Exhibit 99.1
NEWCASTLE INVESTMENT CORP.
Contact: FOR IMMEDIATE RELEASE
Lilly H. Donohue
Director of Investor Relations
212-798-6118
Newcastle Announces Third Quarter 2004 Results
Third Quarter Highlights
o FFO of $24.0 million, or $0.62 per diluted common share, up 21.6%
from the third quarter 2003 on a per diluted common share basis.
o Income available for common stockholders of $23.4 million, or $0.60
per diluted common share, up 25.0% from the third quarter 2003 on a
per diluted common share basis.
o Declared dividend of $0.60 per share of common stock.
o Issued $454.5 million face amount of non-recourse debt through a
collateralized bond obligation in September 2004.
New York, NY. October 27, 2004 - Newcastle Investment Corp. (NYSE: NCT)
reported that for the quarter ended September 30, 2004, Funds from Operations
("FFO") were $24.0 million, or $0.62 per diluted common share, as compared to
$13.9 million, or $0.51 per diluted common share for the quarter ended
September 30, 2003. The Company generated an FFO return on average invested
common equity of 15.31% for the third quarter 2004.
For the three months ended September 30, 2004, income available for common
stockholders was $23.4 million, or $0.60 per diluted common share compared
with $13.2 million, or $0.48 per diluted common share, in the third quarter
2003.
For the quarter ended September 30, 2004, Newcastle declared a dividend of
$0.60 per share of common stock. The Board also declared a dividend on the
Series B preferred stock of $0.61 per share.
Our common equity book value per share increased to $17.40 at September 30,
2004 from $16.71 at June 30, 2004. GAAP common equity book value was $665.1
million at September 30, 2004 compared with $638.8 million at June 30, 2004.
For a reconciliation and discussion of GAAP net income to FFO and GAAP book
equity to invested common equity, please refer to the tables following the
presentation of GAAP results.
Selected Financial Data (in thousands)
Three Months Ended Three Months Ended
Operating Data (Unaudited): September 30, 2004 September 30, 2003
----------------- ------------------
Funds from operations $23,977 $ 13,948
Income available for common stockholders $23,445 $ 13,183
As of
Balance Sheet Data: September 30, 2004 As of
(Unaudited) December 31, 2003
------------------- ------------------
Total real estate and other securities $3,335,925 $ 2,330,830
Total assets $4,669,614 $ 3,533,081
CBO bond obligations $2,656,247 $ 1,793,533
Preferred stock $ 62,500 $ 62,500
Common stockholders' equity $ 665,090 $ 476,863
Supplemental Total Real Estate and Other Securities
Data as of September 30, 2004 (Unaudited):
Weighted average asset yield 6.18%
Weighted average liability cost 4.33%
Weighted average net spread 1.85%
Weighted average credit rating BBB-
Weighted average asset credit spread 2.77%
Percentage investment grade 71.3%
Number of securities 418
Wesley R. Edens, Chairman and Chief Executive Officer, commented, "We had a
highly productive quarter on both the investment and financing side of our
business. During the quarter, we invested $45 million of capital at our
targeted mid-teens returns."
Capital Markets Activity
Mr. Edens added, "This quarter, we successfully term financed our sixth real
estate securities portfolio. We believe our ability to continually tap the
real estate debt markets at increasingly attractive rates supports our core
business strategy." Newcastle priced a $454.5 million face amount issuance of
non-recourse debt to finance its sixth real estate securities portfolio in
September 2004. 78% of the debt was rated AAA/Aaa by S&P and Moody's.
In July 2004, we refinanced $342.5 million of the AAA and AA bonds in our
first collateralized debt obligation which was issued in 1999, and will result
in approximately $1 million of interest cost savings for the next 12 months.
$322.5 million of AAA bonds were refinanced at LIBOR + 30 basis points from
LIBOR + 65 basis points and $20.0 million of AA bonds were refinanced at LIBOR
+ 50 basis points from LIBOR + 80 basis points.
