Arbor Realty Trust Reports Third Quarter 2007 Results
Third Quarter Highlights:
- Net income increased 91% to $20.7 million from 3Q06
- Diluted earnings per share of $1.02, an increase of 62% from 3Q06
- New loans and investments of $265 million
- Received $10.1 million cash distribution and recorded $7.6 million
of income, before minority interest, from equity interest in Prime
portfolio, marking a positive impact from equity kickers in 11 of
the 14 quarters since transitioning to a public company
- Declared quarterly dividend of $0.62 per share
- Amended financing facility increasing committed amount by $50
million
Uniondale, NY, November 9, 2007 -- 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 September 30, 2007. Arbor
reported net income for the quarter of $20.7 million, or $1.02 per diluted
common share, compared to net income for the quarter ended September 30, 2006 of
$10.9 million, or $0.63 per diluted common share. Excluding $6.4 million of net
income from the Prime transaction, net income for the quarter ended September
30, 2007 was $14.3 million, or $0.70 per diluted common share.(1)
- -------------------
(1) See attached supplemental schedule of non-GAAP financial measures on pages 7
& 8.
Net income for the nine months ended September 30, 2007 was $69.2 million, or
$3.73 per diluted common share, compared to net income for the nine months ended
September 30, 2006 of $36.0 million, or $2.09 per diluted share. Excluding $32.2
million of net income from the 450 West 33rd Street, Toy building, Prime and On
the Avenue transactions for the nine months ended September 30, 2007 and $5.6
million of net income from the Prime transaction for the nine months ended
September 30, 2006, net income for the nine months ended September 30, 2007 was
$37.0 million, or $2.00 per diluted common share, compared to net income for the
nine months ended September 30, 2006 of $30.4 million, or $1.76 per diluted
share.(1)
"We are very pleased with our quarterly results and with the progress we have
made in growing and enhancing our franchise," said Ivan Kaufman, Chairman and
Chief Executive Officer. "With earnings per share of $1.02 this quarter, we are
well on our way to another record year as we have already delivered $3.73 in
earnings per share for the first nine months of 2007. The third quarter also
included the monetization of one of our equity kickers and the addition of
another kicker to our portfolio. Equity kickers continue to provide us with
substantial liquidity and have significantly increased our earnings and capital
base. We also continue to improve our capital structure, maximizing the return
on our investments."
The results for the third quarter included a $10.1 million distribution from
Prime Outlets Acquisition Company LLC ("Prime"), an entity in which Arbor owns
an equity and profits interest. The distribution was a result of proceeds from
the sale of certain assets in Prime's portfolio. Of the distribution received by
Arbor, $7.0 million was recorded as interest income, representing the portion of
the distribution received from the profits interest, and $3.1 million of the
distribution was recorded as income from equity affiliates. The Company recorded
an incentive management fee expense of approximately $2.5 million for the
quarter ended September 30, 2007 related to this transaction.
At September 30, 2007, the net balance in the loan and investment portfolio was
$2.6 billion. The average balance of the loan and investment portfolio during
the third quarter was also $2.6 billion and the average yield on these assets
for the quarter was 9.27%, compared to $2.4 billion and 9.55% for the second
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
6.84%, compared to $2.3 billion and 6.82% for the second quarter of 2007.
For the third quarter 2007, Arbor's manager, Arbor Commercial Mortgage, LLC,
earned $4.8 million of incentive compensation. Arbor Commercial Mortgage intends
to exercise its option to receive 25% of the incentive compensation in shares of
Arbor Realty Trust's common stock.
- -------------------
(1) See attached supplemental schedule of non-GAAP financial measures on pages 7
& 8.
Arbor Realty Trust Reports Third Quarter 2007 Results
November 9, 2007
Page 3
Financing Activity
- ------------------
During the quarter, the Company amended one of its financing facilities. The
amendment included increasing the committed amount outstanding to $100 million
from $50 million, adding the ability to finance junior participation interests
and a reduction in borrowing costs of approximately 50 to 75 basis points
depending on the type of asset financed. The term of the facility was extended
to September 2008.
As of September 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.
Portfolio Activity
- ------------------
During the quarter, Arbor originated 20 new loans and investments totaling $265
million. Of the new loans and investments, 14 were bridge loans totaling $182
million, five were mezzanine loans totaling $73 million, and one was an
investment totaling $10 million.
During the quarter, nine loans paid off with an outstanding balance of
approximately $132 million, all of which was related to loans on properties that
were either sold or refinanced outside of Arbor.
At September 30, 2007, the loan and investment portfolio unpaid principal
balance was $2.6 billion with a weighted average current interest pay rate of
8.42%. 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 6.61%, excluding financing and interest rate swap costs.
Arbor's loan portfolio at September 30, 2007 consisted of 31% fixed-rate and 69%
variable rate loans.
Dividend
- --------
As previously announced, the Board of Directors declared a dividend of $0.62 per
share for the quarter ended September 30, 2007, to be paid on November 26, 2007
to shareholders of record on November 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 $7.6 million of income before
minority interest from its equity and profits interest in the Prime transaction.
