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, N.Y., Nov. 9 /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 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)
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.
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. EST. 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
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 investments, 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)
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 Multi-state 1,222,300 Properties
Outlets refinanced
Prime Portfolio Retail Multi-state - All equity
Outlets 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, 30,500 Preferred
CA return of 18%
on equity
St. John's
Development Land Jacksonville, FL 25,000
SOURCE Arbor Realty Trust, Inc.
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, for Arbor
Realty Trust; or Media, Bonnie Habyan, SVP of Marketing of Arbor Realty Trust,
+1-516-229-6615, bhabyan@arbor.com/
Web site: http://www.arborrealtytrust.com/
(ABR)
