x |
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
o |
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|
Maryland
|
81-0559116
|
|
(State
or other jurisdiction of incorporation
|
(I.R.S.
Employer Identification No.)
|
|
or
organization)
|
1345
Avenue of the Americas, New York, NY
|
10105
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Title
of each class:
|
Name
of exchange on which registered:
|
|
Common
Stock, $0.01 par value per share
|
New
York Stock Exchange (NYSE)
|
|
9.75%
Series B Cumulative Redeemable Preferred Stock, $0.01 par value per
share
|
New
York Stock Exchange (NYSE)
|
|
8.05%
Series C Cumulative Redeemable Preferred Stock, $0.01 par value per
share
|
New
York Stock Exchange (NYSE)
|
1.
|
Portions
of the Registrant’s definitive proxy statement for the Registrant’s 2006
annual meeting, to be filed within 120 days after the close of the
Registrant’s fiscal year, are incorporated by reference into Part III of
this Annual Report on Form 10-K.
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1)
|
Real
Estate Securities:
|
We
underwrite and acquire a diversified portfolio of moderately credit
sensitive real estate securities, including commercial mortgage backed
securities (CMBS), senior unsecured REIT debt issued by property
REITs,
real estate related asset backed securities (ABS) and agency residential
mortgage backed securities (RMBS). We generally target investments
rated A
through BB, except for our agency RMBS which are generally considered
AAA
rated. As of December 31, 2005, our investments in real estate securities
represented 80% of our assets.
|
2)
|
Real
Estate Related Loans:
|
We
acquire and originate loans to well capitalized real estate owners
with
strong track records and compelling business plans, including B-notes,
mezzanine loans, bank loans, and real estate loans. As of December
31,
2005, our investments in real estate related loans represented 9%
of our
assets.
|
3)
|
Residential
Mortgage Loans:
|
We
acquire residential mortgage loans, including manufactured housing
loans
and subprime residential loans, that we believe will produce attractive
risk-adjusted returns. As of December 31, 2005, our investments in
residential mortgage loans represented 10% of our assets. In addition,
we
acquired a $1.5 billion portfolio of subprime residential loans subsequent
to year end, as described in “Our Investing Activities- Residential
Mortgage Loans” below.
|
4)
|
Operating
Real Estate:
|
We
acquire direct and indirect interests in operating real estate. As
of
December 31, 2005, our investments in operating real estate represented
1%
of our assets.
|
Total
Portfolio (1)
|
Core
Investment Portfolio (2)
|
||||||||||||
December
31,
|
December
31,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Face
amount
|
$
|
6,111,464
|
$
|
4,493,274
|
$
|
5,413,142
|
$
|
4,294,092
|
|||||
Percentage
of total assets
|
99
|
%
|
91
|
%
|
87
|
%
|
87
|
%
|
|||||
Weighted
average asset yield
|
6.59
|
%
|
5.91
|
%
|
6.85
|
%
|
5.98
|
%
|
|||||
Weighted
average liability cost
|
5.12
|
%
|
4.15
|
%
|
5.22
|
%
|
4.17
|
%
|
|||||
Weighted
average net spread
|
1.47
|
%
|
1.76
|
%
|
1.63
|
%
|
1.81
|
%
|
|||||
(1) |
Excluding
the ICH loans, as described
below.
|
(2)
|
Excluding
the ICH loans and Agency RMBS, as described
below.
|
Year
|
Shares
Issued
|
Range
of Issue
Prices
(1)
|
Net
Proceeds
(millions)
|
|||||||
Formation
|
16,488,517
|
N/A
|
N/A
|
|||||||
2002
|
7,000,000
|
$
|
13.00
|
$
|
80.0
|
|||||
2003
|
7,886,316
|
$
|
20.35-$22.85
|
$
|
163.4
|
|||||
2004
|
8,484,648
|
$
|
26.30-$31.40
|
$
|
224.3
|
|||||
2005
|
4,053,928
|
$
|
29.60
|
$
|
108.2
|
|||||
December
31, 2005
|
43,913,409
|
|||||||||
(1) |
Excludes
prices of shares issued pursuant to the exercise of options and
shares
issued to Newcastle's independent
directors.