In addition, the Company originated one new investment with an equity
participation interest during the quarter.
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) 362-4829 for domestic callers and
(617) 597-5346 for international callers. The participant passcode for both is
10815570.
After the live webcast, the call will remain available on Arbor's Web site,
www.arborrealtytrust.com, through November 23, 2007. In addition, a telephonic
replay of the call will be available until November 16, 2007. The replay dial-in
number is (888) 286-8010 for domestic callers and (617) 801-6888 for
international callers. Please use passcode: 22547303.
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: Investors:
Arbor Realty Trust, Inc. Stephanie Carrington
Paul Elenio, Chief Financial Officer The Ruth Group
516-832-7422 646-536-7017
pelenio@arbor.com scarrington@theruthgroup.com
Media:
Bonnie Habyan, SVP of Marketing
516-229-6615
bhabyan@arbor.com
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2007 2006 2007 2006
------------- ------------- ------------- -------------
<s>
Revenue:
Interest income $ 70,471,815 $ 40,897,083 $ 211,732,742 $ 120,434,185
Income from swap derivative -- 696,960 -- 696,960
Other income 1,806 41,550 25,162 161,947
------------- ------------- ------------- -------------
Total revenue 70,473,621 41,635,593 211,757,904 121,293,092
------------- ------------- ------------- -------------
Expenses:
Interest expense 39,625,100 23,405,789 110,265,602 63,332,763
Employee compensation and benefits 1,989,437 1,120,596 5,309,896 3,430,004
Stock based compensation 365,391 427,609 2,039,327 1,793,062
Selling and administrative 1,365,124 1,118,724 3,669,612 3,037,501
Management fee - related party 5,686,538 2,327,012 21,205,285 8,530,712
------------- ------------- ------------- -------------
Total expenses 49,031,590 28,399,730 142,489,722 80,124,042
------------- ------------- ------------- -------------
Income before income from equity affiliates,
minority interest and provision for income taxes 21,442,031 13,235,863 69,268,182 41,169,050
Income from equity affiliates 3,139,809 -- 29,165,597 2,909,292
------------- ------------- ------------- -------------
Income before minority interest
and provision for income taxes 24,581,840 13,235,863 98,433,779 44,078,342
Income allocated to minority interest 3,841,671 2,379,607 14,160,005 7,921,687
------------- ------------- ------------- -------------
Income before provision for income taxes 20,740,169 10,856,256 84,273,774 36,156,655
============= ============= ============= =============
Provision for income taxes -- -- 15,085,000 150,000
Net income $ 20,740,169 $ 10,856,256 $ 69,188,774 $ 36,006,655
============= ============= ============= =============
Basic earnings per common share $ 1.02 $ 0.63 $ 3.73 $ 2.10
============= ============= ============= =============
Diluted earnings per common share $ 1.02 $ 0.63 $ 3.73 $ 2.09
============= ============= ============= =============
Dividends declared per common share $ 0.62 $ 0.57 $ 1.84 $ 1.99
============= ============= ============= =============
Weighted average number of shares
of common stock outstanding:
Basic 20,366,360 17,226,496 18,526,194 17,185,737
============= ============= ============= =============
Diluted 24,173,877 21,067,847 22,369,766 21,021,218
============= ============= ============= =============
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
2007 2006 2007 2006
------------- ------------- ------------- -------------
Total revenue, GAAP basis $ 70,473,621 $ 41,635,593 $ 211,757,904 $ 121,293,092
Subtract: Prime transaction 6,977,133 -- 11,143,801 6,274,041
On the Avenue transaction -- -- 15,997,843 --
450 West 33rd Street transaction -- -- 10,425,579 --
------------- ------------- ------------- -------------
Total revenue, as adjusted $ 63,496,488 $ 41,635,593 $ 174,190,681 $ 115,019,051
Net income, GAAP basis $ 20,740,169 $ 10,856,256 $ 69,188,774 $ 36,006,655
Subtract: Prime transaction 6,405,386 -- 10,189,375 5,638,218
============= ============= ============= =============
On the Avenue transaction -- -- 6,099,372 --
Toy transaction -- -- 9,342,631 --
450 West 33rd Street transaction -- -- 6,529,699 --
------------- ------------- ------------- -------------
Net income, as adjusted $ 14,334,783 $ 10,856,256 $ 37,027,697 $ 30,368,437
============= ============= ============= =============
Diluted earnings per common share, GAAP basis $ 1.02 $ 0.63 $ 3.73 $ 2.09
============= ============= ============= =============
Diluted earnings per common share, as adjusted $ 0.70 $ 0.63 $ 2.00 $ 1.76
============= ============= ============= =============
Diluted weighted average shares outstanding 24,173,877 21,067,847 22,369,766 21,021,218
============= ============= ============= =============
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 diluted 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)
