[Arbor Realty Trust, Inc.]
Contacts: Investors:
Arbor Realty Trust, Inc. Stephanie Carrington
Paul Elenio, Chief Financial Officer The Ruth Group
516-506-4422 646-536-7017
pelenio@arbor.com scarrington@theruthgroup.com
Media:
Bonnie Habyan, SVP of Marketing
516-506-4615
bhabyan@arbor.com
Arbor Realty Trust Reports First Quarter 2008 Results
First Quarter Highlights:
- Net income of $12.7 million, or $0.62 per diluted common share
- Adjusted book value per share of $23.61 and GAAP book value per
share of $17.85 (1)
- Adjusted net income increased $2.0 million, or 19% from 1Q07 (1)
- Declared quarterly dividend of $0.62 per share
- Recorded $3.0 million in loan loss reserves
Uniondale, NY, May 2, 2008 -- 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, 2008. Arbor reported
net income for the quarter of $12.7 million, or $0.62 per diluted common share,
compared to net income for the quarter ended March 31, 2007 of $16.8 million, or
$0.97 per diluted common share. Excluding $6.1 million of net income from the On
the Avenue transaction, net income for the quarter ended March 31, 2007 was
$10.7 million, or $0.62 per diluted common share.(1)
The net balance in the loan and investment portfolio was $2.6 billion at March
31, 2008 and December 31, 2007. The average balance of the loan and investment
portfolio during the first quarter of 2008 was also $2.6 billion and the average
yield on these assets for the quarter was 8.35%, compared to $2.7 billion and
8.95% for the fourth quarter of 2007.
- -----------
(1.) See attached supplemental schedule of non-GAAP financial measures on page 7
& 8.
Arbor Realty Trust Reports First Quarter 2008 Results
May 2, 2008
Page 2
At March 31, 2008, the balance of debt financing on the loan and investment
portfolio was $2.2 billion, a decrease of 3% from December 31, 2007. The average
balance of debt financing on the loan and investment portfolio during the first
quarter of 2008 was $2.2 billion and the average cost of these borrowings was
5.64%, compared to $2.3 billion and 6.51% for the fourth quarter of 2007.
For the first quarter 2008, Arbor's manager, Arbor Commercial Mortgage, LLC,
earned $1.7 million of incentive compensation. Arbor Commercial Mortgage, LLC
intends to exercise its option to receive 50% of the incentive compensation in
shares of Arbor Realty Trust's common stock.
Financing Activity
As previously disclosed, a $100 million committed financing facility, with
approximately $23.3 million outstanding at December 31, 2007, matured in
December 2007 and was scheduled for repayment by June 2008. During the first
quarter, this facility was repaid in full.
During the quarter, the Company was notified that no further advances could be
taken under a $100 million repurchase agreement with another financial
institution. The facility matures in September 2008 and under the terms of the
repurchase agreement, the facility will be paid in its entirety by December
2008. At March 31, 2008, the outstanding balance under this facility was $44.5
million.
As of March 31, 2008, Arbor's financing facilities for its loan and investment
portfolio totaled approximately $2.5 billion and borrowings outstanding under
such facilities were $2.2 billion.
Portfolio Activity
During the quarter, Arbor originated six new loans and investments totaling $122
million. Of the new loans and investments, three were bridge loans totaling $72
million, two were mezzanine loans totaling $15 million, and one was a junior
participating interest totaling $35 million.
During the quarter, eight loans paid off on properties that were either sold or
refinanced outside of Arbor with an outstanding balance of $165 million and five
loans were either refinanced or modified with Arbor during the quarter totaling
$119 million, of which three loans totaling $74 million were scheduled to repay
during the quarter.
Arbor Realty Trust Reports First Quarter 2008 Results
May 2, 2008
Page 3
In addition, six loans totaling approximately $155 million were extended during
the quarter in accordance with the extension options of the corresponding loan
agreements.
At March 31, 2008, the loan and investment portfolio unpaid principal balance
was $2.6 billion with a weighted average current interest pay rate of 7.56%. At
the same date, advances on financing facilities pertaining to the loan and
investment portfolio totaled $2.2 billion, with a weighted average interest rate
of 4.81% excluding financing and interest rate swap costs.
Arbor's loan portfolio at March 31, 2008 consisted of 33% fixed-rate and 67%
variable rate loans.
As previously disclosed, in the first quarter of 2008 the Lake in the Woods
property was sold and the Company provided the new sponsor with a $45.0 million
first mortgage with a maturity of February 2013. This loan represents a
modification to the previous $45.0 million of loans and investments on the
property which the Company recorded a $1.0 million loan loss reserve against in
2007. The new sponsor funded $3.9 million of equity including a $2.6 million
interest and capital expenditure reserve. As a result of this transaction, the
Company charged-off $1.0 million against the allowance for loan losses and
incurred an additional loss of $0.2 million, which was recorded in selling and
administrative expense during the first quarter of 2008.
