Capital Trust Reports Second Quarter 2012 Results

News provided by

Capital Trust, Inc.

Aug 01, 2012, 04:41 ET

NEW YORK, Aug. 1, 2012 /PRNewswire/ -- Capital Trust, Inc. (NYSE: CT) today reported results for the quarter ended June 30, 2012.

  • Operating Results:
    • Consolidated assets were $584.2 million as of June 30, 2012 and consolidated liabilities were $562.0 million, resulting in total equity of $22.2 million.
    • Consolidated net income was $2.3 million, or $0.10 per share ($0.09 per share on a diluted basis), for the quarter ended June 30, 2012.
    • Adjusted assets were $103.4 million as of June 30, 2012, and adjusted liabilities were $23.6 million, resulting in adjusted shareholders' equity of $79.8 million. Based on 24.8 million shares outstanding (fully diluted basis) at quarter end, adjusted book value per share was $3.21.
    • Cash of $34.6 million decreased by $2.6 million due to a $2.8 million co-investment in CT High Grade II and $2.0 million of income tax payments. This was offset by net operating cash flow of $1.4 million, and $733,000 of net cash flow from CTOPI.
    • The Company's investment management platform generated $5.0 million of gross revenues during the quarter ($2.0 million of fees were eliminated in consolidation under GAAP).

Capital Trust, Inc.

  • As of June 30, 2012, the Company's adjusted assets were comprised of:
    • Unrestricted cash of $34.6 million.
    • Equity interests in the CT Legacy REIT portfolio (52%) with an adjusted book value of $48.9 million. Net of its obligations under the secured notes and management incentive awards, the value of the Company's equity interest in the CT Legacy REIT portfolio is $30.7 million on an adjusted basis.
    • The Company's investment management and special servicing platform, operated through its subsidiary, CT Investment Management Co., LLC ("CTIMCO"). CTIMCO has assets under management of $4.8 billion with mandates including: (i) management of its public company parent, Capital Trust, Inc.; (ii) management of CT Legacy REIT; (iii) management of various private equity funds and separate accounts; (iv) collateral management of five commercial real estate CDOs; and (v) special servicing of securitized loan investments for both CTIMCO-managed vehicles and third parties.
    • A co-investment in CT Opportunity Partners I, LP with an adjusted book value of $11.5 million ($25.0 million commitment, of which a net $10.5 million is funded to date).
    • A new co-investment in CT High Grade Partners II with an adjusted book value of $2.8 million ($2.9 million commitment, of which a net $2.4 million is funded to date).
  • The Company has no recourse liabilities.

CT Legacy REIT

In connection with its March 2011 restructuring, the Company transferred substantially all of its directly held interest earning assets to CT Legacy REIT, and either transferred or extinguished all of its recourse liabilities. CT Legacy REIT is owned 52% by the Company, 24% by an affiliate of its former mezzanine loan lender, and 24% by the Company's former lenders under its extinguished senior credit facility. In addition, CT Legacy REIT issued a subordinate class of common stock to the Company's former junior subordinated noteholders. The Company manages CT Legacy REIT as a liquidating portfolio.

As a result of the February 2012 refinancing of CT Legacy REIT's mezzanine loan, the Company is no longer considered the GAAP primary beneficiary, and therefore has ceased consolidation, of CT Legacy Assets, a wholly-owned subsidiary of CT Legacy REIT. CT Legacy Assets owns all of CT Legacy REIT's assets, other than cash, and is the borrower under its repurchase facility. As a result, the Company's consolidated financial statements no longer include the assets and liabilities of CT Legacy Assets, but show instead a net investment in the CT Legacy Asset portfolio, as well as the cash balance at CT Legacy REIT. The following information primarily relates to the CT Legacy Asset portfolio, which is no longer included in the Company's consolidated financial statements.

  • Assets:
    • Cash of $15.4 million as of June 30, 2012.
    • Asset repayments of $299.4 million since the Company's March 2011 restructuring, representing 60.0% of the initial net book value of the CT Legacy REIT portfolio.
    • 17 loans with a principal balance of $344.6 million, book balance of $209.2 million, and fair value of $185.5 million as of June 30, 2012.
      • No impairment activity during the quarter (total impairments in the portfolio of $132.3 million against five loans).
    • 13 securities with a principal balance of $139.4 million, book balance of $8.3 million, and fair value (excluding CT CDO III) of $1.7 million as of June 30, 2012.
      • No impairment activity during the quarter (total credit impairments in the securities portfolio of $131.2 million against 11 securities).
  • Liabilities:
    • Only remaining liability is its $96.0 million JP Morgan repurchase facility. The facility matures in December 2014, carries a rate of LIBOR+6.00% as of June 30, 2012, and has paydown hurdles and associated potential rate increases going forward.
    • Repayment of $291.7 million, or 75%, of CT Legacy REIT's debt obligations since the Company's March 2011 restructuring.

