Exhibit 99.1
Vestin Realty Mortgage II, Inc.
Reports Results
For The Year Ended December 31, 2008
Las Vegas – March 27, 2009 – Vestin Realty Mortgage II, Inc. (Nasdaq:VRTB), a real estate investment trust (“REIT”), announced results of operations for the year ended December 31, 2008.
The Company reported a net loss of approximately $130.2 million or ($8.86) per share for the year ended December 31, 2008 compared with net income of approximately $16.9 million, or $1.14 per share for the year ended December 31, 2007.
The Company noted that the losses for the year ended December 31, 2008 were in large part due to non-performing loans, and the Company’s recording of loan loss provisions of approximately $83.7 million. In addition, the Company incurred write downs for real estate held for sale of approximately $47.2 million for the year ended December 31, 2008. The loan loss provisions and write downs for real estate held for sale are non-cash items. Net cash flow from operating activities was approximately $7.8 million.
As of December 31, 2008, the Company had 39 loans outstanding with an aggregate principal amount approximating $225.0 million, of which 20 loans with an aggregate principal amount approximating $144.9 million were considered non-performing. Loans are considered non-performing when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement or when the payment of interest is 90 days past due. Non-performing loans increased from December 31, 2007, when the Company reported eight loans representing approximately $30.6 million as non-performing loans. The Company has commenced foreclosure proceedings with respect to 19 of the non-performing loans. In addition, the Company is conducting workout discussions with certain non-performing borrowers; however, no assurance can be made as to whether these discussions will be successful. As of December 31, 2008, we owned 11 properties that we acquired through foreclosure, compared with two properties owned as of December 31, 2007.
As of December 31, 2008, shareholder equity was $9.46 per common share. The Company had on its balance sheet approximately $8.0 million of cash, $146.8 million of investment in real estate loans, net of allowance of $78.2 million, $24.4 million in real estate held for sale and approximately $69.0 million in total liabilities as of December 31, 2008.
As of December 31, 2008, we were not in compliance with the revised tangible net worth covenant and the debt to tangible net worth covenant in the First Supplemental Indenture governing our junior subordinated notes. On March 25, 2009, we entered into a letter agreement with Taberna, agent for the holders of the junior subordinated notes, providing for a waiver of all financial covenants effective December 31, 2008 through June 30, 2009. In addition, pursuant to the letter agreement we will exchange $20 million of the junior subordinated notes for certain replacement securities, which we expect to acquire for approximately $10 million of cash. This will reduce our obligation on the junior subordinated notes to approximately $36.3 million, which should facilitate future compliance with financial covenants set forth in the First Supplemental Indenture. This transaction would result in a net gain of approximately $9 million including transaction costs.
Michael V. Shustek, Chairman and Chief Executive Officer, said, “Our disappointing results are largely attributable to the economic environment the country is experiencing. The severe downturn in the real estate market and the increased difficulties faced by our borrowers in obtaining take-out financing as a result of the disruptions in the credit markets, has caused a number of our loans to become non-performing or delinquent and has caused a decline in the appraised value of the collateral securing the Company’s loan portfolio. We are working aggressively to resolve our problem loans; however, this process will take time and our near term operating results are likely to suffer from the level of non-performing assets.”
The Company’s Annual Earnings conference call will be held April 3, 2009 at 9:00 a.m. PDT. You can access this call by dialing 888-422-7128, code number 573868.
About Vestin Realty Mortgage II, Inc.
Vestin Realty Mortgage II, Inc. is a real estate investment trust (“REIT”) that invests in commercial real estate loans. As of December 31, 2008, Vestin Realty Mortgage II, Inc. had assets of approximately $199.5 million. Vestin Realty Mortgage II, Inc. is managed by Vestin Mortgage, Inc., which is a subsidiary of Vestin Group, Inc., which is engaged in asset management, real estate lending and other financial services through its subsidiaries. Since 1995, Vestin Mortgage Inc. has facilitated more than $2.0 billion in lending transactions.
