RAIT Financial Trust Announces Second Quarter 2012 Financial Results
PHILADELPHIA, PA — July 26, 2012 — RAIT Financial Trust (“RAIT”) (NYSE: RAS) today announced second quarter 2012 financial results.
Highlights
•
Adjusted funds from operations (“AFFO”) increased 45% to $12.4 million for the quarter ended June 30, 2012 from $8.5 million for the quarter ended June 30, 2011.
•
AFFO per share increased to $0.25 for the quarter ended June 30, 2012 from $0.22 for the quarter ended June 30, 2011.
•
Total revenues grew 4% to $56.3 million for the quarter ended June 30, 2012 from $54.2 million for the quarter ended March 31, 2012.
•
Operating income increased 48% to $6.5 million for the quarter ended June 30, 2012 from $4.4 million for the quarter ended June 30, 2011.
•
Adjusted book value of $6.56 at June 30, 2012.
•
RAIT funded $170.3 million in loans during the quarter ended June 30, 2012 and received $86.4 million from loan repayments during the quarter ended June 30, 2012. As of June 30, 2012, RAIT has approximately $275.4 million of capital available for investment into eligible bridge, mezzanine and CMBS loans.
•
RAIT sold $4.6 million of CMBS loans into a securitization and generated a gain of $0.4 million during the quarter. Subsequent to quarter end, RAIT sold $19.1 million of CMBS loans into a securitization, generating a gain of $0.4 million.
•
Rental income increased to $25.5 million during the quarter ended June 30, 2012 from $22.1 million during the quarter ended June 30, 2011.
•
Declared a second quarter 2012 common dividend of $0.08 per share.
Scott Schaeffer, RAIT’s Chairman and CEO, said, “We’ve had strong loan originations in our core commercial real estate businesses. We funded more than $243 million of loans during the first half of the year, including $37 million small balance CMBS loans. Year to date, we’ve successfully securitized $24 million of CMBS loans. We look to build on this momentum during the second half of 2012.”
Second Quarter 2012 Results
RAIT reported AFFO, a non-GAAP financial measure, for the three-month period ended June 30, 2012 of $12.4 million, or $0.25 per share — diluted based on 49.9 million weighted-average shares outstanding – diluted, as compared to AFFO for the three-month period ended June 30, 2011 of $8.5 million, or $0.22 per share – diluted based on 38.1 million weighted-average shares outstanding – diluted. RAIT reported a net loss allocable to common shares for the three-month period ended June 30, 2012 of $7.0 million, or $0.14 total loss per share — diluted based on 49.9 million weighted-average shares outstanding – diluted, as compared to net loss allocable to common shares for the three-month period ended June 30, 2011 of $20.1 million, or $0.53 total loss per share – diluted based on 38.1 million weighted-average shares outstanding – diluted. The second quarter 2012 net loss includes $22.9 million of unrealized losses relating to non-cash mark-to-market adjustments in RAIT’s legacy Taberna portfolios and the associated hedges. Non-cash mark-to-market gains and losses are excluded from AFFO.
RAIT reported AFFO for the six-month period ended June 30, 2012 of $21.7 million, or $0.46 per share — diluted based on 47.0 million weighted-average shares outstanding – diluted, as compared to AFFO for the six-month period ended June 30, 2011 of $15.5 million, or $0.41 per share – diluted based on 37.3 million weighted-average shares outstanding – diluted. RAIT reported a net loss allocable to common shares for the six-month period ended June 30, 2012 of $114.0 million, or $2.42 total loss per share — diluted based on 47.0 million weighted-average shares outstanding – diluted, as compared to net loss allocable to common shares for the six-month period ended June 30, 2011 of $14.3 million, or $0.38 total loss per share – diluted based on 37.3 million weighted-average shares outstanding – diluted.
A reconciliation of RAIT’s reported net income (loss) allocable to common shares to its AFFO is included as Schedule I to this release. A reconciliation of RAIT’s total shareholders’ equity to its adjusted book value is included as Schedule II to this release. Schedule I and Schedule II also include management’s respective rationales for the usefulness of each of these non-GAAP financial measures.