|
Weighted
Average
|
||||||||||||||||||||||
Asset
Type
|
Current
Face Amount
|
Carrying
Value
|
Number
of
Securities
|
S&P
Equivalent
Rating
|
Coupon
|
Yield
|
Maturity
(Years)
|
|||||||||||||||
CMBS-Conduit
|
$
|
1,455,345
|
$
|
1,397,329
|
197
|
BBB-
|
5.84
|
%
|
6.61
|
%
|
7.87
|
|||||||||||
CMBS-Large
Loan
|
578,331
|
584,163
|
61
|
BBB-
|
6.64
|
%
|
6.75
|
%
|
2.10
|
|||||||||||||
CMBS-B
Note
|
180,201
|
180,631
|
32
|
BBB-
|
6.62
|
%
|
6.95
|
%
|
5.97
|
|||||||||||||
Unsecured
REIT Debt
|
916,262
|
942,746
|
99
|
BBB-
|
6.34
|
%
|
5.96
|
%
|
6.95
|
|||||||||||||
ABS-Manufactured
Housing
|
178,915
|
163,066
|
10
|
A-
|
7.12
|
%
|
8.65
|
%
|
6.64
|
|||||||||||||
ABS-Home
Equity
|
525,004
|
524,477
|
89
|
B
|
6.03
|
%
|
6.10
|
%
|
3.16
|
|||||||||||||
ABS-Franchise
|
70,837
|
69,622
|
18
|
BBB+
|
6.66
|
%
|
8.12
|
%
|
5.14
|
|||||||||||||
Agency
RMBS
|
698,322
|
692,485
|
19
|
AAA
|
4.76
|
%
|
4.67
|
%
|
4.90
|
|||||||||||||
Total/Average
|
$
|
4,603,217
|
$
|
4,554,519
|
525
|
BBB+
|
5.99
|
%
|
6.25
|
%
|
5.81
|
Industry
|
%
of Face
Amount
|
|||
Residential
|
40.42
|
%
|
||
Retail
|
21.03
|
%
|
||
Office
|
18.73
|
%
|
||
Lodging
|
5.70
|
%
|
||
Health
Care
|
4.73
|
%
|
||
Industrial
|
3.63
|
%
|
||
Other
|
5.76
|
%
|
Loan
Type
|
Current
Face
Amount
|
Carrying
Value
|
Loan
Count
|
Weighted
Avg. Yield
|
Weighted
Avg.
Maturity
(Years)
|
|||||||||||
B-Notes
|
$
|
72,173
|
$
|
72,520
|
13
|
8.46
|
%
|
2.40
|
||||||||
Mezzanine
Loans (1)
|
302,740
|
302,816
|
8
|
8.44
|
%
|
1.94
|
||||||||||
Bank
Loans
|
56,274
|
56,563
|
3
|
6.58
|
%
|
2.51
|
||||||||||
Real
Estate Loans
|
23,082
|
22,364
|
1
|
20.02
|
%
|
2.00
|
||||||||||
ICH
Loans (2)
|
165,514
|
161,288
|
96
|
8.64
|
%
|
1.55
|
||||||||||
Total
|
$
|
619,783
|
$
|
615,551
|
121
|
8.74
|
%
|
1.94
|
||||||||
(1)
|
One
of these loans has a contractual exit fee which Newcastle will begin
to
accrue if and when management believes it is probable that such exit
fee
will be received.
|
(2)
|
In
October 2003, pursuant to Financial Accounting Standards Board
Interpretation No. 46 “Consolidation of Variable Interest Entities,” we
consolidated an entity that holds a portfolio of commercial mortgage
loans
which has been securitized. This investment, which we refer to as
ICH, was
previously treated as a non-consolidated residual interest in such
securitization. The primary effect of the consolidation is the requirement
that we reflect the gross loan assets and gross bonds payable of
this
entity on our balance sheet, as well as the related gross interest
income
and expense in our statement of
income.
