TO BUSINESS EDITOR:
Arbor Realty Trust Reports Record Second Quarter 2007 Results
Second Quarter Highlights:
- Net income increased 223% to $31.7 million from 2Q06
- Diluted earnings per share of $1.75, the highest quarterly earnings in
Arbor's history
- Record originations of nearly $1 billion
- Loan and investment portfolio increased 13% from 1Q07
- Received $101 million in cash distributions and recorded $24 million of
income, before minority interest, from three equity participation
interests marking a positive impact from equity kickers in 10 of the 13
quarters since transitioning to a public company
- Declared quarterly dividend of $0.62 per share
- Hired a Senior Vice President of Loan Acquisitions to facilitate the
acquisition of loans and debt instruments from financial institutions
- Raised $52 million of trust preferred securities and added a $60 million
working capital line
- Raised $74 million of capital in a public offering issuing 2.7 million
common shares
UNIONDALE, N.Y., Aug. 3 /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 June 30, 2007. Arbor
reported net income for the quarter of $31.7 million, or $1.75 per diluted
common share, compared to net income for the quarter ended June 30, 2006 of $9.8
million, or $0.57 per diluted common share. Excluding $19.7 million of net
income from the 450 West 33rd Street, Toy building, and Prime transactions, net
income for the quarter ended June 30, 2007 was $12.0 million, or $0.67 per
diluted common share.(1)
Net income for the six months ended June 30, 2007 was $48.4 million, or
$2.74 per diluted common share, compared to net income for the six months ended
June 30, 2006 of $25.2 million, or $1.46 per diluted share. Excluding $25.8
million of net income from the 450 West 33rd Street, Toy building, Prime and On
the Avenue transactions for the six months ended June 30, 2007 and $5.6 million
of net income from the Prime transaction for the six months ended June 30, 2006,
net income for the six months ended June 30, 2007 was $22.7 million, or $1.29
per diluted common share, compared to net income for the six months ended June
30, 2006 of $19.5 million, or $1.14 per diluted share.(1)
"We had a record quarter both in terms of earnings and originations," said
Ivan Kaufman, Chairman and Chief Executive Officer. "Earnings per share of $1.75
was the highest in our history and we reached a new milestone with unprecedented
originations of nearly $1.0 billion demonstrating our strong origination
network. The second quarter also included the monetization of several of our
equity kickers, increasing our economic book value by $4 per share, and
significantly increasing our earnings and capital base.(1) We also added two new
equity kickers to our portfolio which continues to demonstrate our unique
ability to participate in the upside of real estate transactions."
The results for the second quarter included $101.0 million in cash
distributions, excluding repayment of debt and return of capital, and $23.7
million in income before minority interest from equity kickers, each of which is
described in detail below:
(1) See attached supplemental schedule of non-GAAP financial measures on
pages 9 & 10.
450 West 33rd Street
In the second quarter, the Company, as part of an investor group for the 450
West 33rd Street partnership, transferred control of the underlying property to
Broadway Partners for a value of approximately $664 million. The investor group,
on a pro-rata basis, retained an approximate 2% ownership interest in the
property and 50% of the property's air rights.
The Company had $45 million of mezzanine debt on the property and a profits
interest in the underlying partnership of approximately 29%. In addition, the
Company had a preferred equity investment of approximately $2.7 million with a
12.5% return. The Company received approximately $134 million in proceeds upon
completion of this transaction. $76 million related to the 29% equity and
profits interest, $10 million related to yield maintenance cost on the
prepayment of the mezzanine debt and the return on the preferred equity
investment, and $48 million for the repayment in full of the mezzanine debt and
preferred equity investment. The Company's manager earned an incentive
management fee of approximately $22 million on this transaction.
The Company recorded deferred revenue of approximately $77.1 million,
deferred expenses related to the incentive management fee of approximately $19.0
million, an investment in equity affiliates of approximately $1.1 million
related to its 29% interest in the 2% retained ownership, interest income of
approximately $10.4 million and an incentive management fee expense of
approximately $2.6 million for the quarter ended June 30, 2007.