RAIT also reported the following:
•
Investments in Real Estate.As of June 30, 2012, RAIT had investments in real estate of $911.1 million as compared to $891.5 million at December 31, 2011. During the three-months ended June 30, 2012, RAIT converted two loans, with a carrying value of $25.1 million, to owned real estate.
•
Average Occupancy.The average occupancy of RAIT’s portfolio of investments in real estate increased to 85.2% at June 30, 2012 from 83.6% at December 31, 2011.
•
CRE CDO Coverage Tests.As of the most recent reporting date, RAIT CRE CDO I, Ltd’s overcollateralization test was passing at 126.4% with a trigger of 116.2% and RAIT Preferred Funding II, Ltd’s overcollateralization test was passing at 118.0% with a trigger of 111.7%.
•
Non-Accrual CRE Loans.The unpaid principal balance of RAIT’s non-accrual commercial real estate loan portfolio decreased to $73.6 million at June 30, 2012 as compared to $94.1 million at June 30, 2011.
•
Provision for losses. Provision for losses on RAIT’s commercial real estate loan portfolio decreased to $0.5 million for the quarter ended June 30, 2012 as compared to $1.0 million for the quarter ended June 30, 2011.
•
Dividends.On June 21, 2012, RAIT declared a second quarter common dividend of $0.08 per common share to shareholders of record on July 11, 2012 and payable on July 31, 2012. On May 1, 2012, RAIT’s Board of Trustees declared a second quarter 2012 cash dividend of $0.484375 per share on RAIT’s 7.75% Series A Cumulative Redeemable Preferred Shares, $0.5234375 per share on RAIT’s 8.375% Series B Cumulative Redeemable Preferred Shares and $0.5546875 per share on RAIT’s 8.875% Series C Cumulative Redeemable Preferred Shares. The preferred dividends were paid on July 2, 2012 to holders of record on June 1, 2012.
Key Statistics (Unaudited and dollars in thousands, except per share information)
As of or For the Three-Month Periods Ended
June 30, 2012
March 31, 2012
December 31, 2011
September 30, 2011
June 30, 2011
Financial Statistics:
Assets under management
$
3,642,189
$
3,549,029
$
3,517,684
$
3,633,133
$
3,753,290
Total revenue
$
56,347
$
54,245
$
56,923
$
60,089
$
58,863
Earnings per share – diluted
$
(0.14
)
$
(2.42
)
$
(0.39
)
$
(0.55
)
$
(0.53
)
Funds from Operations (“FFO”) per share
$
0.01
$
(2.25
)
$
(0.20
)
$
(0.36
)
$
(0.34
)
AFFO per share
$
0.25
$
0.21
$
0.30
$
0.23
$
0.22
Common dividend declared
$
0.08
$
0.08
$
0.06
$
0.06
$
0.06
Commercial Real Estate (“CRE”) Loan Portfolio:
CRE loans— unpaid principal
$
1,072,655
$
990,321
$
952,997
$
1,064,946
$
1,122,898
Non-accrual loans — unpaid principal
$
73,592
$
56,113
$
54,334
$
89,023
$
94,117
Non-accrual loans as a % of reported loans
6.9
%
5.7
%
5.7
%
8.4
%
8.4
%
Reserve for losses
$
35,426
$
35,527
$
40,565
$
50,609
$
49,906
Reserves as a % of non-accrual loans
48.1
%
63.3
%
74.7
%
56.8
%
53.0
%
Provision for losses
$
500
$
500
$
500
$
500
$
950
CRE Property Portfolio:
Reported investments in real estate
$
911,128
$
887,130
$
891,502
$
849,232
$
851,916
Net operating income
$
12,053
$
11,034
$
10,503
$
9,072
$
8,347
Number of properties owned
58
56
56
48
48
Multifamily units owned
8,014
8,014
8,014
8,014
8,014
Office square feet owned
2,015,524
1,786,860
1,786,860
1,786,860
1,786,908
Retail square feet owned
1,422,298
1,358,257
1,358,257
1,114,250
1,116,171
Land
19.90
19.90
19.90
7.25
7.25
Average occupancy data:
Multifamily
91.2
%
90.4
%
88.5
%
89.8
%
88.6
%
Office
71.0
%
70.7
%
69.2
%
68.5
%
68.8
%
Retail
70.0
%
66.9
%
68.0
%
68.9
%
62.0
%
Total
85.2
%
85.0
%
83.6
%
84.5
%
83.1
%
Average Effective Rent per Unit/Square Foot (1):
Multifamily (2)
$
695
$
691
$
681
$
671
$
673
Office (3)
$
19.07
$
21.53
$
20.85
$
20.50
$
18.39
Retail (3)
$
12.44
$
10.59
$
9.73
$
9.55
$
6.69
(1)
Based on properties owned as of June 30, 2012.
