Exhibit 99.1
[NEWCASTLE INVESTMENT CORP. GRAPHIC OMITTED]
Contact: FOR IMMEDIATE RELEASE
Lilly H. Donohue
Director of Investor Relations
212-798-6118
Newcastle Announces Second Quarter 2005 Results
Second Quarter Highlights:
o Income available for common stockholders of $28.0 million, or $0.63
per diluted common share, up 7% from second quarter 2004 on a per
diluted common share basis
o Declared dividend of $0.625 per share of common stock
o $471 million investment activity in the second quarter
o Total assets of $5.7 billion, up 36% from $4.2 billion at the end of
second quarter 2004
o Issued our seventh collateralized bond obligation in April 2005:
98%, or $489 million, of assets purchased by the end of the second
quarter
New York, NY. August 4, 2005 - Newcastle Investment Corp. (NYSE: NCT) reported
funds from operations (or FFO) for the quarter ended June 30, 2005 of $23.0
million, or $0.52 per diluted common share, as compared to $18.7 million, or
$0.51 per diluted common share, for the quarter ended June 30, 2004. Second
quarter FFO, excluding the effect of the reversal of accumulated depreciation
from sales of certain real estate properties, was approximately $28.1 million,
or $0.64 per diluted common share. The Company generated an FFO return on
average invested common equity of 11.8% for second quarter 2005, and 14.4%
excluding the reversal of accumulated depreciation.
For the three months ended June 30, 2005, income available for common
stockholders was $28.0 million, or $0.63 per diluted common share, compared
with $21.7 million, or $0.59 per diluted common share, in second quarter 2004.
For the quarter ended June 30, 2005, Newcastle's Board of Directors declared a
dividend of $0.625 per share of common stock. The Board also declared a
dividend of $0.609 per share on Newcastle's 9.75% Series B Cumulative
Redeemable Preferred Stock.
Our common equity book value per share, as determined in accordance with
generally accepted accounting principles (or GAAP), increased to $19.38 at
June 30, 2005 from $19.17 at March 31, 2005. In addition, GAAP common equity
book value was $848.7 million at June 30, 2005, compared with $839.0 million
at March 31, 2005.
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 Three Months Ended
Operating Data (Unaudited): June 30, 2005 June 30, 2004
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Funds from operations $22,961 $18,699
Income available for common stockholders 27,957 21,651
As of As of
Balance Sheet Data (Unaudited): June 30, 2005 March 31, 2005
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Total assets $5,710,042 $5,274,335
Total liabilities 4,798,793 4,372,854
Common stockholders' equity 848,749 838,981
Preferred stock 62,500 62,500
Supplemental Data - Total Investment Portfolio (Unaudited):
June 30, 2005 March 31, 2005
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Total portfolio (face amount)* $5,352,648 $4,937,770
Percentage of total assets 94% 94%
Weighted average asset yield 6.30% 6.23%
Weighted average liability cost 4.68% 4.49%
Weighted average net spread 1.62% 1.74%
* Excluding ICH.
Supplemental Data - Real Estate Securities and Real Estate Related Loans (Unaudited):
June 30, 2005 March 31, 2005
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Real estate securities and real estate related loans (face
amount)* $4,543,497 $4,041,272
Percentage of total assets 80% 77%
Weighted average credit rating BBB BBB-
Weighted average asset credit spread 254 273
Percentage investment grade 70% 66%
Number of securities and loans 514 457
* Excluding ICH.
Supplemental Data - Residential Mortgage Loans (Unaudited):
June 30, 2005 March 31, 2005
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Residential mortgage loans (face amount) $809,151 $896,498
Percentage of total assets 14% 17%
Weighted average FICO score 715 716
Number of residential mortgage loans 9,344 9,523
Capital Markets Activity
In April 2005, Newcastle priced its seventh collateralized bond obligation (or
CBO). We issued $447 million of investment grade debt to finance a newly
acquired pool of real estate securities and real estate related loans.
Approximately 85%, or $382 million, of the issued debt is rated AAA, which
includes a $323 million money market eligible note. The CBO has an expected
weighted average life of approximately 8.8 years.
Subsequent to quarter end, we closed on a $50 million 3-year revolving credit
facility, which will allow us to minimize the dilutive effect of uninvested
capital on our balance sheet. Our average uninvested capital for the quarter
was $22 million.
Wesley R. Edens, our Chairman and Chief Executive Officer, commented, "We are
pleased with our second quarter results. The quality of our assets and our
match funding discipline continue to produce stable earnings and solid
returns. In the quarter, short-term interest rates rose approximately 50 basis
points and our earnings were unaffected."
Second Quarter Investment Activity
During the second quarter, we purchased or committed to purchase approximately
$471 million in face amount of investments, $351 million of which was acquired
on our balance sheet. In addition, $105 million of these investments were
acquired for our next CBO through its warehouse agreement and the remaining
$15 million consisted of a mezzanine loan (financed through a total rate of
return swap).