The transaction was structured to provide a tax deferral for an estimated
period of seven years.
Toy Building
In the second quarter, the Company, as part of an investor group, sold one
of the buildings that comprise the "Toy Center," 200 Fifth Avenue, with the
partnership receiving net proceeds of approximately $450 million and retaining
an adjacent building located at 1107 Broadway.
The Company had $137 million of outstanding mezzanine debt and a 20% equity
interest in the underlying partnership with approximately $18 million of
invested capital. The partnership used the $450 million of net proceeds from the
sale to repay the total $402 million of outstanding debt on both the 200 Fifth
Avenue and 1107 Broadway properties, and the remaining $48 million of proceeds
was returned to the partners. As a result, the Company received approximately
$10 million in proceeds for its invested capital and was repaid in full on its
$137 million of outstanding debt to the partnership, including all applicable
interest.
The Company owned its 20% equity interest through a taxable REIT subsidiary,
and therefore, the gain on this transaction is subject to corporate income tax.
The Company recorded income before minority interest of approximately $11.4
million in the second quarter related to its 20% equity interest, $24.2 million
was recorded as income from equity affiliates and expenses consisted of a $9.0
million provision for income taxes and a $3.8 million incentive management fee
to be paid to the Company's manager.
Prime
The second quarter also included a $6.0 million distribution from Prime
Outlets Acquisition Company LLC ("Prime"), an entity in which Arbor owns an
equity and profits interest of approximately 24%. Prime refinanced the debt on a
portion of the assets in its portfolio, receiving proceeds in excess of the
amount of the previously existing debt. Of the distribution received by Arbor,
$4.1 million was recorded as interest income, representing the portion of the
distribution received from the profits interest, and $1.9 million of the
distribution was recorded as income from equity affiliates. The Company recorded
an incentive management fee expense of approximately $1.5 million for the
quarter ended June 30, 2007 related to this transaction.
During the quarter, Arbor originated $230 million of longer-term, fixed-rate
product, which represented 23% of its quarterly volume. Fixed-rate loans
represented 31% of Arbor's portfolio at June 30, 2007.
At June 30, 2007, the net balance in the loan and investment portfolio was
$2.6 billion, an increase of 13% from March 31, 2007. The average balance of the
loan and investment portfolio during the second quarter was $2.4 billion and the
average yield on these assets for the quarter was 9.55%, compared to $2.0
billion and 9.68% for the first quarter of 2007.
The average balance of debt financing on the loan and investment portfolio
during the quarter was $2.3 billion and the average cost of these borrowings was
6.82% compared to $1.9 billion and 6.89% for the first quarter of 2007.
For the second quarter 2007, Arbor's manager, Arbor Commercial Mortgage,
LLC, earned $28.9 million of incentive compensation, of which $9.9 million was
recorded as management fee expense and $19.0 million was recorded as deferred
management fee related to the 450 West 33rd Street transaction. Arbor Commercial
Mortgage intends to exercise its option to receive $6.9 million of its $28.9
million of incentive compensation in shares of Arbor Realty Trust's common
stock.
Financing Activity
During the quarter, the Company issued approximately $51.5 million of
long-term junior subordinated notes through two private placements of trust
preferred securities. These securities have an approximate 30 year-term ending
April 30, 2037 and bear interest at a floating rate of three-month LIBOR plus
2.43%. The securities are redeemable, in whole or in part, anytime without
penalty after five years.
In addition, the Company closed a $60.0 million working capital line with a
financial institution with a term of one year and pricing of 2.10% over LIBOR.
As of June 30, 2007, Arbor's financing facilities for its loan and
investment portfolio totaled approximately $2.7 billion and borrowings
outstanding under such facilities were $2.3 billion.
Equity Offering
In June 2007, Arbor issued 2.7 million shares of common stock in a public
offering receiving net proceeds of approximately $73.6 million. These proceeds
were used to pay down debt and fund new loans and investments.