(2)
Average effective rent is rent per unit per month.
(3)
Average effective rent is rent per square foot per year.
Conference Call
All interested parties can listen to the live conference call webcast at 9:00 AM EDT on Thursday, July 26, 2012 from the home page of the RAIT Financial Trust website at www.raitft.com or by dialing 866.356.3095, access code 47631703. For those who are not available to listen to the live call, the replay will be available shortly following the live call on RAIT’s website and telephonically until Thursday, August 2, 2012, by dialing 888.286.8010, access code 43131737.
About RAIT Financial Trust
RAIT Financial Trust is an internally-managed real estate investment trust that provides debt financing options to owners of commercial real estate and invests directly into commercial real estate properties located throughout the United States. In addition, RAIT is an asset and property manager of real estate-related assets. For more information, please visit www.raitft.com or call Investor Relations at 215.243.9000.
Forward-Looking Statements
This press release may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” or other similar words. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from the expectations, intentions, beliefs, plans or predictions of the future expressed or implied by such forward-looking statements. These risks, uncertainties and contingencies include, but are not limited to, those disclosed in RAIT’s filings with the Securities and Exchange Commission. RAIT undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required by law.
RAIT Financial Trust Contact Andres Viroslav 215-243-9000 aviroslav@raitft.com
1
RAIT Financial Trust Consolidated Statements of Operations (Dollars in thousands, except share and per share information) (unaudited)
For the Three-Month
For the Six-Month
Periods Ended
Periods Ended
June 30
June 30
2012
2011
2012
2011
Revenue:
Interest income
$
28,745
$
34,483
$
56,701
$
68,041
Rental income
25,540
22,138
50,371
43,428
Fee and other income
2,062
2,242
3,520
5,673
Total revenue
56,347
58,863
110,592
117,142
Expenses:
Interest expense
19,238
22,328
38,586
45,695
Real estate operating expense
13,487
13,791
27,284
26,408
Compensation expense
5,246
5,737
10,984
12,281
General and administrative expense
3,783
4,431
7,608
9,399
Provision for loan losses
500
950
1,000
2,900
Depreciation and amortization
7,631
7,249
15,294
14,368
Total expenses
49,885
54,486
100,756
111,051
Operating income
6,462
4,377
9,836
6,091
Interest and other income (expense)
(1,471
)
67
(1,438
)
150
Gains (losses) on sale of assets
2,518
564
2,529
1,979
Gains (losses) on extinguishment of debt
—
3,706
1,574
3,169
Change in fair value of financial instruments
(11,169
)
(25,727
)
(120,092
)
(20,116
)
Income (loss) before taxes and discontinued operations
(3,660
)
(17,013
)
(107,591
)
(8,727
)
Income tax benefit (provision)
90
256
357
310
Income (loss) from continuing operations
(3,570
)
(16,757
)
(107,234
)
(8,417
)
Income (loss) from discontinued operations
—
6
—
797
Net income (loss)
(3,570
)
(16,751
)
(107,234
)
(7,620
)
(Income) loss allocated to preferred shares
(3,419
)
(3,414
)
(6,829
)
(6,828
)
(Income) loss allocated to noncontrolling interests
38
67
93
117
Net income (loss) allocable to common shares
$
(6,951
)
$
(20,098
)
$
(113,970
)
$
(14,331
)
Earnings (loss) per share—Basic:
Continuing operations
$
(0.14
)
$
(0.53
)
$
(2.42
)
$
(0.40
)
Discontinued operations
—
—
—
0.02
Total earnings (loss) per share—Basic
$
(0.14
)
$
(0.53
)
$
(2.42
)
$
(0.38
)
Weighted-average shares outstanding—Basic
49,902,247
38,055,234
47,026,586
37,340,755
Earnings (loss) per share—Diluted:
Continuing operations
$
(0.14
)
$
(0.53
)
$
(2.42
)
$
(0.40
)
Discontinued operations
—
0.00
—
0.02
Total earnings (loss) per share—Diluted
$
(0.14
)
$
(0.53
)
$
(2.42
)
$
(0.38
)
Weighted-average shares outstanding—Diluted
49,902,247
38,055,234
47,026,586
37,340,755
2
RAIT Financial Trust Consolidated Balance Sheets (Dollars in thousands, except share and per share information) (unaudited)