September 30, 2007
------------------
GAAP Stockholders' Equity $ 413,077,142
Add: 450 West 33rd Street transaction -
deferred revenue 77,123,133
Subtract: 450 West 33rd Street transaction -
prepaid management fee 19,047,949
------------------
Economic Stockholders' Equity $ 471,152,326
==================
Economic book value per share $ 23.03
==================
GAAP book value per share $ 20.19
==================
Common shares outstanding 20,457,333
==================
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
September 30, December 31,
2007 2006
---------------- ----------------
(Unaudited) (Audited)
Assets:
Cash and cash equivalents $ 14,405,394 $ 7,756,857
Restricted cash 127,094,536 84,772,062
Loans and invesments, net 2,636,016,806 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 57,590,436 25,376,949
Prepaid management fee 19,047,949 --
Other assets 77,117,636 63,062,065
---------------- ----------------
Total assets $ 2,931,272,757 $ 2,204,345,211
================ ================
Liabilities and Stockholders' Equity:
Repurchase agreements $ 766,519,028 $ 395,847,359
Collateralized debt obligations 1,137,689,000 1,091,529,000
Junior subordinated notes to subsidiary
trust issuing preferred securities 276,055,000 222,962,000
Notes payable 110,805,840 94,574,240
Due to related party 5,109,672 3,983,647
Due to borrowers 29,973,915 16,067,295
Deferred revenue 77,123,133 --
Other liabilities 38,557,141 17,802,341
---------------- ----------------
Total liabilities 2,441,832,729 1,842,765,882
---------------- ----------------
Minority interest 76,362,886 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;
20,736,733 shares issued, 20,457,333 shares outstanding at
September 30, 2007 and 17,388,770 shares issued, 17,109,370
shares outstanding at December 31, 2006 207,367 173,888
Additional paid-in capital 359,793,271 273,037,744
Treasury stock, at cost - 279,400 shares (7,023,361) (7,023,361)
Retained earnings 63,050,138 27,732,489
Accumulated other comprehensive (loss) income (2,988,034) 2,152,556
---------------- ----------------
Total stockholders'equity 413,077,142 296,111,077
---------------- ----------------
Total liabilities and stockholders' equity $ 2,931,272,757 $ 2,204,345,211
================ ================
Arbor Realty Trust, Inc.
Summary of Equity and Profit Interests
(all dollar amounts in thousands)
Unaudited
Initial ART Current Approximate
Investment Investment Cash Equity Square
Name Amount Date Investment Profit % Footage
- -------------------- ----------- ---------- ----------- -------- ------------
80 Evergreen $ 384 3Q03 $ 201 12.50% 77,680
930 Flushing 1,126 3Q03 500 12.50% 304,080
Prime Portfolio 2,100 4Q03 -- 7.50% 6,700,000
Prime Portfolio -- 16.67% 6,700,000
450 W. 33rd St 1,500 4Q03 1,137 0.58% (1) 1,746,734
823 Park Avenue -- 3Q04 -- 20.00% 52,374
York Avenue 540 3Q04 -- 8.70% 45,200
Toy Building 10,000 2Q05 5,720 10.00% 320,000
Homewood Mtn Resort -- 2Q06 -- 25.60% 1,224 (3)
Richland Terrace Apartments -- 3Q06 -- 25.00% 342,152
Ashley Court Apartments -- 3Q06 -- 25.00% 177,892
Nottingham Village -- 1Q07 -- 25.00% 285,900
Extended Stay Hotel Portfolio -- 2Q07 115,000 16.17% 684 (4)
Lake in the Woods -- 2Q07 1,500 50.00% 967,648
Alpine Meadows 13,220 3Q07 13,220 39.00% 2,163 (3)
St. John's Development -- 4Q07 -- 50.00% 23 (3)
(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.
Arbor
Realty Trust, Inc.
Summary of Equity and Profit Interests
(all dollar amounts in thousands)
Unaudited
Current
Property Debt Balance
Name Type Location on Property Comments
- -------------------- ----------- ---------- ------------ ----------------------------
80 Evergreen Warehouse Brooklyn, NY $ 4,800
930 Flushing Warehouse Brooklyn, NY 25,000 Property refinanced July 2005
Prime Portfolio Retail Outlets Multi-state 1,222,300 Properties refinanced
Prime Portfolio Retail Outlets Multi-state -- All equity returned to investors
450 W. 33rd St Office New York City 517,000
823 Park Avenue Conversion New York City 120,500 (2) Condo conversion - investment
held in Taxable REIT Subsidiary
("TRS")
York Avenue Conversion New York City 32,000 Property refinanced Dec 2005
Toy Building Conversion New York City 343,400 (2) Condo conversion - investment
held in Taxable REIT Subsidiary
("TRS")
Homewood Mtn Resort Land Homewood, CA 100,986 Profits interest held in TRS
Richland Terrace Apartments Multi Family Columbia, SC 7,460
Ashley Court Apartments Multi Family Fort Wayne, IN 5,452
Nottingham Village Multi Family Indianapolis, IN 6,626
Extended Stay Hotel Portfolio Hotel Multistate 7,400,000 Preferred return of 12% on equity
Lake in the Woods Multi Family Ypsilanti, MI 43,500
Alpine Meadows Land Alpine Meadows, CA 30,500 Preferred return of 18% on equity
St. John's Development Land Jacksonville, FL 25,000
(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.