CT Investment Management Co., LLC

All of the Company's investment management activities are conducted through its wholly-owned, investment management subsidiary, CTIMCO. CTIMCO is headquartered in New York, employs all 29 of the Company's employees, and is operated as a taxable subsidiary. Since its inception, CTIMCO has originated approximately $12.0 billion of commercial real estate debt and related investments and has raised over $3.5 billion of private equity capital, as well as over $10 billion of public and private debt capital. CTIMCO currently manages approximately $4.8 billion of assets including its public company parent, CT Legacy REIT, five commercial real estate CDOs, three private equity funds, and one separate account. In addition, CTIMCO is an approved special servicer by all three rating agencies and is the named special servicer on $2.3 billion of loans.

  • The investment management platform earned $5.0 million of gross revenues during the quarter, and $10.7 million year-to-date ($2.0 million and $4.1 million of fees were eliminated in consolidation under GAAP, respectively).
  • CTIMCO is currently investing CT Opportunity Partners I, a fund with $539.9 million of total equity commitments of which $312.5 million remains undrawn.
  • CTIMCO is also currently investing under its CT High Grade Mezzanine mandate, which was re-opened in May 2011 to invest on a non-discretionary basis. During the quarter, CTIMCO originated one new $10.0 million investment for this mandate.
  • CTIMCO continues to manage CT High Grade Partners II, which has $552.0 million of invested capital

Adjusted Balance Sheet and Operating Results

The consolidated financial statements of the Company include five consolidated securitization vehicles which are all non-recourse, as well as assets and liabilities related to loan participations sold which did not qualify as sales under accounting principles generally accepted in the United States ("GAAP"). This has resulted in a presentation of gross assets and liabilities, provisions/impairments, and operations being recorded in excess of the Company's economic interests in such entities.

The Company's adjusted balance sheet (i) eliminates loan participations sold, and (ii) deconsolidates securitization vehicles which are presented gross in accordance with GAAP, and shows instead the Company's cash investment in these non-recourse entities, adjusted for losses expected or incurred. Due to the non-recourse nature of these entities, the Company's investment amount cannot be less than zero on a cash basis. Also, the adjusted balance sheet separately shows the Company's financial position from that of CT Legacy REIT.

The Company's adjusted balance sheet is not an alternative or substitute for its consolidated balance sheet prepared in accordance with GAAP as a measure of its financial position. Rather, the Company believes that its adjusted balance sheet provides meaningful information to consider, in addition to its consolidated balance sheet prepared in accordance with GAAP, because it helps the Company evaluate its financial position without the effects of certain transactions and GAAP adjustments that are not necessarily indicative of the Company's current investment portfolio, capitalization, or shareholders' equity.

The Company's adjusted balance sheet should not be viewed as an alternative measure of shareholders' equity, and the Company may not prepare its adjusted balance sheet in the same manner as other companies that use a similarly titled measure.

  









Adjusted Balance Sheet as of June 30, 2012





(in thousands, except per share data)



Adjusted Balance Sheet


Consolidated GAAP

Adjustments

CT Legacy

Capital


Capital Trust, Inc.

(1)(2)(3)(4)

REIT

Trust, Inc.

Assets









Cash and cash equivalents

$34,604

$—

$—

$34,604

Loans receivable, net 

1,619

(1,619)

—

—

Equity investments in unconsolidated
    subsidiaries

17,978

(3,660)

—

14,318

Investment in CT Legacy REIT

—

48,883

—

48,883

Deferred income taxes 

2,727

—

—

2,727

Prepaid expenses and other assets

2,207

625

—

2,832

Subtotal

59,135

44,229

—

103,364











Assets of Consolidated Entities







CT Legacy REIT









Restricted cash

15,433

—

15,433

—

Investment in CT Legacy Asset, at fair value

90,700

—

90,700

—

Subtotal

106,133

—

106,133

—











Assets of consolidated securitization vehicles

418,969

(418,969)

—

—











Total/adjusted assets

$584,237

($374,740)

$106,133

$103,364











Liabilities & Shareholders' Equity







Accounts payable, accrued expenses and other liabilities

$12,320

$225

$—

$12,545

Secured notes

8,176

2,883

—

11,059

Participations sold

1,619

(1,619)

—

—

Subtotal

22,115

1,489

—

23,604











Non-Recourse Liabilities of Consolidated Entities





CT Legacy REIT









Accounts payable, accrued expenses and other liabilities

—

625

625

—

Subtotal

—

625

625

—











Liabilities of consolidated securitization vehicles

539,882

(539,882)

—

—











Total/adjusted liabilities

561,997

(537,768)

625

23,604











Total/adjusted equity

(34,385)

219,653

105,508

79,760











Noncontrolling interests

56,625

(56,625)

—

—











Total/adjusted liabilities and shareholders' equity

$584,237

($374,740)

$106,133

$103,364











Capital Trust, Inc. book value/adjusted book value per share:





Basic

($1.48)





$3.44

Diluted

($1.48)





$3.21











(1) All securitization vehicles have been deconsolidated and reported at our cash investment amount, adjusted for current losses relative to our equity investment in each vehicle. Due to the non-recourse nature of these entities, our investment cannot be less than zero on a cash basis. See Note 7 to our consolidated financial statements for discussion of consolidated securitization vehicles.