Real estate securities and real estate related loans. The $471 million of
real estate securities and real estate related loans that we purchased or
committed to purchase during second quarter 2005 had an average credit
rating of A- as of June 30, 2005. Approximately $158 million of these
securities were CMBS, $156 million were agency RMBS, $70 million were
ABS, $68 million were REIT debt and $19 million were real estate related
loans. In addition, we sold approximately $86 million of real estate
securities with an average credit rating of B+.
Operating real estate. During the quarter, we completed the sales of a
Canadian property (Norelco) for C$47.6 million and a Belgian property
(Alfa) for (euro)10.4 million. We recorded a net gain of $0.9 million, or
$0.02 per diluted share, from the Norelco sale. In addition, we recorded
a net loss of $0.7 million, or $0.02 per diluted share, from the sale of
the Alfa property.
Upon the sale of real property, accumulated depreciation is reversed for
the purposes of calculating FFO. Accordingly, in determining our FFO for
second quarter 2005, we reversed the accumulated depreciation
attributable to the Norelco and Alfa properties. As a result, we recorded
a net FFO loss of $3.0 million (or $0.11 per diluted share) and $1.9
million (or $0.04 per diluted share), respectively, in connection with
the Norelco and Alfa transactions.
The Company entered into an agreement with a major investment bank in the
second quarter that gives us the ability to purchase CMBS, REIT debt, real
estate loans, ABS and other assets for our eighth real estate securities
portfolio, which is targeted to be between $500 million and $600 million.
Kenneth Riis, our President, commented, "We continued to increase the
diversity and scale of our investment portfolio with assets offering
attractive risk-adjusted returns at a time when credit spreads are
historically tight. Since the quarter end, we have been very active. We have
purchased or committed to purchase $416 million of assets, which will utilize
all of our uninvested capital, as well as substantially all of the amounts
available under our credit facility."
Investment Portfolio
At June 30, 2005, approximately 85% of our total $5.4 billion investment
portfolio consisted of real estate securities and real estate related loans
and approximately 15% was comprised of residential mortgage loans.
Real Estate Securities and Real Estate Related Loans. Our $4.5 billion
real estate securities and real estate related loan portfolio was well
diversified with 514 securities and loans. Of these investments, 67% were
fixed rate investments and the remaining 33% were floating rate. The
portfolio consisted of 40% CMBS, 18% REIT debt, 14% ABS, 10% agency RMBS,
10% B-Notes and mezzanine loans and 8% real estate loans and bank loans.
The average credit quality of our real estate securities and real estate
related loan portfolio was BBB, and 70% of these investments were rated
investment grade. Our average investment size was $8.8 million, with our
largest single investment being $83.0 million, at quarter end. The
weighted average credit spread on this portfolio (i.e., the yield premium
on our investments over the comparable U.S. Treasury rate or LIBOR) was
254 basis points as of June 30, 2005.
Residential Mortgage Loans. 62% of our $809 million residential mortgage
loan portfolio consisted of residential loans and the remaining 38% was
comprised of manufactured housing loans. The residential loans and
manufactured housing loans were well diversified with 1,323 loans and
8,021 loans, respectively. The residential loans had an average maturity
of 3.7 years at quarter end. In addition, the manufactured housing loans
had an average maturity of 4.7 years at the quarter end.
Newcastle's business strategy is to invest in a diverse portfolio of
moderately credit sensitive real estate securities and other real estate
related assets. Our goal is to "lock in" and optimize the difference (which we
refer to as the "net spread") between the yield on our assets and the cost of
our liabilities. Newcastle seeks to minimize the impact of interest rate
fluctuations on earnings, and to reduce the risk of refinancing our
liabilities prior to the respective maturities of our assets, by financing (or
match funding) these investments with respect to their interest rates and
maturities. Our entire portfolio of assets and the related liabilities have a
weighted average life of approximately 5.01 years and 4.66 years,
respectively. As of June 30, 2005, a 100 basis point increase in short term
interest rates would decrease our earnings by approximately $89,000 per annum,
or less than $0.01 per share.
Our investment portfolio continues to perform as expected. We continue to seek
investments that will generate superior risk-adjusted returns, with the
long-term objective of capital preservation and earnings stability in varying
interest rate and credit cycles.
Conference Call
Newcastle's management will conduct a live conference call on August 4, 2005
at 4:30 P.M. Eastern Time to review the financial results for the quarter
ended June 30, 2005. All interested parties are welcome to participate on the
live call. You can access the conference call by dialing 866-323-3742 (from
within the U.S.) or 706-643-3330 (from outside of the U.S.) ten minutes prior
to the scheduled start of the call; please reference "Newcastle Second Quarter
2005 Earnings Call."
A replay of the conference call will be available until 11:59 P.M. Eastern
Time on Friday, August 12, 2005 by dialing 800-642-1687 (from within the U.S.)
or 706-645-9291 (from outside of the U.S.); please reference access code
"8170380."
