholders' equity was $426 million. Based upon shareholders' equity at quarter end, book value per share was $24.03, compared to $24.06 at December 31, 2006. Included in these calculations are 198,886 and 230,399 dilutive shares issuable upon the exercise of outstanding options for the periods ended March 31, 2007 and December 31, 2006, respectively, in addition to the common and restricted shares and stock units outstanding.
At March 31, 2007, the Company had total liquidity of $191 million, comprised of $22 million of cash, $144 million of immediately available liquidity from its repurchase agreements, and $25 million from the senior unsecured credit facility. At March 31, 2007, the Company's debt-to-equity ratio (defined as the ratio of total Interest Bearing Liabilities to book equity) was 5.3-to-1 compared to 4.6-to-1 at December 31, 2006.
Investment Management
At March 31, 2007, the Company managed two private equity funds and one separate account with total assets of $411 million. All of the Company's investment management activities are conducted through its wholly-owned, taxable, investment management subsidiary, CT Investment Management Co., LLC ("CTIMCO"). One of these funds, Fund III, has ended its investment period and is liquidating in the ordinary course of business. The other, CT Large Loan 2006, Inc. ("CT Large Loan") (with $325 million of third party equity commitments) invests in certain large transactions that exceed the balance sheet's maximum concentration limits, generally $50 million. In such cases, Capital Trust co-invests with CT Large Loan on a pari passu basis. The separate account, CT High Grade Mezzanine(SM) ("CT High Grade") ($250 million of third party equity commitments) invests primarily in senior (or high grade) commercial real estate mezzanine investments with rates of return lower than the minimum hurdle rates targeted for the balance sheet. The latter two vehicles are specifically designed to create operating leverage for the CT platform, allowing the Company to earn fees for investing third party capital side by side or senior to the Company's balance sheet.
During the quarter, CT Mezzanine Partners II, LP ("Fund II") was liquidated as the last remaining asset in the fund was repaid. Formed in 2001, Fund II invested in 40 transactions totaling $1.2 billion between 2001 and 2003 and experienced 100% performance on its assets.
Comparison of Results of Operations: Three Months Ended March 31, 2007 to March 31, 2006
Income from loans and other investments
Growth in Interest Earning Assets, along with a 0.71% increase in average LIBOR, drove a $25.8 million (82%) increase in interest income between the first quarter of 2006 and the first quarter of 2007. These same factors, combined with generally higher levels of leverage, resulted in an $18.8 million, or 109%, increase in interest expense for the same period. On a net basis, net interest margin increased by $7.0 million, or 49%, which was the primary driver of net income growth from the first quarter of 2006 to the first quarter of 2007.
Management and advisory fees
Base management fees from the investment management business increased as management fees from both CT Large Loan and CT High Grade offset the decrease in base management fees from Fund II and Fund III. Fund II paid its final base management fee to the Company during the first quarter of 2007.
Incentive management fees
The Company received a final incentive management fee distribution from Fund II of $962,000 in March 2007 as the fund's last investment repaid and the fund was liquidated. In the first quarter of 2006, the Company received $128,000 of Fund II incentive management fees.
General and administrative expenses
General and administrative expenses include compensation and benefits for employees, operating expenses and professional fees. Total general and administrative expenses increased 33% between the first quarter of 2006 and the first quarter of 2007, primarily as a result of higher levels of employment costs as well as increased professional fees.
Depreciation and amortization
Depreciation and amortization increased by $1.1 million between the first quarter of 2006 and the first quarter of 2007 due primarily to the write off of $1.3 million of capitalized costs related to the liquidation of Fund II in the first quarter of 2007.
Income/(loss) from equity investments
The loss from equity investments in the first quarter of 2007 resulted primarily from the amortization of $384,000 of capitalized costs passed through to the Company from the general partner of Fund II and a net loss of $159,000 at Bracor, representing the Company's share of operating losses (plus de minimus currency adjustments) for the period from October 1, 2006 through December 31, 2006 (the Company reports Bracor's operating results on a one fiscal quarter lag). During the first quarter of 2006, income from equity investments was primarily comprised of co-investment income from Fund II and Fund III.
Income taxes
In both the first quarter of 2007 and 2006, CTIMCO, the Company's taxable REIT subsidiary, recorded an operating loss. In the first quarter of 2006, the Company booked an income tax benefit of $701,000 as a result of the operating loss during the period. In 2007, however, the Company reserved for the entire tax benefit and did not record a tax benefit associated with the operating loss. The $254,000 tax benefit recorded for the first quarter of 2007 was not associated with the operations of CTIMCO, but was a result of the reversal of a tax liability previously reserved at Capital Trust, Inc.