|
Current
Face
Amount
|
Carrying
Value
|
Loan
Count
|
Weighted
Avg. Yield
|
|||||||
$
28,974
|
$
|
17,802
|
91
|
16.08
|
%
|
Reference
Asset
|
Notional
Amount
|
Margin
Amount
|
Receive
Interest
Rate
|
Pay
Interest
Rate
|
Maturity
Date
|
Fair
Value
|
|||||||||||||
Term
loan to a retail mall
REIT
|
$
|
106,083
|
$
|
18,149
|
LIBOR
+ 2.000%
|
|
LIBOR
+ 0.500%
|
|
Nov
2008
|
$
|
1,008
|
||||||||
Term
loan to a diversified real estate
and finance company
|
97,997
|
19,599
|
LIBOR
+ 3.000%
|
|
LIBOR
+ 0.625%
|
|
Feb
2008
|
877
|
|||||||||||
Mezzanine
loan to a hotel company
|
15,000
|
5,224
|
LIBOR
+4.985%
|
|
LIBOR
+ 1.350%
|
|
Jun
2007
|
101
|
|||||||||||
Term
loan to a diversified real estate
company
|
94,954
|
9,495
|
LIBOR
+1.750%
|
|
LIBOR
+ 0.500%
|
|
Aug
2007
|
904
|
|||||||||||
Term
loan to a retail company
|
100,000
|
19,960
|
LIBOR
+3.000%
|
|
LIBOR
+ 0.500%
|
|
Dec
2008
|
206
|
|||||||||||
$
|
414,034
|
$
|
72,427
|
$
|
3,096
|
Current
Face
Amount
|
Carrying
Value
|
Loan
Count
|
Weighted
Avg.
Yield
|
Weighted
Avg.
Maturity
(Years) (1)
|
||||||||||||
Residential
loans
|
$
|
326,100
|
$
|
333,226
|
919
|
4.79
|
%
|
2.73
|
||||||||
Manufactured
housing loans
|
284,870
|
267,456
|
7,067
|
7.84
|
%
|
5.78
|
||||||||||
Total
|
$
|
610,970
|
$
|
600,682
|
7,986
|
6.15
|
%
|
4.15
|
||||||||
(1) |
Weighted
average maturity was calculated based on a constant prepayment
rate (CPR)
of approximately 30% for residential loans and 10% for manufactured
housing loans.
|
Property
Address
|
City
/ Submarket
|
State/
Province
|
Net
Rentable
Sq
Ft
|
Year
Built/ Renovated
|
Use
|
||||||||||||||||||||
100
Dundas St.
|
London
(Central
business
district)
|
ON
|
323,411
|
1980
|
Office
|
||||||||||||||||||||
|
|||||||||||||||||||||||||
Tenant
|
%
of Total Sq Ft Leased
|
Tenant
Net Rentable Sq Ft
|
Lease
Start
Date
|
Lease
End
Date
|
Annual
Rent
(1)
(2)
|
Current
Rent per Sq Ft (1)
|
Annual
Real Estate Taxes (1)
|
Tenant
Credit Rating
|
|||||||||||||||||
Bell
Canada - Office
|
89.89
|
%
|
290,706
|
03/26/98
|
3/31/06
(4
|
)
|
$
|
1,751
|
$
|
6.02
|
$
|
1,146
|
A
|
||||||||||||
Bell
Canada - Storage
|
3.99
|
%
|
12,890
|
03/26/98
|
03/31/06
|
55
|
4.30
|
A
|
|||||||||||||||||
Bell
Canada - Communication
|
0.52
|
%
|
1,686
|
03/26/98
|
03/31/47
|
29
|
17.21
|
A
|
|||||||||||||||||
Mactel
|
0.16
|
%
|
519
|
03/01/03
|
(3)
|
|
4
|
6.88
|
|||||||||||||||||
Tony
& Fay Gardiner
|
0.15
|
%
|
475
|
09/01/02
|
08/31/07
|
4
|
9.04
|
||||||||||||||||||
O&Y
Enterprise Office
|
0.46
|
%
|
1,478
|
03/26/98
|
03/31/06
|
13
|
9.04
|
||||||||||||||||||
COMTECH
|
0.03
|
%
|
96
|
01/01/00
|
(3)
|
|
1
|
6.88
|
|||||||||||||||||
Vacant
|
N/A
|
15,561
|
N/A
|
N/A
|
N/A
|
N/A
|
|
|
|||||||||||||||||
Total
|
95.20
|
%
|
323,411
|
|
|
$
|
1,857
|
|
$
|
1,146
|
|
Year
|
Number
of Tenant