Forward-Looking Statements
Certain information discussed in this press release may constitute forward-looking statements within the Private Securities Litigation Reform Act of 1995 and the federal securities laws. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions at the time made, it can give no assurance that its expectations will be achieved. Readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements are inherently subject to unpredictable and unanticipated risks, trends and uncertainties, such as the Company’s potential inability to accurately forecast its operating results; the Company’s potential inability to regain profitability or continue to generate positive cash flow from operations; constraints in the credit markets, the availability of take-out financing for our borrowers; defaults on outstanding loans; unexpected difficulties encountered in pursuing our remedies if a loan is in default; a decline in the value of collateral securing our loans, declining real estate values in the markets we serve and other risks associated with the Company’s business. The Company assumes no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.
Contact:
Steve Stern
Stern And Company
702-240-9533
steve@sdsternpr.com
FINANCIAL STATEMENTS
VESTIN REALTY MORTGAGE II, INC. | |
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CONSOLIDATED BALANCE SHEETS | |
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ASSETS | |
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| | December 31, 2008 | | | December 31, 2007 | |
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Assets | | | | | | |
Cash | | $ | 8,026,000 | | | $ | 20,241,000 | |
Cash - restricted | | | 5,000,000 | | | | -- | |
Certificates of deposit | | | -- | | | | 102,000 | |
Investment in marketable securities - related party | | | 496,000 | | | | 2,460,000 | |
Interest and other receivables, net of allowance of $593,000 at December 31, 2008 and $160,000 at December 31, 2007 | | | 1,345,000 | | | | 4,162,000 | |
Notes receivable, net of allowance of $2,340,000 at December 31, 2008 and $2,619,000 at December 31, 2007 | | | -- | | | | -- | |
Real estate held for sale | | | 24,433,000 | | | | 28,563,000 | |
Investment in real estate loans, net of allowance for loan losses of $78,208,000 at December 31, 2008 and $12,873,000 at December 31, 2007 | | | 146,834,000 | | | | 278,190,000 | |
Investment in equity affiliate | | | 100,000 | | | | 100,000 | |
Assets under secured borrowings | | | 10,600,000 | | | | -- | |
Deferred financing costs | | | 2,504,000 | | | | 2,213,000 | |
Other assets | | | 144,000 | | | | 137,000 | |
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Total assets | | $ | 199,482,000 | | | $ | 336,168,000 | |
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LIABILITIES AND STOCKHOLDERS' EQUITY | |
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Liabilities | | | | | | | | |
Accounts payable and accrued liabilities | | $ | 2,154,000 | | | $ | 2,641,000 | |
Due to related parties | | | 522,000 | | | | 122,000 | |
Secured borrowings | | | 9,907,000 | | | | -- | |
Junior subordinated notes payable | | | 56,350,000 | | | | 60,100,000 | |
Note payable | | | 24,000 | | | | -- | |
Dividend payable | | | -- | | | | 1,546,000 | |
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Total liabilities | | | 68,957,000 | | | | 64,409,000 | |
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Commitments and contingencies | | | | | | | | |
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Stockholders' equity | | | | | | | | |
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued | | | -- | | | | -- | |
Treasury stock, at cost 1,198,573 shares at December 31, 2008 and 109,634 at December 31, 2007 | | | (5,692,000 | ) | | | (1,440,000 | ) |
Common stock, $0.0001 par value; 100,000,000 shares authorized; 13,798,790 shares issued and outstanding at December 31, 2008 and 14,866,219 shares issued and outstanding at December 31, 2007 | | | 1,000 | | | | 1,000 | |
Additional paid in capital | | | 278,550,000 | | | | 278,367,000 | |
Accumulated deficit | | | (141,627,000 | ) | | | (4,198,000 | ) |
Accumulated other comprehensive loss | | | (707,000 | ) | | | (971,000 | ) |
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Total stockholders' equity | | | 130,525,000 | | | | 271,759,000 | |
