Arbor Realty
Trust Reports First Quarter 2007 Results
First Quarter Highlights:
- Net income increased 9% to $16.8 million from 1Q06
- Diluted earnings per share of $0.97
- New loans and investments of $570 million
- Loan and investment portfolio increased 14% from 4Q06
- Declared quarterly dividend of $0.62 per share
- Received $16.0 million cash distribution and recorded $7.4 million of
income, before minority interest, from equity participation interest
UNIONDALE, N.Y., May 4 /PRNewswire-FirstCall/ -- Arbor Realty Trust, Inc.
(NYSE: ABR), a real estate investment trust focused on the business of
investing in real estate related bridge and mezzanine loans, preferred and
direct equity investments, mortgage-related securities and other real estate
related assets, today announced financial results for the quarter ended March
31, 2007. Arbor reported net income for the quarter of $16.8 million, or
$0.97 per diluted common share, compared to net income for the quarter ended
March 31, 2006 of $15.4 million, or $0.90 per diluted common share. Excluding
$6.1 million of net income from the On the Avenue transaction and $5.6 million
from the Prime transaction for the quarters ended March 31, 2007 and 2006,
respectively, net income for the quarter ended March 31, 2007 was $10.7
million, or $0.62 per diluted common share, compared to net income for the
quarter ended March 31, 2006 of $9.7 million, or $0.57 per diluted share. (1)
1. See attached supplemental schedule of non-GAAP financial measures on
page 7.
"The first quarter results reflect our continued financial success and our
commitment to enhance the long-term value of our company and franchise," said
Ivan Kaufman, Chairman and Chief Executive Officer. "Once again, we
demonstrated the strength of our origination network with 28 new loans and
investments totaling $570 million originated during the quarter. We also
continue to improve our long-term funding sources and drive down borrowing
costs maximizing the return on our investments. The first quarter further
demonstrates the considerable earnings power of our equity interests, a key
component of our business model that continues to enhance our franchise
value."
The results for the first quarter included a $16.0 million distribution
from 2170-2178 Broadway Owner LLC "Broadway," an entity in which Arbor owned a
33% profits interest. Broadway owned and operated On the Avenue, an upscale
boutique hotel in Manhattan, which it sold with the Company receiving $16.0
million for its profits interest. The Company owned its profits interest
through a taxable REIT subsidiary and therefore, the proceeds are subject to
corporate income tax. The Company recorded income before minority interest of
approximately $7.4 million related to this transaction for the quarter ended
March 31, 2007. $16.0 million was recorded as interest income and expenses
consisted of a $6.1 million provision for income taxes and a $2.5 million
incentive management fee to be paid to our manager.
During the quarter, Arbor originated $178 million of longer-term, fixed-
rate product, which represented 31% of its quarterly volume. Fixed-rate loans
represented 27% of Arbor's portfolio at March 31, 2007.
Total revenues for the quarter ended March 31, 2007 were $66.5 million, an
increase of 63% from the same quarter of 2006.
At March 31, 2007, the net balance in the loan and investment portfolio
was $2.3 billion, an increase of 14% from December 31, 2006. The average
balance of the loan and investment portfolio during the first quarter was $2.0
billion and the average yield on these assets for the quarter was 9.68%,
compared to 10.15% for the fourth quarter of 2006.
Interest expense for the first quarter 2007 was $32.1 million, an increase
of 75% from the first quarter of 2006. This increase reflects higher average
borrowings, as well as the rise in interest rates. The average balance of debt
financing on the loan and investment portfolio during the quarter was $1.9
billion and the average cost of these borrowings was 6.89% compared to 7.11%
for the fourth quarter of 2006.
For the first quarter 2007, Arbor's manager, Arbor Commercial Mortgage,
LLC, earned $4.2 million of incentive compensation, representing 25% of the
amount by which earnings for the four most recent quarters exceeded a 9.5%
return on equity, as described in the management agreement. Arbor Commercial
Mortgage intends to exercise its option to receive all of its incentive
compensation in shares of Arbor Realty Trust's common stock.
Financing Activity
As of March 31, 2007, Arbor's financing facilities for its loan and
investment portfolio totaled approximately $2.6 billion and borrowings
outstanding under such facilities were $2.1 billion.