Leases
Expiring
|
Square
Feet of
Expiring
Leases
|
Annual
Rent of
Expiring
Leases (1)
|
%
of Gross Annual
Rent
Represented
by
Expiring Leases
|
|||||||||
Vacant
|
N/A
|
15,561
|
N/A
|
N/A
|
|||||||||
2006
(4)
|
5
|
305,689
|
$
|
1,824
|
98.2
|
%
|
|||||||
2007
|
1
|
475
|
4
|
0.2
|
%
|
||||||||
2047
|
1
|
1,686
|
29
|
1.6
|
%
|
||||||||
Total
|
7
|
323,411
|
$
|
1,857
|
100.0
|
%
|
|||||||
(1)
|
Monetary
amounts are in U.S. dollars based on the December 31, 2005 Canadian
dollar
exchange rate of 1.1620.
|
(2) |
Certain
operating expenses are reimbursed by tenants at rates ranging up
to 15%
above actual cost.
|
(3) |
These
leases are running month to month.
|
(4) |
184,504
square feet have been released to Bell Canada for six years commencing
in
April 2006 for $6.02 per square foot per
annum, before adjustment for lease incentives, with one five year
renewal
option.
|
Debt
Obligation
|
Current
Face
Amount
|
Carrying
Value
|
Weighted
Average
Funding
Cost
(1)
|
Weighted
Average Maturity
(Years)
|
Face
Amount
of
Floating
Rate
Debt
|
Collateral
Carrying
Value
|
Collateral
Weighted Average Maturity
(Years)
|
Face
Amount
of
Floating Rate Collateral
|
Aggregate
Notional
Amount
of
Current
Hedges
|
|||||||||||||||||||
CBO
Bonds Payable
|
$
|
3,560,953
|
$
|
3,530,384
|
5.27
|
%
|
6.55
|
$
|
3,275,603
|
$
|
4,002,158
|
5.86
|
$
|
1,107,164
|
$
|
1,960,808
|
||||||||||||
Other
Bonds Payable
|
353,330
|
353,330
|
5.94
|
%
|
0.63
|
215,624
|
428,744
|
4.23
|
9,961
|
227,576
|
||||||||||||||||||
Notes
Payable
|
260,441
|
260,441
|
4.70
|
%
|
1.21
|
260,441
|
288,683
|
2.69
|
282,589
|
—
|
||||||||||||||||||
Repurchase
Agreements
|
1,048,203
|
1,048,203
|
4.68
|
%
|
0.10
|
1,048,203
|
1,170,435
|
4.29
|
341,591
|
755,368
|
||||||||||||||||||
Credit
Facility
|
20,000
|
20,000
|
6.86
|
%
|
2.55
|
20,000
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Total
debt obligations
|
$
|
5,242,927
|
$
|
5,212,358
|
5.17
|
%
|
4.59
|
$
|
4,819,871
|
$
|
5,890,020
|
5.27
|
$
|
1,741,305
|
$
|
2,943,752
|
||||||||||||
(1) |
Including
the effect of applicable
hedges.
|
·
|
no
investment is to be made which would cause us to fail to qualify
as a
REIT;
|
·
|
no
investment is to be made which would cause us to be regulated as
an
investment company;
|
·
|
no
more than 20% of our total equity, determined as of the date of such
investment, is to be invested in any single
asset;
|
·
|
our
leverage is not to exceed 90% of the sum of our total debt and our
total
equity; and
|
·
|
we
are not to co-invest with the manager or any of its affiliates unless
(i)
our co-investment is otherwise in accordance with these guidelines
and
(ii) the terms of such co-investment are at least as favorable to
us as to
the manager or such affiliate (as applicable) making such
co-investment.