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 (or REIT) for federal income tax
purposes. For more information on Newcastle Investment Corp. or to be added to
our email distribution list, please visit www.newcastleinv.com.
Safe Harbor
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 the stability of 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, changes in
investment opportunities present in the markets we operate in or our ability
to access or finance such investment opportunities; 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. and Subsidiaries
Consolidated Statements of Income
(dollars in thousands, except share data)
(Unaudited)
Three Months Ended
June 30,
--------
Revenues 2005 2004
---- ----
Interest income $ 86,715 $ 56,144
Rental and escalation income 1,715 1,022
Gain on settlement of investments 3,635 4,446
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92,065 61,612
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Expenses
Interest expense 55,791 32,615
Property operating expense 540 531
Loan and security servicing expense 1,580 861
Provision for credit losses 1,187 -
General and administrative expense 1,326 1,163
Management fee to affiliate 3,316 2,563
Incentive compensation to affiliate 883 1,236
Depreciation and amortization 135 95
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64,758 39,064
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Income before equity in earnings of unconsolidated subsidiaries 27,307 22,548
Equity in earnings of unconsolidated subsidiaries 1,438 2,218
Income taxes on related taxable subsidiaries (45) -
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Income from continuing operations 28,700 24,766
Income (loss) from discontinued operations 781 (1,591)
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Net Income 29,481 23,175
Preferred dividends (1,524) (1,524)
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Income Available For Common Stockholders $ 27,957 $ 21,651
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Net Income Per Share of Common Stock
Basic $ 0.64 $ 0.60
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Diluted $ 0.63 $ 0.59
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Income from continuing operations per share of common stock, after
preferred dividends
Basic $ 0.62 $ 0.64
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Diluted $ 0.61 $ 0.63
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Income (loss) from discontinued operations per share of common stock
Basic $ 0.02 $( 0.04)
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Diluted $ 0.02 $( 0.04)
============= ============
Weighted Average Number of Shares of Common Stock Outstanding
Basic 43,768,381 36,160,778
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Diluted 44,127,381 36,670,603
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Dividends Declared Per Share of Common Stock $ 0.625 $ 0.600
============= ============
Newcastle Investment Corp. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands, except share data)
As of
June 30, 2005 As of
Assets (Unaudited) December 31, 2004
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Real estate securities, available for sale $ 3,973,566 $ 3,369,496
Real estate securities portfolio deposit 10,126 25,411
Real estate related loans, net 566,913 591,890
Investments in unconsolidated subsidiaries 33,691 41,230
Operating real estate, net 16,110 57,193
Real estate held for sale - 12,376
Residential mortgage loans, net 799,772 654,784
Cash and cash equivalents 68,965 37,911
Restricted cash 186,085 77,974
Derivative assets 22,597 27,122
Receivables and other assets 32,217 37,333
---------------------- ----------------------
$ 5,710,042 $ 4,932,720
====================== ======================
Liabilities and Stockholders' Equity
Liabilities
CBO bonds payable $ 3,093,682 $ 2,656,510
Other bonds payable 383,553 222,266
Notes payable 474,513 652,000
Repurchase agreements 677,303 490,620
Derivative liabilities 48,380 39,661
Dividends payable 28,384 25,928
Due to affiliates 3,963 8,963
Accrued expenses and other liabilities 89,015 40,057
---------------------- ----------------------
4,798,793 4,136,005
---------------------- ----------------------
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 62,500 62,500
Common stock, $0.01 par value, 500,000,000 shares authorized, 43,789,819 and
39,859,481 shares issued and outstanding at June 30, 2005 and December 31,
2004, respectively 438 399
Additional paid-in capital 782,103 676,015
Dividends in excess of earnings (13,573) (13,969)
Accumulated other comprehensive income 79,781 71,770
---------------------- ----------------------
911,249 796,715
---------------------- ----------------------
$ 5,710,042 $ 4,932,720
====================== ======================
Newcastle Investment Corp.
Reconciliation of GAAP Net Income to FFO
(In thousands)
(Unaudited)
Three Months Ended Three Months Ended
June 30, 2005 June 30, 2004
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Net income available for common stockholders $ 27,957 $ 21,651
Operating real estate depreciation 114 517
Accumulated depreciation on operating real estate sold (5,110) (3,469)
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Funds from operations ("FFO") $ 22,961 $ 18,699
======== ========
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. Furthermore, FFO is used to
compute our incentive compensation to our manager. 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)
June 30, 2005
-------------
Book equity $911,249
Preferred stock (62,500)
Accumulated depreciation on operating real estate 3,066
Accumulated other comprehensive income (79,781)
----------
Invested common equity $772,034
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