Portfolio Activity
During the quarter, Arbor originated 28 new loans and investments totaling
$570 million. Of the new loans and investments, 18 were bridge loans totaling
$419 million, two were junior participating interests totaling $71 million,
five were mezzanine loans totaling $50 million, and three were preferred
equity investments totaling $30 million.
During the quarter, 12 loans paid off with an outstanding balance of
approximately $270 million. Of this amount, $154 million were loans on
properties that were either sold or refinanced outside of Arbor and $116
million was concurrent with an Arbor refinance.
At March 31, 2007, the loan and investment portfolio unpaid principal
balance was $2.3 billion with a weighted average current interest pay rate of
8.68%. At the same date, advances on financing facilities pertaining to the
loan and investment portfolio totaled $2.1 billion, with a weighted average
interest rate of 6.66% excluding financing and interest rate swap costs.
As previously disclosed, Arbor has an $8.5 million loan in its portfolio
that is non-performing and income recognition has been suspended. During the
first quarter, the Company purchased the remaining portion of the non-
performing first mortgage debt of approximately $36 million, including accrued
interest, allowing Arbor to control the exit strategy on the asset. The
principal amount of these loans is not deemed to be impaired and no loan loss
reserve has been recorded to date.
Dividend
As previously announced, the Board of Directors declared a dividend of
$0.62 per share for the quarter ended March 31, 2007, to be paid on May 25,
2007 to shareholders of record on May 16, 2007.
Equity Participation Interests
Attached as an exhibit to this press release is a schedule of certain data
pertaining to the Company's investments with equity participation interests
and IRR lookbacks. As previously disclosed, the Company recorded $7.4 million
of income before minority interest from its profits interest in the On the
Avenue transaction during the quarter. In addition, the Company originated one
new investment with an equity participation interest during the quarter. There
were no new loans and investments originated during the quarter with IRR
lookbacks.
Earnings Conference Call
Management will host a conference call today at 10:00 a.m. EDT. A live
webcast of the conference call will be available online at
www.arborrealtytrust.com. Web participants are encouraged to go to Arbor's Web
site at least 15 minutes prior to the start of the call to register, download
and install any necessary audio software. Listening to the webcast requires
speakers and RealPlayer(TM) software, downloadable without charge at
www.real.com. Those without Web access should access the call telephonically
at least ten minutes prior to the conference call. The dial-in numbers are
(866) 831-6162 for domestic callers and (617) 213-8852 for international
callers. The participant passcode for both is 83055413.
After the live webcast, the call will remain available on Arbor's Web
site, www.arborrealtytrust.com through May 18, 2007. In addition, a
telephonic replay of the call will be available until May 11, 2007. The
replay dial-in number is (888) 286-8010 for domestic callers and (617) 801-
6888. Please use passcode: 24057874.
About Arbor Realty Trust, Inc.
Arbor Realty Trust, Inc. is a real estate investment trust which invests
in a diversified portfolio of multi-family and commercial real estate related
bridge and mezzanine loans, preferred equity investments, mortgage related
securities and other real estate related assets. Arbor commenced operations in
July 2003 and conducts substantially all of its operations through its
operating partnership, Arbor Realty Limited Partnership and its subsidiaries.
Arbor is externally managed and advised by Arbor Commercial Mortgage, LLC, a
national commercial real estate finance company operating through 11 offices
in the US that specializes in debt and equity financing for multi-family and
commercial real estate.
Safe Harbor Statement
Certain items in this press release may constitute forward-looking
statements within the meaning of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995. 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. Arbor can give no
assurance that its expectations will be attained. Factors that could cause
actual results to differ materially from Arbor's expectations include, but are
not limited to, continued ability to source new investments, changes in
interest rates and/or credit spreads, changes in the real estate markets, and
other risks detailed in Arbor's Annual Report on Form 10-K for the year ended
December 31, 2006 and its other reports filed with the SEC. Such forward-
looking statements speak only as of the date of this press release. Arbor
expressly disclaims any obligation or undertaking to release publicly any
updates or revisions to any forward-looking statements contained herein to
reflect any change in Arbor's expectations with regard thereto or change in
events, conditions, or circumstances on which any such statement is based.
