Arbor Realty Trust Reports Second Quarter 2006 Results and Announces Authorization of Stock Repurchase Program
Highlights:
UNIONDALE, N.Y., Aug. 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 June 30, 2006. Arbor reported net income for the quarter of $9.8 million, or $0.57 per diluted common share, compared to net income for the quarter ended June 30, 2005 of $22.9 million, or $1.36 per diluted common share. Excluding $15.5 million of income from the Prime transaction, net income for the quarter ended June 30, 2005 was $7.4 million, or $0.44 per diluted common share.(1)
Net income for the six months ended June 30, 2006 was $25.2 million, or $1.46 per diluted common share, compared to net income for the six months ended June 30, 2005 of $32.6 million, or $1.94 per diluted share. Excluding $5.6 million and $15.5 million of income from the Prime transaction for the quarter ended March 31, 2006 and June 30, 2005, respectively, net income for the six months ended June 30, 2006 was $19.5 million, or $1.14 per diluted common share, compared to net income for the six months ended June 30, 2005 of $17.1 million, or $1.02 per diluted share.(1)
"Our strong second quarter earnings results reflect the solid growth of our portfolio and the quality of our new investments," said Ivan Kaufman, Chairman and Chief Executive Officer. "We continue to solidify our long-term funding sources so that we may achieve our focused goal of enhancing shareholder value by maximizing the return on our investments and securing the proper financing for the future growth of our portfolio."
Mr. Kaufman continued, "We remain focused on increasing the fixed-rate portion of our portfolio. During the quarter, we originated $92 million of longer-term fixed-rate product, which represented 30% of our quarterly volume. Fixed-rate loans represent 23% of our portfolio as of June 30, 2006. These loans generally include prepayment penalties and we believe that these assets provide a more stable return for our portfolio."
Total revenues for the quarter ended June 30, 2006 were $38.9 million, an increase of 76% from the same quarter of 2005 excluding $17.2 million in revenue generated from the Prime transaction in the quarter ended June 30, 2005.
At June 30, 2006, the net balance in the loan and investment portfolio was $1.5 billion, an increase of 11% from March 31, 2006. The average balance of the loan and investment portfolio during the second quarter was $1.4 billion and the average yield on these assets for the quarter was 10.60% compared to an average yield of 10.63% for the first quarter of 2006.
Interest expense for the second quarter 2006 was $21.6 million, an increase of 123% from the second quarter of 2005. This reflects increased average borrowings during the quarter, as well as the rise in interest rates. The average balance of debt financing on the loan and investment portfolio during the quarter was $1.2 billion and the average cost of these borrowings was 7.11%.
For the second quarter 2006, Arbor's manager, Arbor Commercial Mortgage, LLC, earned $1.4 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
Mr. Kaufman commented, "During the quarter we issued approximately $65 million of long-term junior subordinated notes through two private placements of trust preferred securities. We continue to view these securities as a lower cost alternative to raising capital. These securities provide us with longer-term funding sources, which further strengthens our balance sheet and helps support the growth of our portfolio."
As of June 30, 2006, Arbor's financing facilities for the loan and investment portfolio totaled approximately $1.5 billion and borrowings outstanding under such facilities were $1.2 billion.
Portfolio Activity
During the quarter, Arbor originated 17 new loans and investments totaling $311 million, the highest quarterly loan volume in Arbor's history. Of the new loans and investments, seven were bridge loans totaling $197 million, seven were mezzanine loans totaling $66 million, two were junior participating interests totaling $46 million, and one was a preferred equity investment totaling $2 million.
During the quarter, 11 loans paid off with an outstanding balance of approximately $135 million. These loans were on properties that were either sold or refinanced outside of Arbor.
At June 30, 2006, the loan and investment portfolio unpaid principal balance was $1.5 billion with a weighted average current interest pay rate of 9.63%. At the same date, advances on financing facilities pertaining to the loan and investment portfolio totaled $1.2 billion, with a weighted average interest rate of 6.97%.
The loan and investment portfolio continues to perform according to terms and there have been no defaults. Arbor continues to seek loans and 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.
