NEWCASTLE INVESTMENT CORP.
Contact: FOR IMMEDIATE RELEASE
Lilly H. Donohue
Director of Investor Relations
212-798-6118
Newcastle Announces Third Quarter Results
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Highlights
- - Issued 4.6 million shares of common stock at $20.35 per share in July
2003, raising net proceeds of approximately $89 million.
- - FFO of $13.9 million, or $0.51 per diluted common share, for the third
quarter 2003 as compared to $12.6 million, or $0.53 per diluted common
share, for the second quarter 2003.
- - Income available for common stockholders of $13.2 million, or $0.48 per
diluted common share, for the third quarter 2003, as compared to $11.9
million, or $0.50 per diluted common share, for the second quarter 2003.
- - FFO return on average invested common equity was 15.7% for the three
months ended September 30, 2003.
- - Third quarter results included approximately $58 million invested in cash.
- - Declared quarterly dividend of $0.50 per share of common stock for the
third quarter 2003.
- - Issued $460 million face amount of non-recourse debt through a
collateralized bond obligation in September 2003.
New York, NY. October 29, 2003 - Newcastle Investment Corp. (NYSE: NCT)
reported that for the quarter ended September 30, 2003, Funds from Operations
("FFO") were $13.9 million. We generated a FFO return on average invested
common equity of 15.7% for the third quarter 2003 and 16.2% for the nine months
ended September 30, 2003. FFO represents net income to common stockholders,
computed in accordance with GAAP, before depreciation.
For the three months ended September 30, 2003, income available for common
stockholders was $13.2 million or $0.48 per diluted common share. For the
quarter ended September 30, 2003, Newcastle declared a dividend of $0.50 per
share of common stock.
Our GAAP common equity book value was $393.5 million at September 30, 2003 and
increased from $310.8 million at June 30, 2003, primarily the result of the
issuance of 4.6 million shares of common stock in July 2003. Total assets of
$2.8 billion at September 30, 2003 increased from $2.3 billion at June 30, 2003
principally from the purchase of real estate securities.
For a reconciliation and discussion of GAAP net income to FFO and GAAP book
equity to invested common equity, please refer to the tables following the
presentation of GAAP results.
Selected Financial Data
(in thousands)
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2003
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Operating Data (Unaudited):
Funds from operations $ 13,948 $ 38,201
Income available for common stockholders $ 13,183 $ 35,976
As of
September 30, 2003 As of
Balance Sheet Data: (Unaudited) December 31, 2002
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Real estate securities $ 2,117,278 $ 1,069,892
Total assets $ 2,844,923 $ 1,572,567
CBO bond obligations $ 1,792,503 $ 868,497
Common stockholders' equity $ 393,519 $ 284,241
Preferred stock $ 62,500 -
Supplemental Real Estate Securities Data as of
September 30, 2003 (Unaudited):
Weighted average asset yield 6.60%
Weighted average liability cost 4.64%
Weighted average net spread 1.96%
Weighted average credit rating BBB-
Weighted average asset credit spread 2.89%
Percentage investment grade 78%
Number of securities 270
Capital Markets Activity
In July 2003, Newcastle issued 4.6 million shares of common stock raising net
proceeds of approximately $89 million. The Company will use these proceeds to
acquire real estate debt securities and other real estate related investments.
Wesley R. Edens, Chairman and Chief Executive Officer, commented, "We had a
solid quarter despite having cash on our balance sheet from our capital raise
in July. We are well on our way to investing this cash by year end and the
accretive effect to earnings should be fully realized in the first quarter of
2004."
In addition, Newcastle filed on October 9, 2003 a Form S-3 shelf registration
statement with the Securities and Exchange Commission. The shelf registration
allows the Company to issue various types of securities, such as common stock,
preferred stock, depositary shares, debt securities and warrants, from time to
time, up to an aggregate of $750 million. Such issuances would be subject to
market conditions and Newcastle's capital needs.
In September 2003, Newcastle announced a $460 million face amount issuance of
non-recourse debt to finance its fourth real estate securities portfolio. The
financing included structural enhancements that enabled Newcastle to more
efficiently access the capital markets and reduce our funding costs.
Real Estate Securities Investment Activity
During the third quarter 2003, Newcastle purchased or committed to purchase
$350.0 million face amount of real estate securities. We also sold $58.1
million face amount of real estate securities for a net gain of $2.9 million
during the third quarter 2003. Kenneth Riis, Newcastle's President, added, "As
spreads for REIT debt securities have tightened, we have sold certain of these
securities and reinvested in similar rated commercial mortgage backed
securities at wider spreads."