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
Quarter Ended
March 31,
2007 2006
(Unaudited) (Unaudited)
Revenue:
Interest income $66,460,653 $40,688,671
Other income 6,170 71,347
Total revenue 66,466,823 40,760,018
Expenses:
Interest expense 32,112,519 18,350,312
Employee compensation and benefits 1,441,148 1,154,931
Stock based compensation 451,560 422,415
Selling and administrative 1,059,019 787,822
Management fee - related party 4,873,682 4,152,773
Total expenses 39,937,928 24,868,253
Income before income from equity
affiliates, minority interest
and provision for income taxes 26,528,895 15,891,765
Income from equity affiliates - 2,909,292
Income before minority interest
and provision for income taxes 26,528,895 18,801,057
Income allocated to minority
interest 3,680,314 3,396,810
Income before provision for income
taxes 22,848,581 15,404,247
Provision for income taxes 6,085,000 50,000
Net income $16,763,581 $15,354,247
Basic earnings per common share $0.98 $0.90
Diluted earnings per common share $0.97 $0.90
Dividends declared per common share $0.60 $0.70
Weighted average number of shares
of common stock outstanding:
Basic 17,183,318 17,086,849
Diluted 21,029,957 20,920,197
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Quarter Ended
March 31,
2007 2006
Total revenue, GAAP basis $66,466,823 $40,760,018
Subtract: Prime transaction - 6,274,041
On the Avenue transaction 15,997,843 -
Total revenue, as adjusted $50,468,980 $34,485,977
Net income, GAAP basis $16,763,581 $15,354,247
Subtract: Prime transaction - 5,638,218
On the Avenue transaction 6,099,638 -
Net income, as adjusted $10,663,943 $9,716,029
Diluted earnings per common share,
GAAP basis $0.97 $0.90
Diluted earnings per common share,
as adjusted $0.62 $0.57
Diluted weighted average shares
outstanding 21,029,957 20,920,197
a.) Given the magnitude of the Prime and On the Avenue transactions,
Arbor has elected to report adjusted revenues, net income and earnings
per share for the affected periods to help ensure the comparability of
the reporting periods. Management considers these non-GAAP financial
measures to be effective indicators, for both management and
investors, of Arbor's financial performance. Arbor's management does
not advocate that investors consider such non-GAAP financial measures
in isolation from, or as a substitute for, financial information
prepared in accordance with GAAP.
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2007 2006
(Unaudited) (Audited)
Assets:
Cash and cash equivalents $8,106,495 $7,756,857
Restricted cash 115,043,453 84,772,062
Loans and investments, net 2,279,472,485 1,993,525,064
Related party loans, net - 7,752,038
Available-for-sale securities, at
fair value - 22,100,176
Investment in equity affiliates 28,910,033 25,376,949
Other assets 69,359,599 63,062,065
Total assets $2,500,892,065 $2,204,345,211
Liabilities and Stockholders' Equity:
Repurchase agreements $571,451,002 $395,847,359
Collateralized debt obligations 1,144,049,000 1,091,529,000
Junior subordinated notes to subsidiary
trust issuing preferred securities 222,962,000 222,962,000
Notes payable 140,569,360 94,574,240
Due to related party 5,157,967 3,983,647
Due to borrowers 13,106,797 16,067,295
Other liabilities 32,305,435 17,802,341
Total liabilities 2,129,601,561 1,842,765,882
Minority interest 66,837,456 65,468,252
Stockholders' equity:
Preferred stock, $0.01 par value:
100,000,000 shares authorized;
3,776,069 shares issued and outstanding 37,761 37,761
Common stock, $0.01 par value:
500,000,000 shares authorized;
17,509,775 shares issued, 17,230,375
shares outstanding at March 31, 2007
and 17,388,770 shares issued,
17,109,370 shares outstanding at
December 31, 2006 175,098 173,888
Additional paid-in capital 277,174,607 273,037,744
Treasury stock, at cost - 279,400
shares (7,023,361) (7,023,361)
Retained earnings 34,157,839 27,732,489
Accumulated other comprehensive
(loss) income (68,896) 2,152,556
Total stockholders' equity 304,453,048 296,111,077
Total liabilities and stockholders'
equity $2,500,892,065 $2,204,345,211
Arbor Realty Trust, Inc.
Internal Rate of Return ("IRR") Lookbacks
(all dollar amounts in thousands)
Unaudited
Loan Pay Rate
Origination Commitment @ IRR
Loan Name Date Amount Index 3/31/07 Rate
135 Greenwich
St. 1Q05 11,815 LIBOR + 5.00% 10.32% 12.00% Year 1
LIBOR + 5.00% 13.50% Year 2
LIBOR + 5.00% 15.00% Year 3
Total $11,815 10.32% 13.50%
This loan contains a provision whereby upon repayment of the loan,
the borrower must make an additional payment in an amount sufficient to
give Arbor Realty Trust, Inc. the yield noted in the "IRR Rate" column.