During the first quarter, the Company recorded $3.0 million in loan loss
reserves, representing new reserves related to three loans with an aggregate
outstanding principal balance of approximately $70.2 million. The loan loss
reserves were the result of the Company's regular quarterly risk rating review
process, which is based on several factors including current market conditions,
values and the operating status of these properties. At March 31, 2008, the
Company's total loan loss reserves were $4.5 million relating to four loans with
an aggregate outstanding principal balance of approximately $84.1 million.
As of March 31, 2008, one of the four loans reserved for, with an outstanding
principal balance of approximately $5.0 million, had been classified as
non-performing. Income recognition has been suspended and will resume when the
loan becomes contractually current and performance has recommenced. In April
2008, the Company took control of this asset, via a UCC foreclosure sale of the
entity that owned the equity interest in the property securing this loan.
Recent Developments
Arbor Realty Trust Reports First Quarter 2008 Results
May 2, 2008
Page 4
The Company has a $70.4 million bridge loan on a land development project in New
York City located at 303 East 51st Street. This loan has an initial maturity
date of May 2008 with one six month extension option and an interest rate of
Libor plus 4.25% with a Libor floor of 5.32%. On March 15, 2008, there was a
tragic construction accident related to the development of this project and a
stop work order has been issued by the city of New York for an undeterminable
amount of time. As a result, effective April 1, 2008, the Company will not
record interest income on this loan until it is received. The property did not
sustain significant damage. The principal amount of this loan is not deemed to
be impaired at this time and no loan loss reserve has been recorded to date.
As disclosed in an amended 13D filing on April 24, 2008, the Company reached an
agreement with CBRE Realty Finance, Inc. not to initiate a proxy fight and
withdraw the Company's slate of director nominees. CBRE has agreed to allow
Arbor to participate in a sale process, if there is one, within the next twelve
months.
Dividend
As previously announced, the Board of Directors declared a dividend of $0.62 per
share for the quarter ended March 31, 2008, to be paid on May 27, 2008 to
shareholders of record on May 15, 2008.
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.
During the quarter, the Company received a distribution of $0.3 million from its
25% profits interest in Richland Terrace Apartments, which was recorded as
interest income. The distribution was the result of a refinance of the
outstanding indebtedness of the property. In addition, as a result of the sale
and modification of the Lake in the Woods loans, the Company no longer retains a
profits interest in the property.
Earnings Conference Call
Management will host a conference call today at 8:30 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) 770-7051 for domestic callers and
(617) 213-8064 for international callers. The participant passcode for both is
47138725.
Arbor Realty Trust Reports First Quarter 2008 Results
May 2, 2008
Page 5
After the live webcast, the call will remain available on Arbor's Web site,
www.arborrealtytrust.com through May 16, 2008. In addition, a telephonic replay
of the call will be available until May 9, 2008. The replay dial-in number is
(888) 286-8010 for domestic callers and (617) 801-6888. Please use passcode:
86855412.
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, 2007 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 Reports First Quarter 2008 Results
May 2, 2008
Page 6
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
Quarter Ended
March 31,
-------------------------
2008 2007
----------- -----------
(Unaudited) (Unaudited)
Revenue:
Interest income $55,416,330 $66,460,653
Other income 20,693 6,170
----------- -----------
Total revenue 55,437,023 66,466,823
----------- -----------
Expenses:
Interest expense 31,304,099 32,112,519
Employee compensation and benefits 1,977,343 1,730,355
Selling and administrative 1,538,066 1,221,372
Provision for loan losses 3,000,000 --
Management fee - related party 2,579,433 4,873,682
----------- -----------
Total expenses 40,398,941 39,937,928
----------- -----------
Income before income from equity affiliates,
minority interest and provision for income taxes 15,038,082 26,528,895
Income from equity affiliates -- --
----------- -----------
Income before minority interest
and provision for income taxes 15,038,082 26,528,895
Income allocated to minority interest 2,333,290 3,680,314
----------- -----------
Income before provision for income taxes 12,704,792 22,848,581
Provision for income taxes -- 6,085,000
----------- -----------
Net income $12,704,792 $16,763,581
=========== ===========
Basic earnings per common share $ 0.62 $ 0.98
=========== ===========
Diluted earnings per common share $ 0.62 $ 0.97
=========== ===========
Dividends declared per common share $ 0.62 $ 0.60
=========== ===========
Weighted average number of shares of common stock outstanding:
Basic 20,571,780 17,183,318
=========== ===========
Diluted 24,403,381 21,029,957
=========== ===========