Dividend
As previously announced, the Board of Directors declared a dividend of $0.57 per share for the quarter ended June 30, 2006, to be paid on August 21, 2006 to shareholders of record on August 7, 2006.
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. During the quarter, the Company originated one new investment with an equity participation interest. There were no new loans made during the quarter with IRR lookbacks. The Company did record income during the quarter on one of its IRR lookbacks, The Point Lakeview totaling approximately $335,000, net of taxes.
Stock Repurchase Program
Arbor today announced that its Board of Directors has authorized a stock repurchase plan that enables the Company to buy up to one million shares of its common stock. At management's discretion, shares may be acquired on the open market, through privately negotiated transactions or pursuant to a Rule 10b5-1 plan. A Rule 10b5-1 plan permits the Company to repurchase shares at times when it might otherwise be prevented from doing so. There is no guarantee as to the exact number of shares that will be repurchased by Arbor and the program may be terminated at any time.
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 http://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 http://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 800-261-3417 for domestic callers and 617-614-3673 for international callers. The participant passcode for both is 89885558.
After the live webcast, the call will remain available on Arbor's Web site, http://www.arborrealtytrust.com through August 18, 2006. In addition, a telephonic replay of the call will be available until August 18, 2006. The replay dial-in number is 888-286-8010 for domestic callers and 617-801-6888. Please use passcode: 67355994.
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 15 offices in the U.S. 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 the Arbor's Annual Report on Form 10-K for the year ended December 31, 2005 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.
(1) See attached supplemental schedule of non-GAAP financial measures.
CONSOLIDATED INCOME STATEMENTS (Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Revenue:
Interest income $38,848,431 $39,295,309 $79,537,102 $62,416,467
Other income 49,050 46 120,397 387,844
Total revenue 38,897,481 39,295,355 79,657,499 62,804,311
Expenses:
Interest expense 21,576,662 9,690,559 39,926,974 18,016,712
Employee compensation
and benefits 1,154,477 956,687 2,309,408 2,110,896
Stock based
compensation 943,038 372,828 1,365,453 464,855
Selling and
administrative 1,230,955 927,895 2,068,777 1,773,774
Management fee -
related party 2,050,927 7,360,947 6,203,700 8,991,265
Total expenses 26,956,059 19,308,916 51,874,312 31,357,502
Income before
minority interest
and income from
equity affiliates 11,941,422 19,986,439 27,783,187 31,446,809
Income from equity
affiliates - 8,006,443 2,909,292 8,453,440
Income before
minority interest 11,941,422 27,992,882 30,692,479 39,900,249
Income allocated to
minority interest 2,145,270 5,126,510 5,542,080 7,328,236
Net income $9,796,152 $22,866,372 $25,150,399 $32,572,013
Basic earnings per
common share $0.57 $1.36 $1.47 $1.95
Diluted earnings per
common share $0.57 $1.36 $1.46 $1.94
Dividends declared
per common share $0.72 $0.55 $1.42 $1.02
Weighted average
number of shares
of common stock
outstanding:
Basic 17,242,332 16,794,922 17,165,020 16,715,639
Diluted 21,073,987 20,593,148 20,997,517 20,551,148
ARBOR REALTY TRUST, INC. AND SUBSIDIARIES
SUPPLEMENTAL SCHEDULE OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
2006 2005 2006 2005
Total revenue, GAAP
basis $38,897,481 $39,295,355 $79,657,499 $62,804,311
Subtract: Prime
transaction - 17,239,447 6,274,041 17,239,447
Total revenue, as
adjusted(a) $38,897,481 $22,055,908 $73,383,458 $45,564,864
Net income, GAAP
basis $9,796,152 $22,866,372 $25,150,399 $32,572,013