(2) Loan participations which have been sold to third-parties, and did not qualify for sale accounting, have been eliminated. See Note 3 to our consolidated financial statements for discussion of loan participations sold.











(3) Incentive allocations to CTIMCO from our investment management vehicles have been excluded from our adjusted balance sheet. These incentive allocations will only be paid to CTIMCO in the future contingent on the ultimate performance of such vehicles.











(4) Liabilities under our secured notes and the management incentive awards plan, the payments of which are linked to our gross recovery from CT Legacy REIT, have been adjusted to reflect what would be paid in a liquidation of CT Legacy REIT based on its adjusted balance sheet as of June 30, 2012.











   






Capital Trust, Inc. and Subsidiaries

Consolidated Statements of Operations

Three and Six Months Ended June 30, 2012 and 2011

(in thousands, except share and per share data)

(unaudited)









Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2011

2012

2011

Income from loans and other investments:






     Interest and related income

$6,763

$32,554

$21,479

$69,545

     Less: Interest and related expenses

5,413

32,296

28,754

58,543

          Income from loans and other investments, net

1,350

258

(7,275)

11,002








Other revenues:






     Management fees from affiliates

1,610

1,595

3,195

3,174

     Servicing fees

1,365

438

3,385

748

          Total other revenues

2,975

2,033

6,580

3,922








Other expenses:






     General and administrative

4,740

4,649

9,052

14,928

          Total other expenses

4,740

4,649

9,052

14,928








Total other-than-temporary impairments of securities

—

—

—

(4,933)

Portion of other-than-temporary impairments of securities
     recognized in other comprehensive income

—

—

(160)

(3,271)

Net impairments recognized in earnings

—

—

(160)

(8,204)








Recovery of provision for loan losses

—

8,088

8

17,249

Valuation allowance on loans held-for-sale

—

(224)

—

(224)

Gain on extinguishment of debt

—

937

—

250,976

Fair value adjustment on investment in CT Legacy Assets

3,704

—

7,657

—

Gain on deconsolidation of subsidiary

—

—

146,380

—

Income from equity investments

205

842

901

1,797

Income before income taxes

3,494

7,285

145,039

261,590

           Income tax provision 

143

1,061

1,066

1,450

Net income

$3,351

$6,224

$143,973

$260,140








Less: Net income attributable to noncontrolling interests

(1,068)

(8,069)

(75,137)

(7,400)








Net income (loss) attributable to Capital Trust, Inc.

$2,283

($1,845)

$68,836

$252,740








Per share information:






     Net income (loss) per share of common stock:






          Basic

$0.10

($0.08)

$3.01

$11.19

          Diluted

$0.09

($0.08)

$2.83

$10.52








     Weighted average shares of common stock outstanding:






          Basic

22,893,522

22,723,146

22,865,819

22,580,143

          Diluted

24,426,857

22,723,146

24,353,388

24,024,222

















 ******

The Company will conduct a management conference call at 10:00 a.m. Eastern Time on Thursday, August 2, 2012 to discuss second quarter 2012 results. Interested parties can access the call toll free by dialing (800) 895-4790 or 785-424-1071 for international participants. The conference ID is "CAPITAL." A recorded replay will be available from noon on August 2, 2012 through midnight on Thursday, August 16, 2012. The replay call number is 800-695-0974 or 402-220-1459 for international callers.

Forward-Looking Statements

This news release contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to future financial results and business prospects. The forward-looking statements contained in this news release are subject to certain risks and uncertainties including, but not limited to, the performance of the Company's investments, the timing of collections, its capability to repay indebtedness as it comes due, competition for servicing and investment management assignments, its ability to originate investments, the availability of capital and the Company's tax status, 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 or circumstances.

About Capital Trust

Capital Trust, Inc. is a fully integrated, self-managed real estate finance and investment management company that specializes in credit sensitive structured financial products. To date, the Company's investment programs have focused primarily on loans and securities backed by commercial real estate assets, investing both for its balance sheet and for third party vehicles. 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.

SOURCE Capital Trust, Inc.

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