As of
As of
June 30,
December 31,
2012
2011
Assets
Investments in mortgages and loans, at amortized cost:
Commercial mortgages, mezzanine loans, other loans and preferred
$
1,090,481
$
996,363
equity interests
Allowance for losses
(39,877
)
(46,082
)
Total investments in mortgages and loans
1,050,604
950,281
Investments in real estate
911,128
891,502
Investments in securities and security-related receivables, at fair value
657,783
647,461
Cash and cash equivalents
44,265
29,720
Restricted cash
101,347
278,607
Accrued interest receivable
43,143
39,455
Other assets
44,881
39,771
Deferred financing costs, net of accumulated amortization of $13,706 and
21,050
23,178
$11,613, respectively
Intangible assets, net of accumulated amortization of $2,590 and $2,337,
2,376
2,629
respectively
Total assets
$
2,876,577
$
2,902,604
Liabilities and Equity
Indebtedness:
Recourse indebtedness
$
184,230
$
169,107
Non-recourse indebtedness
1,601,128
1,579,167
Total indebtedness
1,785,358
1,748,274
Accrued interest payable
24,619
22,541
Accounts payable and accrued expenses
23,956
20,825
Derivative liabilities
167,155
181,499
Deferred taxes, borrowers’ escrows and other liabilities
27,799
9,481
Distributions payable
7,384
5,890
Total liabilities
2,031,271
1,988,510
Equity:
Shareholders’ equity:
Preferred shares, $0.01 par value per share, 25,000,000 shares authorized; 7.75% Series A cumulative redeemable preferred shares, liquidation
28
28
preference $25.00 per share, 2,787,931 and 2,760,000 shares issued and outstanding
8.375% Series B cumulative redeemable preferred shares, liquidation
23
23
preference $25.00 per share, 2,271,620 and 2,258,300 shares issued and outstanding
8.875% Series C cumulative redeemable preferred shares, liquidation
16
16
preference $25.00 per share, 1,621,430 and 1,600,000 shares issued and outstanding
Common shares, $0.03 par value per share, 200,000,000 shares authorized,
1,490
1,236
49,905,866 and 41,289,566 issued and outstanding
Additional paid in capital
1,779,514
1,735,969
Accumulated other comprehensive income (loss)
(108,721
)
(118,294
)
Retained earnings (deficit)
(830,738
)
(708,671
)
Total shareholders’ equity
841,612
910,307
Noncontrolling interests
3,694
3,787
Total equity
845,306
914,094
Total liabilities and equity
$
2,876,577
$
2,902,604
3
Schedule I RAIT Financial Trust Reconciliation of Net income (loss) Allocable to Common Shares and Funds From Operations (“FFO”) and Adjusted Funds From Operations (“AFFO”) (1) (Dollars in thousands, except share and per share amounts) (unaudited)
For the Three- Month Periods
For the Six-Month Periods
Ended June 30
Ended June 30
2012
2011
2012
2011
Funds From Operations (“FFO”):
Net income (loss) allocable to common shares
$
(6,951
)
$
(20,098
)
$
(113,970
)
$
(14,331
)
Adjustments:
Depreciation expense
7,449
6,961
14,908
13,531
(Gains) Losses on sale of real estate
—
168
—
46
Funds from operations
$
498
$
(12,969
)
$
(99,062
)
$
(754
)
Funds from Operations per share
$
0.01
$
(0.34
)
$
(2.11
)
$
(0.02
)
Weighted-average shares — diluted
49,902,247
38,055,234
47,026,586
37,340,755
Adjusted Funds From Operations (“AFFO”):
Funds from Operations
$
498
$
(12,969
)
$
(99,062
)
$
(754
)
Adjustments:
Change in fair value of financial instruments
11,169
25,727
120,092
20,116
(Gains) Losses on debt extinguishment
—
(3,706
)
(1,574
)
(3,169
)
Capital expenditures, net of direct financing
(535
)
(413
)
(783
)
(775
)
Straight-line rental adjustments
(785
)
(922
)
(1,091
)
(1,687
)
Amortization of deferred items and intangible assets
1,516
763
3,042
1,436
Share-based compensation
549
58
1,106
317
Adjusted Funds from Operations
$
12,412
$
8,538
$
21,730
$
15,484
Adjusted Funds from Operations per share
$
0.25
$
0.22
$
0.46
$
0.41
Weighted-average shares — diluted
49,902,247
38,055,234
47,026,586
37,340,755
(1)
We believe that funds from operations, or FFO, and adjusted funds from operations, or AFFO, each of which are non-GAAP measures, are additional appropriate measures of the operating performance of a REIT and us in particular.