Arbor Realty Trust Reports First Quarter 2008 Results
May 2, 2008
Page 7
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Quarter Ended
March 31,
--------------------------
2008 2007
----------- -----------
Total revenue, GAAP basis $55,437,023 $66,466,823
Subtract: On the Avenue transaction -- 15,997,843
----------- -----------
Total revenue, as adjusted $55,437,023 $50,468,980
=========== ===========
Net income, GAAP basis $12,704,792 $16,763,581
Subtract: On the Avenue transaction -- 6,099,372
----------- -----------
Net income, as adjusted $12,704,792 $10,664,209
=========== ===========
Diluted earnings per common share, GAAP basis $ 0.62 $ 0.97
=========== ===========
Diluted earnings per common share, as adjusted $ 0.62 $ 0.62
=========== ===========
Diluted weighted average shares outstanding 24,403,381 21,029,957
=========== ===========
a.) Given the magnitude of the 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 Reports First Quarter 2008 Results
May 2, 2008
Page 8
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES - Continued
(Unaudited)
March 31, 2008
------------
GAAP Stockholders' Equity $367,879,894
Add: 450 West 33rd Street transaction - deferred revenue 77,123,133
Unrealized loss on derivative instruments 60,541,776
Subtract: 450 West 33rd Street transaction - prepaid management fee 19,047,949
------------
Adjusted Stockholders' Equity $486,496,854
============
Adjusted book value per share $ 23.61
============
GAAP book value per share $ 17.85
============
Common shares outstanding 20,606,107
============
b.) Given the magnitude and the deferral structure of the 450 West 33rd Street
transaction combined with the change in the fair value of certain derivative
instruments, Arbor has elected to report adjusted book value per share for the
affected period to currently reflect the future impact of the 450 West 33rd
Street transaction on the company's financial condition as well as the
evaluation of Arbor without the effects of unrealized losses from certain of the
Company's derivative instruments. 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 Reports First Quarter 2008 Results
May 2, 2008
Page 9
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2008 2007
--------------- ---------------
(Unaudited) (Audited)
Assets:
Cash and cash equivalents $ 12,961,360 $ 22,219,541
Restricted cash 76,570,283 139,136,105
Loans and investments, net 2,577,429,004 2,592,093,930
Available-for-sale securities, at fair value 11,846,043 15,696,743
Investment in equity affiliates 29,465,190 29,590,190
Prepaid management fee - related party 19,047,949 19,047,949
Other assets 94,970,403 83,709,076
--------------- ---------------
Total assets $ 2,822,290,232 $ 2,901,493,534
=============== ===============
Liabilities and Stockholders' Equity:
Repurchase agreements $ 196,995,819 $ 244,937,929
Collateralized debt obligations 1,132,829,000 1,151,009,000
Junior subordinated notes to subsidiary trust issuing
preferred
securities 276,055,000 276,055,000
Notes payable 599,303,222 596,160,338
Due to related party 1,964,256 2,429,109
Due to borrowers 11,869,828 18,265,906
Deferred revenue 77,123,133 77,123,133
Other liabilities 90,740,091 67,395,776
--------------- ---------------
Total liabilities 2,386,880,349 2,433,376,191
--------------- ---------------
Minority interest 67,529,989 72,854,258
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;
20,885,507 shares issued, 20,606,107 shares outstanding at March 31, 2008 and
20,798,735 shares issued, 20,519,335 shares
outstanding at December 31, 2007 208,855 207,987
Additional paid-in capital 372,670,690 365,376,136
Treasury stock, at cost - 279,400 shares (7,023,361) (7,023,361)
Retained earnings 65,591,339 65,665,951
Accumulated other comprehensive loss (63,605,390) (29,001,389)
--------------- ---------------
Total stockholders'equity 367,879,894 395,263,085
--------------- ---------------
Total liabilities and stockholders' equity $ 2,822,290,232 $ 2,901,493,534
=============== ===============
Arbor Realty Trust Reports First Quarter 2008 Results
May 2, 2008
Page 10
Arbor Realty Trust, Inc.
Summary of Equity and Profit Interests
(all dollar amounts in thousands)
Unaudited
Initial ART
Invest- Invest- Current Approximate
ment ment Cash Equity Square
Name Amount Date Investment Profit % Footage
80 Evergreen $384 3Q03 $201 12.50% 77,680
930 Flushing 1,126 3Q03 375 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)
Alpine Meadows 13,220 3Q07 13,220 39.00% 2,163 (3)
St. John's
Development 500 4Q07 500 50.00% 23 (3)
Current
Property Debt Balance
Name Type Location on Property Comments
80 Evergreen Warehouse Brooklyn, NY $4,800
930 Flushing Warehouse Brooklyn, NY 24,851 Property
refinanced
July 2005
Prime Portfolio Retail Outlets Multi-state 1,200,700 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 59,322 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 Profits
Resort Land Homewood, CA 101,086 interest
held in TRS
Richland
Terrace
Apartments Multi Family Columbia, SC 9,140
Ashley Court
Apartments Multi Family Fort Wayne, IN 5,452
Nottingham
Village Multi Family Indianapolis, IN 6,626
Extended Stay Preferred
Hotel Portfolio Hotel Multistate 7,400,000 return of
12% on
equity
Alpine Meadows Land Alpine Meadows, Preferred
CA 30,500 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.