Management has not yet determined that these amounts are collectable and,
therefore, has not accrued the difference between the
current pay rate and the IRR rate.
Arbor Realty Trust, Inc.
Summary of Equity Participation Interests
(all dollar amounts in thousands)
Unaudited
Initial ART Current
Investment Investment Investment
Name Amount Date Amount
80 Evergreen $384 3Q03 $201
930 Flushing 1,126 3Q03 375
Prime Portfolio 2,100 4Q03 -
Prime Portfolio -
450 W. 33rd St 1,500 4Q03 2,711
823 Park Avenue - 3Q04 -
York Avenue 540 3Q04 -
Toy Building 10,000 2Q05 19,569
Homewood Mtn Resort - 2Q06 -
Richland Terrace Apartments - 3Q06 -
Ashley Court Apartments - 3Q06 -
Nottingham Village - 1Q07 -
Arbor Realty Trust, Inc.
Summary of Equity Participation Interests
(all dollar amounts in thousands)
Unaudited
Approximate
Square Property
Name Profit % Footage Type
80 Evergreen 12.50% 77,680 Warehouse
930 Flushing 12.50% 304,080 Warehouse
Prime Portfolio 7.50% 6,700,000 Retail Outlets
Prime Portfolio 16.67% 6,700,000 Retail Outlets
450 W. 33rd St 29.00% 1,746,734 Office
823 Park Avenue 20.00% 52,374 Conversion
York Avenue 8.70% 45,200 Conversion
Toy Building 20.00% 958,000 Office
Homewood Mtn Resort 25.60% ** 1224 Land
Richland Terrace Apartments 25.00% 342,152 Multi Family
Ashley Court Apartments 25.00% 177,892 Multi Family
Nottingham Village 25.00% 285,900 Multi Family
Arbor Realty Trust, Inc.
Summary of Equity Participation Interests
(all dollar amounts in thousands)
Unaudited
Current
Debt Balance
Name Location on Property Comments
80 Evergreen Brooklyn, NY $4,800
930 Flushing Brooklyn, NY 25,000 Property refinanced July
2005
Prime Portfolio Multi-state 1,275,678 Properties refinanced
Prime Portfolio Multi-state All equity returned to
investors
450 W. 33rd St New York City 350,000 Preferred return of 12.5%
823 Park Avenue New York City 120,500 *Condo conversion -
investment held in
Taxable REIT Subsidiary
("TRS")
York Avenue New York City 32,000 Property refinanced Dec
2005
Toy Building New York City 390,000 TRS Asset
Homewood Mtn Resort Homewood, CA 78,253 Profits interest held in
TRS
Richland Terrace
Apartments Columbia, SC 7,460
Ashley Court
Apartments Fort Wayne, IN 5,452
Nottingham Village Indianapolis, IN 6,626
* - debt balance represents anticipated debt financing required to
complete condominium conversion project.
** - amount represents approximate acreage of property.
Contacts: Investors:
Arbor Realty Trust, Inc. Stephanie Carrington/ Denise Roche
Paul Elenio, Chief Financial Officer The Ruth Group
516-832-7422 646-536-7017 / 7008
pelenio@arbor.com scarrington@theruthgroup.com
droche@theruthgroup.com
Media:
Bonnie Habyan, SVP of Marketing
516-229-6615
bhabyan@arbor.com
SOURCE Arbor Realty Trust
-0- 05/04/2007
/CONTACT: Paul Elenio, Chief Financial Officer, +1-516-832-7422, or
pelenio@arbor.com, or Media, Bonnie Habyan, SVP of Marketing, +1-516-229-6615,
or bhabyan@arbor.com, both of Arbor Realty Trust, Inc.; or Investors,
Stephanie Carrington, +1-646-536-7017, or scarrington@theruthgroup.com, or
Denise Roche, +1-646-536-7008, or droche@theruthgroup.com, both of The Ruth
Group, for Arbor Realty Trust, Inc. /
/Web site: http://www.arborrealtytrust.com
http://www.real.com /
(ABR)