Portfolio Activity
During the quarter, Arbor originated 32 new loans and investments totaling
$995 million, the highest quarterly loan volume in Arbor's history. Of the new
loans and investments, 12 were bridge loans totaling $551 million, four were
junior participating interests totaling $73 million, 14 were mezzanine loans
totaling $186 million, and two were preferred equity investments totaling $185
million.
During the quarter, 19 loans paid off with an outstanding balance of
approximately $618 million. Of this amount, $449 million were loans on
properties that were either sold or refinanced outside of Arbor and $169 million
was concurrent with an Arbor refinance.
At June 30, 2007, the loan and investment portfolio unpaid principal balance
was $2.6 billion with a weighted average current interest pay rate of 8.46%. At
the same date, advances on financing facilities pertaining to the loan and
investment portfolio totaled $2.3 billion, with a weighted average interest rate
of 6.74% excluding financing and interest rate swap costs.
As previously disclosed, Arbor had an $8.5 million loan in its portfolio
that was non-performing and income recognition had 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. In
the second quarter, Arbor foreclosed on the asset and arranged for a group of
new investors to purchase the property. As part of the purchase, the new
investors committed approximately $2 million of capital and Arbor provided $45
million of financing and retained a 50% profits interest in the property. The
principal amount of Arbor's loan 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 June 30, 2007, to be paid on August 27, 2007 to
shareholders of record on August 15, 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. As
previously disclosed, the Company recorded $23.7 million of income before
minority interest from its equity and profits interest in the 450 West 33rd
Street, Toy building and Prime transactions during the quarter. In addition, the
Company originated two new investments with equity participation interests
during the quarter. The Company recorded income during the quarter on an IRR
lookback, 135 Greenwich Street, totaling approximately $0.9 million.
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)
770-7129 for domestic callers and (617) 213-8067 for international callers. The
participant passcode for both is 19390684.
After the live webcast, the call will remain available on Arbor's Web site,
www.arborrealtytrust.com through August 17, 2007. In addition, a telephonic
replay of the call will be available until August 10, 2007. The replay dial-in
number is (888) 286-8010 for domestic callers and (617) 801-6888. Please use
passcode: 56312101.
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.
Contacts:
Arbor Realty Trust, Inc.
Paul Elenio, Chief Financial Officer
516-832-7422
pelenio@arbor.com
Media:
Bonnie Habyan, SVP of Marketing
516-229-6615
bhabyan@arbor.com
Investors:
Stephanie Carrington
The Ruth Group
646-536-7017
scarrington@theruthgroup.com
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Revenue:
Interest income $74,800,274 $38,848,431 $141,260,927 $79,537,102
Other income 17,186 49,050 23,356 120,397
Total revenue 74,817,460 38,897,481 141,284,283 79,657,499
Expenses:
Interest expense 38,527,983 21,576,662 70,640,502 39,926,974
Employee compensation
and benefits 1,879,311 1,154,477 3,320,459 2,309,408
Stock based
compensation 1,222,376 943,038 1,673,936 1,365,453
Selling and
administrative 1,245,469 1,130,955 2,304,488 1,918,777
Management fee -
related party 10,645,065 2,050,927 15,518,747 6,203,700
Total expenses 53,520,204 26,856,059 93,458,132 51,724,312
Income before income
from equity affiliates,
minority interest and
provision for
income taxes 21,297,256 12,041,422 47,826,151 27,933,187
Income from equity
affiliates 26,025,788 - 26,025,788 2,909,292
Income before
minority interest
and provision
for income taxes 47,323,044 12,041,422 73,851,939 30,842,479
Income allocated to
minority interest 6,638,020 2,145,270 10,318,334 5,542,080
Income before
provision for
income taxes 40,685,024 9,896,152 63,533,605 25,300,399