Third Quarter Investment Activity
During the third quarter, we purchased or committed to purchase approximately
$454 million in face amount of real estate securities and mortgage loans.
Real estate securities. Purchased approximately $370 million of real
estate securities with an average credit rating of BBB. Approximately
$192 million of these securities were commercial mortgage backed
securities, $88 million of REIT debt and $90 million of asset backed
securities. In addition, we sold approximately $73 million of real estate
securities with an average credit rating of BBB-.
Mortgage loans. Residential mortgage loans represent $84 million of total
purchases. These loans are adjustable rate LIBOR mortgage loans to high
quality borrowers with strong credit scores.
Mr. Riis noted that "There continues to be significant new issuance volume and
growth in our target markets. For the first nine months of 2004 CMBS issuance
was up 18% and REIT debt issuance was up 95% over the same period in 2003. In
particular, we expect an active fourth quarter on the investment side as deal
flow is historically higher in this period. Since quarter end, we have
purchased or committed to purchase approximately $185 million of assets."
The Company entered into an agreement with a major investment bank in October
that enables us to purchase commercial mortgage backed securities, REIT debt,
real estate loans and asset backed securities for our seventh real estate
securities portfolio, targeted to be $500 million.
Real Estate Securities
As of September 30, 2004, our aggregate $3.3 billion real estate securities
portfolio was well diversified with 418 securities, of which 73% were fixed
rate securities with a weighted average maturity of 7.36 years and the
remaining 27% were floating rate securities with a weighted average maturity
of 2.80 years. The portfolio consisted of 57% commercial mortgage backed
securities, 24% senior unsecured REIT debt and 19% asset backed securities. As
of September 30, 2004, the average credit quality of our aggregate real estate
securities portfolio was BBB- and 71.3% of the real estate securities were
rated investment grade. Our average investment size was $7 million and our
largest investment in a single security was $57 million. The weighted average
credit spread was 2.77% as of September 30, 2004. The weighted average credit
spread represents the yield premium on our securities over the comparable US
Treasury rate or LIBOR.
The Company's core business strategy is to invest in a diverse portfolio of
moderately credit sensitive real estate debt investments. Our business model
is to lock in the difference between the yield on our assets and the cost of
our liabilities and optimize this difference, which we refer to as "net
spread." Newcastle seeks to match fund these investments with respect to
interest rates and maturities in order to minimize the impact of interest rate
fluctuations on earnings, and to reduce the risk of refinancing our
liabilities prior to the maturity of our assets. As of September 30, 2004, an
immediate 100 basis point increase in interest rates would affect our earnings
by no more than $1.3 million per annum. The weighted average maturity of our
real estate securities and their related liabilities was 6.13 years and 6.57
years, respectively.
Newcastle's real estate securities portfolio continues to perform well: as of
September 30, 2004, none of our owned securities had defaulted, and there have
been no principal losses in our real estate securities portfolio to date. We
continue to seek investments that will generate superior risk adjusted returns
with a long-term objective of capital preservation and earnings stability in
varying interest rate and credit cycles.
Conference Call
Management will conduct a conference call on October 28, 2004 to review the
Company's third quarter financial results for the period ended September 30,
2004. The conference call is scheduled for 4:30 P.M. eastern time. All
interested parties are welcome to participate on the live call. You can access
the conference call by dialing (866) 225-8754 ten minutes prior to the
scheduled start of the call; please reference "Newcastle Third Quarter 2004
Earnings." International callers should dial (303) 262-0068.
For those who are not available to listen to the live call, a replay will be
available until 11:59 P.M. eastern time on Friday, November 5, 2004 by dialing
(800) 475-6701; please reference access code "751226." International callers
should dial (320) 365-3844 to access the replay.