|
· |
any
person who beneficially owns 10% or more of the voting power of the
corporation's outstanding shares; or
|
· |
an
affiliate or associate of a corporation who, at any time within the
two-year period prior to the date in question, was the beneficial
owner of
10% or more of the voting power of the then outstanding stock of
the
corporation.
|
·
|
80%
of the votes entitled to be cast by holders of outstanding shares
of
voting stock of the corporation voting together as a single group;
and
|
·
|
two-thirds
of the votes entitled to be cast by holders of voting stock of the
corporation other than shares held by the interested stockholder
with whom
or with whose affiliate the business combination is to be effected
or held
by an affiliate or associate of the interested stockholder voting
together
as a single voting group.
|
2005
|
High
|
Low
|
Last
Sale
|
Distributions
Declared
|
|||||||||
First
Quarter
|
$
|
31.95
|
$
|
29.27
|
$
|
29.60
|
$
|
0.625
|
|||||
Second
Quarter
|
$
|
32.31
|
$
|
28.25
|
$
|
30.15
|
$
|
0.625
|
|||||
Third
Quarter
|
$
|
31.25
|
$
|
27.00
|
$
|
27.90
|
$
|
0.625
|
|||||
Fourth
Quarter
|
$
|
27.96
|
$
|
24.74
|
$
|
24.85
|
$
|
0.625
|
|||||
2004
|
High
|
Low
|
Last
Sale
|
Distributions
Declared
|
|||||||||
First
Quarter
|
$
|
33.89
|
$
|
25.51
|
$
|
33.70
|
$
|
0.600
|
|||||
Second
Quarter
|
$
|
33.40
|
$
|
24.51
|
$
|
29.95
|
$
|
0.600
|
|||||
Third
Quarter
|
$
|
31.74
|
$
|
27.97
|
$
|
30.70
|
$
|
0.600
|
|||||
Fourth
Quarter
|
$
|
32.87
|
$
|
29.84
|
$
|
31.78
|
$
|
0.625
|
Number
of Securities to be Issued Upon Exercise of Outstanding
Options
|
Weighted
Average Exercise Price of Outstanding Options
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans
|
||||||||
Equity
Compensation Plans Approved
|
||||||||||
by
Security Holders:
|
||||||||||
Newcastle
Investment Corp. Nonqualified
|
||||||||||
Stock
Option and Incentive Award Plan
|
1,811,807
(1
|
)
|
$
|
25.14
|
7,320,577
(2
|
)
|
||||
Equity
Compensation Plans Not Approved
|
||||||||||
by
Security Holders:
|
||||||||||
None
|
N/A
|
N/A
|
N/A
|
|||||||
(1)
|
Includes
options for (i) 1,170,317 shares held by an affiliate of our manager;
(ii)
627,490 shares granted to our manager and assigned to certain of
the
manager’s employees; and (iii) an aggregate of 14,000 shares held by our
directors, other than Mr. Edens.
|
(2) |
The
maximum available for issuance is equal to 10% of the number of
outstanding equity interests, subject to a maximum of 10,000,000
shares in
the aggregate over the term of the plan. The number of securities
remaining available for future issuance is net of an aggregate of
5,696
shares of our common stock awards to our directors, other than Mr.
Edens,
representing the aggregate annual automatic stock awards to each
such
director for 2003 through 2005, and of 861,920 shares issued to certain
of
our directors and employees of our manager upon the exercise of previously
granted options.