Provision for income
taxes 9,000,000 100,000 15,085,000 150,000
Net income $31,685,024 $9,796,152 $48,448,605 $25,150,399
Basic earnings per
common share $1.76 $0.57 $2.75 $1.47
Diluted earnings per
common share $1.75 $0.57 $2.74 $1.46
Dividends declared
per common share $0.62 $0.72 $1.22 $1.42
Weighted average number of shares of common stock outstanding:
Basic 17,993,924 17,242,332 17,590,860 17,165,020
Diluted 21,873,322 21,073,987 21,453,969 20,997,517
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
Total revenue, GAAP
basis $74,817,460 $38,897,481 $141,284,283 $79,657,499
Subtract: Prime
transaction 4,166,666 - 4,166,666 6,274,041
On the Avenue
transaction - - 15,997,843 -
450 West 33rd
Street
transaction 10,425,579 - 10,425,579 -
Total revenue, as
adjusted $60,225,215 $38,897,481 $110,694,195 $73,383,458
Net income, GAAP
basis $31,685,024 $9,796,152 $48,448,605 $25,150,399
Subtract: Prime
transaction 3,783,988 - 3,783,988 5,638,218
On the Avenue
transaction - - 6,099,372 -
Toy transaction 9,342,631 - 9,342,631 -
450 West 33rd
Street
transaction 6,529,699 - 6,529,699 -
Net income, as
adjusted $12,028,706 $9,796,152 $22,692,915 $19,512,181
Diluted earnings per
common share, GAAP
basis $1.75 $0.57 $2.74 $1.46
Diluted earnings per
common share, as
adjusted $0.67 $0.57 $1.29 $1.14
Diluted weighted
average shares
outstanding 21,873,322 21,073,987 21,453,969 20,997,517
a.) Given the magnitude of the Prime, On the Avenue, Toy and 450 West 33rd
Street 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
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES - Continued
(Unaudited)
Quarter Ended
June 30, 2007
GAAP Stockholders' Equity $414,231,249
Add: 450 West 33rd Street
transaction - deferred revenue 77,123,133
Subtract: 450 West 33rd Street transaction -
deferred management fee 19,047,949
Economic Stockholders' Equity $472,306,433
Economic book value per share $23.40
GAAP book value per share $20.52
Common shares outstanding 20,187,349
b.) Given the magnitude and the deferral structure of the 450 West 33rd
Street transaction, Arbor has elected to report economic book value per
share for the affected period to currently reflect the future impact of this
transaction on the company's financial condition. Management considers this
non-GAAP financial measure to be an effective indicator, for both management
and investors, of Arbor's financial performance. Arbor's management does not
advocate that investors consider this non-GAAP financial measure in
isolation from, or as a substitute for, financial information prepared in
accordance with GAAP.
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2007 2006
(Unaudited) (Audited)
Assets:
Cash and cash equivalents $9,946,584 $7,756,857
Restricted cash 198,550,129 84,772,062
Loans and investments, net 2,570,292,095 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 44,245,624 25,376,949
Deferred management fee 19,047,949 -
Other assets 79,225,939 63,062,065
Total assets $2,921,308,320 $2,204,345,211
Liabilities and Stockholders' Equity:
Repurchase agreements $693,219,964 $395,847,359
Collateralized debt obligations 1,140,869,000 1,091,529,000
Junior subordinated notes to subsidiary
trust issuing preferred securities 276,055,000 222,962,000
Notes payable 140,421,300 94,574,240
Due to related party 29,651,045 3,983,647
Due to borrowers 23,764,458 16,067,295
Deferred revenue 77,123,133 -
Other liabilities 48,374,692 17,802,341
Total liabilities 2,429,478,592 1,842,765,882
Minority interest 77,598,479 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;
20,466,749 shares issued,
20,187,349 shares outstanding at
June 30, 2007 and 17,388,770
shares issued, 17,109,370 shares
outstanding at December 31, 2006 204,667 173,888
Additional paid-in capital 349,726,186 273,037,744
Treasury stock, at cost - 279,400 shares (7,023,361) (7,023,361)
Retained earnings 54,997,135 27,732,489
Accumulated other comprehensive income 16,288,861 2,152,556
Total stockholders' equity 414,231,249 296,111,077
Total liabilities and stockholders'
equity $2,921,308,320 $2,204,345,211
Arbor Realty Trust, Inc.