Subtract: Prime
transaction - 15,454,536 5,638,218 15,454,536
Net income, as
adjusted $9,796,152 $7,411,836 $19,512,181 $17,117,477
Diluted earnings per
common share, GAAP
basis $0.57 $1.36 $1.46 $1.94
Diluted earnings per
common share, as
adjusted $0.57 $0.44 $1.14 $1.02
Diluted weighted
average shares
outstanding 21,073,987 20,593,148 20,997,517 20,551,148
(a) Given the magnitude of the Prime transaction, 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
June 30, December 31,
2006 2005
(Unaudited) (Audited)
Assets:
Cash and cash equivalents $6,386,148 $19,427,309
Restricted cash 55,252,101 35,496,276
Loans and investments, net 1,460,590,987 1,246,825,906
Related party loans, net 35,604,487 7,749,538
Available-for-sale securities, at
fair value 26,240,481 29,615,420
Investment in equity affiliates 20,467,920 18,094,242
Other assets 58,278,404 38,866,666
Total assets $1,662,820,528 $1,396,075,357
Liabilities and Stockholders' Equity:
Repurchase agreements $269,895,547 $413,624,385
Collateralized debt obligations 650,389,000 299,319,000
Junior subordinated notes to
subsidiary trust issuing preferred
securities 222,962,000 155,948,000
Notes payable 124,946,835 115,400,377
Notes payable - related party - 30,000,000
Due to related party 1,684,852 1,777,412
Due to borrowers 13,441,750 10,691,355
Other liabilities 13,581,302 18,014,755
Total liabilities 1,296,901,286 1,044,775,284
Minority interest 65,754,671 63,691,556
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;
17,267,902 and 17,051,391 shares
issued and outstanding at June 30,
2006 and December 31, 2005,
respectively 172,679 170,514
Additional paid-in capital 267,507,331 264,691,931
Retained earnings 22,281,046 21,452,789
Accumulated other comprehensive income 10,165,754 1,255,522
Total stockholders' equity 300,164,571 287,608,517
Total liabilities and stockholders'
equity $1,662,820,528 $1,396,075,357
Arbor Realty Trust, Inc.
Internal Rate of Return ("IRR") Lookbacks
(all dollar amounts in thousands)
Unaudited
Loan
Origination Commitment
Loan Name Date Amount Index
135 Greenwich St. 1Q05 11,815 LIBOR + 5.00%
LIBOR + 5.00%
LIBOR + 5.00%
Waipouli Beach Resort 1Q05 14,300 LIBOR + 5.00%
Total $26,115
Pay Rate @ IRR
Loan Name 6/30/06 Rate
135 Greenwich St. 10.13% 12.00% Year 1
13.00% Year 2
15.00% Year 3
Waipouli Beach Resort 10.13% 12.50%
Total 10.13% 12.27%
These loans contain 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 Profit %
80 Evergreen $384 3Q03 $201 12.50%
930 Flushing 1,126 3Q03 - 12.50%
Prime Portfolio 2,100 4Q03 - 7.50%
Prime Portfolio - 16.67%
450 W. 33rd St 1,500 4Q03 2,711 28.00%
823 Park Avenue - 3Q04 - 20.00%
York Avenue 540 3Q04 - 8.70%
Toy Building 10,000 2Q05 11,507 20.00%
On The Ave 2,000 2Q05 2,000 33.33%
Homewood Mtn Resort - 2Q06 - 25.60%
Approximate Current
Square Property Debt Balance
Name Footage Type Location on Property Comments
80 Evergreen 77,680 Warehouse Brooklyn, $4,664
NY
Property
930 Flushing 304,080 Warehouse Brooklyn, 25,000 refinanced
NY July 2005
Property
Prime Portfolio 6,700,000 Retail Multi- 1,180,600 refinanced
Outlets state June 2005
All equity
returned
Prime Portfolio 6,700,000 Retail Multi- to
Outlets state investors
Preferred
450 W. 33rd St 1,746,734 Office New York return of
City 350,000 12.5%
823 Park Avenue 50,000 Conversion New York 96,411 * Condo
City conversion
- investment
held in
Taxable
REIT
Subsidiary
("TRS")
Property
York Avenue 45,200 Conversion New York 32,000 refinanced
City Dec 2005
Condo
conversion
Toy Building 958,000 Conversion New York 640,000 - TRS
City Asset
Condo/hotel
conversion
On The Ave 170,000 Hotel New York 64,304 - TRS
City Asset
Profits
interest
Homewood Mtn ** 769 Commercial Homewood, held in
Resort CA 60,000 TRS
* - 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, Inc.
Contact:
Arbor Realty Trust, Inc.
Investor Relations
516-506-4200
InvestorRelations@arbor.com