Net income
Net income grew by $3.9 million or 36% from the first quarter of 2006 to the first quarter of 2007, based in large part upon increased net interest income generated by a higher level of Interest Earning Assets. On a diluted per share basis, net income was $0.84 and $0.71 in the first quarter of 2007 and 2006, respectively, representing an increase of 18%.
Dividends
The Company raised its regular dividend during the first quarter of 2007 from $0.75 per share to $0.80 per share (7% increase). Compared to a $0.60 per share dividend for the first quarter of 2006, the Company generated growth of 33% in recurring income from operations (the metric by which the regular quarterly cash dividend is set).
Forward-Looking Statements
The forward-looking statements contained in this news release are subject to certain risks and uncertainties including, but not limited to, new origination volume, the continued credit performance of the Company's loan and CMBS investments, the asset/liability mix, the effectiveness of the Company's hedging strategy and the rate of repayment of the Company's portfolio assets, as well as other risks indicated from time to time in the Company's Form 10-K and Form 10-Q filings with the Securities and Exchange Commission. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
About Capital Trust
Capital Trust, Inc. is a finance and investment management company that specializes in credit-sensitive structured financial products. To date, the Company's investment activities have focused primarily on the commercial real estate subordinate debt markets. Capital Trust executes its business both as a balance sheet investor and as an investment manager. Capital Trust is a real estate investment trust traded on the New York Stock Exchange under the symbol "CT." The Company is headquartered in New York City.
Tables to follow
Capital Trust, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 2007 and December 31, 2006
(in thousands except per share data)
March 31, December 31,
2007 2006
(unaudited) (audited)
Assets
Cash and cash equivalents $22,187 $26,142
Restricted cash 913 1,707
Commercial mortgage backed securities 839,501 810,970
Loans receivable 2,015,048 1,754,536
Total return swaps -- 1,815
Equity investment in unconsolidated subsidiaries 9,855 11,485
Deposits and other receivables 10,963 3,128
Accrued interest receivable 15,099 14,888
Interest rate hedge assets 1,982 2,565
Deferred income taxes 3,609 3,609
Prepaid and other assets 20,832 17,719
Total assets $2,939,989 $2,648,564
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable and accrued expenses $24,979 $38,061
Repurchase obligations 881,104 704,444
Collateralized debt obligations 1,206,458 1,212,500
Participations sold 239,312 209,425
Senior unsecured credit facility 25,000 --
Junior subordinated debentures 128,875 51,550
Interest rate hedge liabilities 2,962 1,688
Deferred origination fees and other revenue 5,141 4,624
Total liabilities 2,513,831 2,222,292
Shareholders' equity:
Class A common stock, $0.01 par value, 100,000
shares authorized, 16,994 and 16,933
shares issued and outstanding at March 31, 2007
and December 31, 2006, respectively
("class A common stock") 170 169
Restricted class A common stock, $0.01 par
value, 466 and 481 shares issued and
outstanding at March 31, 2007 and December 31,
2006, respectively ("restricted class
A common stock" and together with class A common
stock, "common stock") 5 5
Additional paid-in capital 419,268 417,641
Accumulated other comprehensive gain 10,094 12,717
Accumulated earnings (deficit) (3,379) (4,260)
Total shareholders' equity 426,158 426,272
Total liabilities and shareholders' equity $2,939,989 $2,648,564
Capital Trust, Inc. and Subsidiaries
Consolidated Statements of Income
Three Months Ended March 31, 2007 and 2006
(in thousands, except share and per share data)
(unaudited)
Three Months Ended
March 31,
2007 2006
(unaudited) (unaudited)
Income from loans and other investments:
Interest and related income $57,449 $31,633
Less: Interest and related expenses 36,100 17,269
Income from loans and other investments,
net 21,349 14,364
Other revenues:
Management fees 749 608
Incentive management fees 962 128
Servicing fees 67 --
Other interest income 311 231
Total other revenues 2,089 967
Other expenses:
General and administrative 6,812 5,126
Depreciation and amortization 1,328 276
Total other expenses 8,140 5,402
Income (loss) from equity investments (703) 319
Income before income taxes 14,595 10,248
(Benefit) provision for income taxes (254) (701)
Net income $14,849 $10,949
Per share information:
Net earnings per share of Class A common
stock
Basic $0.85 $0.72
Diluted $0.84 $0.71
Weighted average shares of common stock
outstanding
Basic 17,513,742 15,304,948
Diluted 17,724,495 15,519,336
Dividends declared per share of common
stock $0.80 $0.60