|
Year
Ended December 31,
|
||||||||||||||||
2005
|
2004
|
2003
|
2002
|
2001
|
||||||||||||
Operating
Data
|
(2)
|
(1)
|
||||||||||||||
Revenues
|
||||||||||||||||
Interest
income
|
$
|
348,516
|
$
|
225,761
|
$
|
133,183
|
$
|
73,620
|
$
|
48,729
|
||||||
Other
income
|
29,697
|
23,908
|
18,901
|
18,716
|
50,348
|
|||||||||||
378,213
|
249,669
|
152,084
|
92,336
|
99,077
|
||||||||||||
Expenses
|
||||||||||||||||
Interest
expense
|
226,446
|
136,398
|
76,877
|
44,238
|
30,495
|
|||||||||||
Other
expense
|
42,529
|
29,259
|
20,828
|
18,197
|
36,865
|
|||||||||||
268,975
|
165,657
|
97,705
|
62,435
|
67,360
|
||||||||||||
Equity
in earnings of unconsolidated subsidiaries
|
5,930
|
12,465
|
862
|
362
|
2,807
|
|||||||||||
Income
taxes on related taxable subsidiaries
|
(321
|
)
|
(2,508
|
)
|
—
|
—
|
—
|
|||||||||
5,609
|
9,957
|
862
|
362
|
2,807
|
||||||||||||
Income
from continuing operations
|
114,847
|
93,969
|
55,241
|
30,263
|
34,524
|
|||||||||||
Income
from discontinued operations
|
2,108
|
4,446
|
877
|
1,232
|
9,147
|
|||||||||||
Net
income
|
116,955
|
98,415
|
56,118
|
31,495
|
43,671
|
|||||||||||
Preferred
dividends and related accretion
|
(6,684
|
)
|
(6,094
|
)
|
(4,773
|
)
|
(1,162
|
)
|
(2,540
|
)
|
||||||
Income
available for common stockholders
|
$
|
110,271
|
$
|
92,321
|
$
|
51,345
|
$
|
30,333
|
$
|
41,131
|
||||||
Net
income per share of common stock, diluted
|
$
|
2.51
|
$
|
2.46
|
$
|
1.96
|
$
|
1.68
|
$
|
2.49
|
||||||
Income
from continuing operations per share of common
|
||||||||||||||||
stock,
after preferred dividends and related accretion, diluted
|
$
|
2.46
|
$
|
2.34
|
$
|
1.93
|
$
|
1.61
|
$
|
1.94
|
||||||
Weighted
average number of shares of common stock
|
||||||||||||||||
outstanding,
diluted
|
43,986
|
37,558
|
26,141
|
18,090
|
16,493
|
|||||||||||
Dividends
declared per share of common stock
|
$
|
2.500
|
$
|
2.425
|
$
|
1.950
|
$
|
2.050
|
$
|
2.000
|
||||||
As
Of December 31,
|
||||||||||||||||
2005
|
2004
|
2003
|
2002
|
2001
(1)
|
||||||||||||
Balance
Sheet Data
|
||||||||||||||||
Real
estate securities, available for sale
|
$
|
4,554,519
|
$
|
3,369,496
|
$
|
2,192,727
|
$
|
1,025,010
|
$
|
501,509
|
||||||
Real
estate related loans, net
|
615,551
|
591,890
|
402,784
|
26,417
|
20,662
|
|||||||||||
Residential
mortgage loans, net
|
600,682
|
654,784
|
586,237
|
258,198
|
—
|
|||||||||||
Operating
real estate, net
|
16,673
|
57,193
|
102,995
|
113,652
|
524,834
|
|||||||||||
Cash
and cash equivalents
|
21,275
|
37,911
|
60,403
|
45,463
|
31,360
|
|||||||||||
Total
assets
|
6,209,699
|
4,932,720
|
3,550,299
|
1,574,828
|
1,262,509
|
|||||||||||
Debt
|
5,212,358
|
4,021,396
|
2,924,552
|
1,217,007
|
897,390
|
|||||||||||
Total
liabilities
|
5,291,696
|
4,136,005
|
3,010,936
|
1,288,326
|
928,637
|
|||||||||||
Common
stockholders' equity
|
815,503
|
734,215
|
476,863
|
284,241
|
310,545
|
|||||||||||
Preferred
stock
|
102,500
|
62,500
|
62,500
|
—
|
—
|
|||||||||||
Supplemental
Balance Sheet Data
|
||||||||||||||||
Common
shares outstanding
|
43,913
|
39,859
|
31,375
|
23,489
|
16,489
|
|||||||||||
Book
value per share of common stock, subsequent to
|
||||||||||||||||
initial
public offering
|
$
|
18.57
|
$
|
18.42
|
$
|
15.20
|
$
|
12.10
|
N/A
|
|||||||
|
(1) |
Represents
the operations and financial position of our
predecessor.