As of September 30, 2003, our aggregate $2.1 billion real estate securities
portfolio was well diversified with 270 securities of which 79% were fixed
rate securities with a weighted average life of 7.6 years and the remaining
21% represented floating rate securities with a weighted average life of 2.5
years. The portfolio consisted of 65% commercial mortgage backed securities,
28% senior unsecured REIT debt and 7% asset backed securities. As of September
30, 2003, the average credit quality of our aggregate real estate securities
portfolio was BBB- and 78% of the real estate securities were rated investment
grade. Our average investment size was $7.1 million and our largest investment
in a single security was $28.4 million. The weighted average credit spread was
2.89% as of September 30, 2003. The weighted average credit spread represents
the yield premium on our securities over the comparable US Treasury rate or
LIBOR.
The Company entered into an agreement with a major investment bank in October
2003 for the right to purchase commercial mortgage backed securities, REIT
debt, real estate loans and asset backed securities for our next real estate
securities portfolio which is targeted to be $500 million. Mr. Riis commented
that, "As anticipated, our investment pipeline has been strong since quarter
end. Domestic CMBS new issuance in the fourth quarter is expected to be
approximately $20 billion, bringing the total for 2003 to $80 billion versus
2002 new issuance of $60 billion. In October alone, we have identified $300
million of potential investments."
Real Estate Securities Business
Our core business strategy is to invest in a diverse portfolio of moderately
credit sensitive real estate debt securities. Our business model is to lock in
the difference between the yield on our assets and the cost of our liabilities
and optimize this difference, which we refer to as "net spread". We generally
target securities rated "A" through "BB". Newcastle seeks to match fund these
securities with respect to interest rates and maturities in order to minimize
the impact of interest rate fluctuations on earnings, and to reduce the risk
of refinancing our liabilities prior to the maturity of our assets. In
addition, these financings are designed to give us the flexibility to manage
our credit exposure. As of October 29, 2003, an immediate 100 basis point
change in short term interest rates would affect our annual earnings by
approximately $0.5 million.
Our real estate securities portfolio is financed to maturity through long
term, match funded financings that are not callable as a result of changes in
asset value. Accordingly, unless there is a material impairment in value that
would result in a payment not being received on a security, changes in the
book value of our portfolio will not affect our recurring earnings and our
ability to pay a dividend, although they will result in changes to GAAP common
equity book value. As of September 30, 2003, none of our owned securities had
defaulted, and there have been no principal losses in our real estate
securities portfolio to date. Mr. Riis stated, "The performance and asset
quality of our securities portfolio remain solid. We believe it is critical to
stay focused on the credit profile of our portfolio. Our systems are designed
to enable us to review individual loans collateralizing our investment
portfolio and monitor the performance of our assets."
Conference Call
Management will conduct a conference call on October 30, 2003 to review the
Company's third quarter financial results for the period ended September 30,
2003. The conference call is scheduled for 4:30 P.M. eastern time. All
interested parties are welcome to participate on the live call. You can access
the conference call by dialing (888) 273-9890 ten minutes prior to the
scheduled start of the call; please reference "Newcastle Third Quarter 2003
Earnings Call." International callers should dial (612) 332-0720.
For those who are not available to listen to the live call, a replay will be
available until 11:59 P.M. eastern time on Sunday, November 9, 2003 by dialing
(800) 475-6701; please reference access code "703672." International callers
should dial (320) 365-3844 to access the replay.
About Newcastle
Newcastle Investment Corp. invests in real estate securities and other real
estate-related assets. Newcastle is organized and conducts its operations to
qualify as a real estate investment trust (REIT) for federal income tax
purposes. For more information on Newcastle Investment Corp. and to be added to
our email distribution list, please visit www.newcastleinv.com.
Certain items in this press release may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995
including statements relating to our ability to invest our capital and to our
earnings. 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; Newcastle can give no assurance that its
expectations will be attained. Factors that could cause actual results to
differ materially from Newcastle's expectations include, but are not limited
to, continued ability to source new investments which we deem suitable; our
ability to invest capital in investments that will generate returns consistent
with historical levels; changes in interest rates and/or credit spreads, as
well as the success of our hedging strategy in relation to such changes;
impairments in the value of the collateral underlying our real estate
securities; completion of pending investments; competition within the finance
and real estate industries; and other risks detailed from time to time in
Newcastle's SEC reports. Such forward-looking statements speak only as of the
date of this press release. Newcastle expressly disclaims any obligation to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in the Company's expectations with
regard thereto or change in events, conditions or circumstances on which any
statement is based.
Newcastle Investment Corp.