About Newcastle
Newcastle Investment Corp. invests in real estate securities and other real
estate-related assets. Newcastle is organized and conducts its operations to
qualify as a real estate investment trust (REIT) for federal income tax
purposes. For more information on Newcastle Investment Corp. or to be added to
our email distribution list, please visit www.newcastleinv.com.
Certain items in this press release may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
including statements relating to the performance of our real estate securities
portfolio. These statements are based on management's current expectations and
beliefs and are subject to a number of trends and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements; Newcastle can give no assurance that its
expectations will be attained. Factors that could cause actual results to
differ materially from Newcastle's expectations include, but are not limited
to, changes in particular sectors of the economy which might adversely affect
the credit quality of our securities portfolios and thereby their performance;
and other risks detailed from time to time in Newcastle's SEC reports. Such
forward-looking statements speak only as of the date of this press release.
Newcastle expressly disclaims any obligation to release publicly any updates
or revisions to any forward-looking statements contained herein to reflect any
change in the Company's expectations with regard thereto or change in events,
conditions or circumstances on which any statement is based.
Newcastle Investment Corp.
Consolidated Statements of Income
(dollars in thousands, except share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
Revenues 2004 2003 2004 2003
---- ---- ---- ----
Interest income $ 55,770 $ 33,909 $ 160,942 $ 89,743
Rental and escalation income 3,817 4,839 13,341 15,064
============= ============ ============= =============
Gain on settlement of investments 6,227 2,928 15,809 9,047
------------- ------------ ------------- -------------
65,814 41,676 190,092 113,854
------------- ------------ ------------- -------------
Expenses
Interest expense 34,645 19,655 97,684 53,336
Property operating expense 1,946 1,920 6,143 6,475
Loan and security servicing expense 742 665 2,385 1,588
General and administrative expense 1,259 671 3,715 2,268
Management fee to affiliate 2,790 1,783 7,750 4,537
Incentive compensation to affiliate 2,494 1,436 6,104 4,392
Depreciation and amortization 550 498 1,622 1,450
------------- ------------ ------------- -------------
44,426 26,628 125,403 74,046
------------- ------------ ------------- -------------
Income before equity in earnings of unconsolidated subsidiaries 21,388 15,048 64,689 39,808
Equity in earnings of unconsolidated subsidiaries 4,893 - 8,334 -
Income taxes on related taxable subsidiaries (1,714) - (1,714) -
------------- ------------ ------------- -------------
Income from continuing operations 24,567 15,048 71,309 39,808
Income (loss) from discontinued operations 401 (342) (1,316) (582)
------------- ------------ ------------- -------------
Net income 24,968 14,706 69,993 39,226
Preferred dividends (1,523) (1,523) (4,570) (3,250)
------------- ------------ ------------- -------------
Income Available For Common Stockholders $ 23,445 $ 13,183 $ 65,423 $ 35,976
============= ============ ============= =============
Net Income Per Share of Common Stock
Basic $ 0.61 $ 0.48 $ 1.80 $ 1.45
============= ============ ============= =============
Diluted $ 0.60 $ 0.48 $ 1.77 $ 1.44
============= ============ ============= =============
Income from continuing operations, after preferred dividends, per share
of common stock
Basic $ 0.60 $ 0.49 $ 1.84 $ 1.47
============= ============ ============= =============
Diluted $ 0.59 $ 0.49 $ 1.81 $ 1.46
============= ============ ============= =============
Income (loss) from discontinued operations per share of common stock
Basic $ 0.01 $(0.01) $ (0.04) $ (0.02)
============= ============ ============= =============
Diluted $ 0.01 $(0.01) $ (0.04) $ (0.02)
============= ============ ============= =============
Weighted average number shares of common stock outstanding
Basic 38,234,481 27,340,057 36,273,142 24,786,517
============= ============ ============= =============
Diluted 38,882,991 27,620,076 36,851,038 24,987,583
============= ============ ============= =============
Dividends Declared per Common Share $ 0.60 $ 0.50 $ 1.80 $ 1.45
============= ============ ============= =============
Newcastle Investment Corp.