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Total liabilities and stockholders' equity | | $ | 199,482,000 | | | $ | 336,168,000 | |
VESTIN REALTY MORTGAGE II, INC. | |
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CONSOLIDATED STATEMENTS OF OPERATIONS | |
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| | For the Year Ended | | | For the Year Ended | | | For the Twelve Months Ended | |
| | 12/31/2008 | | | 12/31/2007 | | | 12/31/2006 | |
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Revenues | | | | | | | | | |
Interest income from investment in real estate loans | | $ | 18,604,000 | | | $ | 26,982,000 | | | $ | 21,718,000 | |
Gain related to pay off of real estate loan, including recovery of allowance for loan loss | | | -- | | | | 1,044,000 | | | | -- | |
Other income | | | 703,000 | | | | 984,000 | | | | 335,000 | |
Total revenues | | | 19,307,000 | | | | 29,010,000 | | | | 22,053,000 | |
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Operating expenses | | | | | | | | | | | | |
Management fees - related party | | | 1,098,000 | | | | 1,097,000 | | | | 1,096,000 | |
Provision for loan loss | | | 83,712,000 | | | | 3,116,000 | | | | 5,500,000 | |
Interest expense | | | 6,421,000 | | | | 3,367,000 | | | | 1,446,000 | |
Professional fees | | | 3,714,000 | | | | 3,004,000 | | | | 1,219,000 | |
Professional fees - related party | | | 236,000 | | | | 138,000 | | | | 88,000 | |
Provision for doubtful accounts related to receivable | | | 754,000 | | | | 235,000 | | | | 329,000 | |
Loan fees – related party | | | 594,000 | | | | -- | | | | -- | |
Other | | | 1,123,000 | | | | 922,000 | | | | 946,000 | |
Total operating expenses | | | 97,652,000 | | | | 11,879,000 | | | | 10,624,000 | |
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Income (loss) from operations | | | (78,345,000 | ) | | | 17,131,000 | | | | 11,429,000 | |
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Non-operating income (loss) | | | | | | | | | | | | |
Gain on sale of marketable securities | | | -- | | | | -- | | | | 21,000 | |
Gain on purchase of debt | | | 1,556,000 | | | | -- | | | | -- | |
Dividend income - related party | | | 86,000 | | | | 308,000 | | | | 72,000 | |
Interest income from banking institutions | | | 376,000 | | | | 1,535,000 | | | | 1,333,000 | |
Loss on sale of investment in real estate loan | | | (2,760,000 | ) | | | -- | | | | -- | |
Impairment on marketable securities - related party | | | (2,228,000 | ) | | | -- | | | | -- | |
Total other non-operating income (loss) | | | (2,970,000 | ) | | | 1,843,000 | | | | 1,426,000 | |
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Income (loss) from real estate held for sale | | | | | | | | | | | | |
Revenue related to real estate held for sale | | | -- | | | | 86,000 | | | | 4,101,000 | |
Net gain (loss) on sale of real estate held for sale | | | (259,000 | ) | | | -- | | | | 1,517,000 | |
Gain on sale of real estate held for sale - seller financed | | | -- | | | | 2,003,000 | | | | 2,293,000 | |
Expenses related to real estate held for sale | | | (1,370,000 | ) | | | (2,869,000 | ) | | | (4,915,000 | ) |
Write downs on real estate held for sale | | | (47,225,000 | ) | | | (1,266,000 | ) | | | -- | |
Total income (loss) from real estate held for sale | | | (48,854,000 | ) | | | (2,046,000 | ) | | | 2,996,000 | |
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Income (loss) before provision for income taxes | | | (130,169,000 | ) | | | 16,928,000 | | | | 15,851,000 | |
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Provision for income taxes | | | -- | | | | -- | | | | -- | |
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NET INCOME (LOSS) | | $ | (130,169,000 | ) | | $ | 16,928,000 | | | $ | 15,851,000 | |
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Basic and diluted earnings (loss) per weighted average common share / membership unit | | $ | (8.86 | ) | | $ | 1.14 | | | $ | 1.06 | |
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Dividends declared per common share / cash distribution to members per membership unit | | $ | 0.49 | | | $ | 1.50 | | | $ | 1.51 | |
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Weighted average common shares / membership units | | | 14,695,756 | | | | 14,909,651 | | | | 14,935,585 | |