Summary of Equity and Profit Interests
(all dollar amounts in thousands)
Unaudited
Initial ART Current
Investment Investment Cash Equity
Name Amount Date Investment Profit %
80 Evergreen $384 3Q03 $201 12.50%
930 Flushing 1,126 3Q03 375 12.50%
Prime Portfolio 2,100 4Q03 - 7.50%
Prime Portfolio - 16.67%
450 W. 33rd St 1,500 4Q03 1,137 0.58% (1)
823 Park Avenue - 3Q04 - 20.00%
York Avenue 540 3Q04 - 8.70%
Toy Building 10,000 2Q05 8,398 20.00%
Homewood Mtn Resort - 2Q06 - 25.60%
Richland Terrace
Apartments - 3Q06 - 25.00%
Ashley Court Apartments - 3Q06 - 25.00%
Nottingham Village - 1Q07 - 25.00%
Extended Stay Hotel
Portfolio - 2Q07 115,000 16.17%
Lake in the Woods - 2Q07 1,500 50.00%
Approximate
Square Property
Name Footage Type Location
80 Evergreen 77,680 Warehouse Brooklyn, NY
930 Flushing 304,080 Warehouse Brooklyn, NY
Prime Portfolio 6,700,000 Retail Outlets Multi-state
Prime Portfolio 6,700,000 Retail Outlets Multi-state
450 W. 33rd St 1,746,734 Office New York City
823 Park Avenue 52,374 Conversion New York City
York Avenue 45,200 Conversion New York City
Toy Building 320,000 Office New York City
Homewood Mtn Resort 1,224 (3) Land Homewood, CA
Richland Terrace
Apartments 342,152 Multi Family Columbia, SC
Ashley Court Apartments 177,892 Multi Family Fort Wayne, IN
Nottingham Village 285,900 Multi Family Indianapolis, IN
Extended Stay Hotel
Portfolio 684 (4) Hotel Multistate
Lake in the Woods 967,648 Multi Family Ypsilanti, MI
Current
Debt Balance
Name on Property Comments
80 Evergreen $4,800
930 Flushing 25,000 Property refinanced
July 2005
Prime Portfolio 1,275,678 Properties refinanced
Prime Portfolio - All equity returned
to investors
450 W. 33rd St 517,000
823 Park Avenue 120,500 (2) Condo conversion -
investment held in
Taxable REIT
Subsidiary ("TRS")
York Avenue 32,000 Property refinanced
Dec 2005
Toy Building - TRS Asset
Homewood Mtn Resort 78,253 Profits interest
held in TRS
Richland Terrace Apartments 7,460
Ashley Court Apartments 5,452
Nottingham Village 6,626
Extended Stay Hotel
Portfolio 7,400,000 Preferred return of 12%
Lake in the Woods 43,500
(1) Represents approximately 29% of the 2% retained interest in the
property. In addition, Arbor has approximately 29% of a 50% interest in the
property's air rights.
(2) Debt balance represents anticipated debt financing required to complete
condominium conversion project.
(3) Amount represents approximate acreage of property.
(4) Amount represents approximately 684 properties in 44 states and Canada
with approximately 76,000 rooms
SOURCE Arbor Realty Trust, Inc.
-0- 08/03/2007
/CONTACT: Paul Elenio, Chief Financial Officer of Arbor Realty Trust,
Inc., +1-516-832-7422, pelenio@arbor.com; or Investors, Stephanie Carrington of
The Ruth Group, +1-646-536-7017, scarrington@theruthgroup.com; or Media, Bonnie
Habyan, SVP of Marketing, +1-516-229-6615, bhabyan@arbor.com /
/Web site: http://www.arborrealtytrust.com /
(ABR)