Consolidated Balance Sheets
(dollars in thousands, except share data)
As of
September 30, 2004 As of
Assets (Unaudited) December 31, 2003
----------- -----------------
Real estate securities, available for sale $ 3,079,852 $ 2,089,712
Real estate securities portfolio deposit - 19,541
Other securities, available for sale 256,073 221,577
Real estate related loans, net 352,275 341,193
Investments in unconsolidated subsidiaries 53,397 30,640
Operating real estate, net 91,112 102,995
Real estate held for sale 11,355 29,404
Residential mortgage loans, net 711,056 586,237
Cash and cash equivalents 62,598 60,403
Restricted cash 13,232 13,132
Deferred costs, net 6,968 10,304
Receivables and other assets 31,696 27,943
------------------------ ------------------
$ 4,669,614 $ 3,533,081
======================== ==================
Liabilities and Stockholders' Equity
Liabilities
CBO bonds payable $ 2,656,247 $ 1,793,533
Other bonds payable 235,245 260,674
Notes payable 154,556 154,562
Repurchase agreements 824,340 715,783
Derivative liabilities 27,669 32,457
Dividends payable 23,956 16,703
Due to affiliates 7,013 2,445
Accrued expenses and other liabilities 12,998 17,561
------------------------ ------------------
3,942,024 2,993,718
------------------------ ------------------
Stockholders' Equity
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 2,500,000
shares of Series B Cumulative Redeemable Preferred Stock, liquidation
preference $25.00 per share, issued and outstanding 62,500 62,500
Common stock, $0.01 par value, 500,000,000 shares authorized, 38,234,481 and
31,374,833 shares issued and outstanding at September 30, 2004 and
December 31, 2003, respectively 382 314
Additional paid-in capital 625,937 451,806
Dividends in excess of earnings (15,955) (14,670)
Accumulated other comprehensive income 54,726 39,413
------------------------ ------------------
727,590 539,363
------------------------ ------------------
$ 4,669,614 $ 3,533,081
======================== ==================
Newcastle Investment Corp.
Reconciliation of GAAP Net Income to FFO
(In thousands)
(Unaudited)
Three Months Ended Three Months Ended
September 30, 2004 September 30, 2003
------------------ ------------------
Net income available for common stockholders $ 23,445 $ 13,183
Operating real estate depreciation 532 765
Funds from operations ("FFO") $ 23,977 $ 13,948
We believe FFO is one appropriate measure of the operating performance of
real estate companies because it provides investors with information
regarding our ability to service debt and make capital expenditures. We
also believe that FFO is an appropriate supplemental disclosure of
operating performance for a REIT due to its widespread acceptance and use
within the REIT and analyst communities. Furthermore, FFO is used to
compute our incentive compensation to our manager. FFO, for our purposes,
represents net income available for common stockholders (computed in
accordance with GAAP), excluding extraordinary items, plus real estate
depreciation, and after adjustments for unconsolidated subsidiaries, if
any. We consider gains and losses on resolution of our investments to be a
normal part of our recurring operations and therefore do not exclude such
gains and losses when arriving at FFO. Adjustments for unconsolidated
subsidiaries, if any, are calculated to reflect FFO on the same basis. FFO
does not represent cash generated from operating activities in accordance
with GAAP and therefore should not be considered an alternative to net
income as an indicator of our operating performance or as an alternative to
cash flow as a measure of liquidity and is not necessarily indicative of
cash available to fund cash needs. Our calculation of FFO may be different
from the calculation used by other companies and, therefore, comparability
may be limited.
Newcastle Investment Corp.
Reconciliation of GAAP Book Equity to Invested Common Equity
(In thousands)
(Unaudited)
September 30, 2004
------------------
Book equity $727,590
Preferred stock (62,500)
Accumulated depreciation on operating real estate 11,968
Accumulated other comprehensive income (54,726)
---------
Invested common equity $622,332
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