We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss allocated to common shares (computed in accordance with GAAP), excluding real estate-related depreciation and amortization expense, gains or losses on sales of real estate and the cumulative effect of changes in accounting principles.
AFFO is a computation made by analysts and investors to measure a real estate company’s cash flow generated by operations. We calculate AFFO by adding to or subtracting from FFO: change in fair value of financial instruments; gains or losses on debt extinguishment; capital expenditures, net of any direct financing associated with those capital expenditures; straight-line rental effects; amortization of various deferred items and intangible assets; and share-based compensation.
Our calculation of AFFO differs from the methodology used for calculating AFFO by certain other REITs and, accordingly, our AFFO may not be comparable to AFFO reported by other REITs. Our management utilizes FFO and AFFO as measures of our operating performance, and believes they are also useful to investors, because they facilitate an understanding of our operating performance after adjustment for certain non-cash items, such as real estate depreciation, share-based compensation and various other items required by GAAP that may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, AFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we also believe that FFO and AFFO may provide us and our investors with an additional useful measure to compare our financial performance to certain other REITs.
Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with U.S. GAAP. Furthermore, FFO and AFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity. References to “we”, “us”, and “our” refer to RAIT Financial Trust and its subsidiaries.
4
Schedule II RAIT Financial Trust Reconciliation of Shareholders’ Equity to Adjusted Book Value (1) (Dollars in thousands, except share and per share amounts) (unaudited)
As of June 30, 2012
Amount
Per Share (2)
Total Shareholders’ equity, as reported
$841,612
$
16.87
Subtract: Liquidation value of preferred shares (3)
(167,025)
(3.35
)
RAIT Book Value
674,587
13.52
Adjustments:
Subtract: Taberna securitizations net effect
(547,257) (10.97
)
Add: CRE CDO derivative liabilities
79,816 1.60
Add: Accumulated depreciation and amortization
99,333 1.99
Add: Valuation of recurring collateral and property management fees 20,970 0.42
Total adjustments
(347,138)
(6.96
)
Adjusted Book Value
$327,449
$
6.56
(1)
Management views adjusted book value as a useful and appropriate supplement to shareholders’ equity and book value per share. The measure serves as an additional measure of our value because it facilitates evaluation of us without the effects of various items that we are required to record in accordance with GAAP but which have limited economic impact on our business. Those adjustments primarily reflect the effect of consolidated securitizations where we do not currently receive cash flows on our retained interests, accumulated depreciation and amortization, the valuation of long-term derivative instruments and a valuation of our recurring collateral and property management fees. Adjusted book value is a non-GAAP financial measurement, and does not purport to be an alternative to reported shareholders’ equity, determined in accordance with GAAP, as a measure of book value. Adjusted book value should be reviewed in connection with shareholders’ equity as set forth in our consolidated balance sheets, to help analyze our value to investors. Adjusted book value may be defined in various ways throughout the REIT industry. Investors should consider these differences when comparing our adjusted book value to that of other REITs.
(2)
Based on 49,905,866 common shares outstanding as of June 30, 2012.
(3)
Based on 2,787,931 Series A preferred shares, 2,271,620 Series B preferred shares, and 1,621,430 Series C preferred shares outstanding as of June 30, 2012, all of which have a liquidation preference of $25.00 per share.
5
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