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended Nine Months Ended
Revenue: September 30, 2003 September 30, 2003
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Interest income $ 33,909 $ 89,771
Rental and escalation income 5,621 17,639
Gain on settlement of investments 2,928 9,047
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Total revenue 42,458 116,457
Expenses:
Interest expense 20,220 54,998
Property operating expense 2,223 7,380
Loan servicing expense 665 1,588
General and administrative expense 673 2,434
Management fee to affiliate 1,783 4,537
Preferred incentive return to affiliate 1,436 4,392
Depreciation and amortization 776 2,262
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Total expenses 27,776 77,591
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Income from continuing operations 14,682 38,866
Income from discontinued operations 24 360
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Net income 14,706 39,226
Preferred dividends (1,523) (3,250)
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Income available for common stockholders $ 13,183 $ 35,976
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Net income per share of common stock, basic $ 0.48 $ 1.45
Net income per share of common stock, diluted $ 0.48 $ 1.44
Income from continuing operations per share of common stock, basic $ 0.48 $ 1.44
Income from continuing operations per share of common stock, diluted $ 0.48 $ 1.43
Income from discontinued operations per share of common stock, basic $ 0.00 $ 0.01
Income from discontinued operations per share of common stock, diluted $ 0.00 $ 0.01
Weighted average number shares of common stock outstanding, basic 27,340,057 24,786,517
Weighted average number shares of common stock outstanding, diluted 27,620,076 24,987,583
Newcastle Investment Corp.
Consolidated Balance Sheet
(In thousands)
As of
September 30, 2003 As of
Assets (Unaudited) December 31, 2002
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Real estate securities, available for sale $ 2,117,278 $ 1,069,892
Real estate securities portfolio deposit - 37,777
Operating real estate, net 126,606 113,652
Real estate held for sale - 3,471
Mortgage loans, net 427,197 258,198
Other securities, available for sale 33,649 11,209
Cash and cash equivalents 94,099 45,463
Restricted cash 13,445 10,380
Deferred costs, net 9,137 6,489
Receivables and other assets 23,512 16,036
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Total assets $ 2,844,923 $ 1,572,567
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Liabilities and Stockholders' Equity
CBO bonds payable $ 1,792,503 $ 868,497
Other bonds payable 40,381 37,389
Notes payable 69,237 62,952
Repurchase agreements 407,740 248,169
Derivative liabilities 53,791 54,095
Dividends payable 15,061 9,161
Due to affiliates 2,046 1,335
Accrued expenses and other liabilities 8,145 6,728
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Total liabilities 2,388,904 1,288,326
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Stockholders' Equity
Preferred stock, $0.01 par value, 100,000,000 shares
authorized, 2,500,000 shares of Series B Cumulative
Redeemable Preferred Stock, liquidation preference
$25.00 per share, issued and outstanding at September 30, 2003 62,500 -
Common stock, $0.01 par value, 500,000,000 shares
authorized, 28,090,057 and 23,488,517 shares issued and
outstanding at September 30, 2003 and December 31,
2002, respectively 281 235
Additional paid-in capital 377,100 290,935
Dividends in excess of earnings (14,350) (13,966)
Accumulated other comprehensive income 30,488 7,037
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Total stockholders' equity 456,019 284,241
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Total liabilities and stockholders' equity $ 2,844,923 $ 1,572,567
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Newcastle Investment Corp.
Reconciliation of GAAP Net Income to FFO
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2003
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Net income available for common stockholders $ 13,183 $ 35,976
Operating real estate depreciation 765 2,225
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Funds from operations ("FFO") $ 13,948 $ 38,201
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We believe FFO is one appropriate measure of the operating performance of
real estate companies because it provides investors with information
regarding our ability to service debt and make capital expenditures. We also
believe that FFO is an appropriate supplemental disclosure of operating
performance for a REIT due to its widespread acceptance and use within the
REIT and analyst communities. FFO, for our purposes, represents net income
available for common stockholders (computed in accordance with GAAP),
excluding extraordinary items, plus real estate depreciation, and after
adjustments for unconsolidated subsidiaries, if any. We consider gains and
losses on resolution of our investments to be a normal part of our recurring
operations and therefore do not exclude such gains and losses when arriving
at FFO. Adjustments for unconsolidated subsidiaries, if any, are calculated
to reflect FFO on the same basis. FFO does not represent cash generated from
operating activities in accordance with GAAP and therefore should not be
considered an alternative to net income as an indicator of our operating
performance or as an alternative to cash flow as a measure of liquidity and
is not necessarily indicative of cash available to fund cash needs. Our
calculation of FFO may be different from the calculation used by other
companies and, therefore, comparability may be limited.
Newcastle Investment Corp.
Reconciliation of GAAP Book Equity to Invested Common Equity
(In thousands)
(Unaudited)
September 30, 2003
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Book equity $ 456,019
Preferred stock (62,500)
Accumulated depreciation on operating real estate 13,052
Accumulated other comprehensive income (30,488)
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Invested common equity $ 376,083
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