|
(2) |
Includes
the operations of our predecessor through the date of commencement
of our
operations, July 12,
2002.
|
Year
Ended December 31,
|
||||||||||||||||
2005
|
2004
|
2003
|
2002
|
2001
|
||||||||||||
Other
Data
|
||||||||||||||||
Cash
Flow provided by (used in):
|
||||||||||||||||
Operating
activities
|
$
|
98,763
|
$
|
90,355
|
$
|
38,454
|
$
|
21,919
|
$
|
37,255
|
||||||
Investing
activities
|
(1,334,746
|
)
|
(1,332,164
|
)
|
(1,659,026
|
)
|
(683,053
|
)
|
103,246
|
|||||||
Financing
activities
|
1,219,347
|
1,219,317
|
1,635,512
|
675,237
|
(119,716
|
)
|
||||||||||
Funds
from Operations (FFO) (1)
|
104,031
|
86,201
|
54,380
|
37,633
|
48,264
|
|||||||||||
(1)
|
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 depreciation
of
our operating real estate, 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 our
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.
|
Year
Ended December 31,
|
||||||||||||||||
2005
|
2004
|
2003
|
2002
|
2001
|
||||||||||||
Calculation
of Funds From Operations (FFO):
|
||||||||||||||||
Income
available for common stockholders
|
$
|
110,271
|
$
|
92,321
|
$
|
51,345
|
$
|
30,333
|
$
|
41,131
|
||||||
Operating
real estate depreciation
|
702
|
2,199
|
3,035
|
7,994
|
12,909
|
|||||||||||
Accumulated
depreciation on operating real estate sold
|
(6,942
|
)
|
(8,319
|
)
|
—
|
(2,847
|
)
|
—
|
||||||||
Other-Fund
I (1)
|
—
|
—
|
—
|
2,153
|
(5,776
|
)
|
||||||||||
Funds
from operations (FFO)
|
$
|
104,031
|
$
|
86,201
|
$
|
54,380
|
$
|
37,633
|
$
|
48,264
|
||||||
(1) |
Related
to an investment retained by our
predecessor.
|
Year
|
Shares
Issued
|
Range
of Issue Prices per Share (1)
|
Net
Proceeds (millions)
|
|||||||
Formation
|
16,488,517
|
N/A
|
N/A
|
|||||||
2002
|
7,000,000
|
$
|
13.00
|
$
|
80.0
|
|||||
2003
|
7,886,316
|
$
|
20.35-$22.85
|
$
|
163.4
|
|||||
2004
|
8,484,648
|
$
|
26.30-$31.40
|
$
|
224.3
|
|||||
2005
|
4,053,928
|
$
|
29.60
|
$
|
108.2
|
|||||
December
31, 2005
|
43,913,409
|
|||||||||
(1) |
Excludes
prices of shares issued pursuant to the exercise of options and
shares
issued to Newcastle’s independent
directors.
|
For
the Year Ended
|
Real
Estate Securities and Real Estate Related Loans
|
Residential
Mortgage Loans
|
Operating
Real Estate
|
Unallocated
|
Total
|
|||||||||||
December
31, 2005
|
$
|
321,889
|
$
|
48,844
|
$
|
6,772
|
$
|
708
|
$
|
378,213
|
||||||
December
31, 2004
|
$
|
225,236
|
$
|
19,135
|
$
|
4,745
|
$
|
553
|
$
|
249,669
|
||||||
December
31, 2003
|
$
|
134,348
|
$
|
12,892
|
$
|
4,264
|
$
|
580
|
$
|
152,084
|
Year-to-Year
Increase
(Decrease)
|
Year-to-Year
Percent
Change
|
Explanation
|
|||||||||||||||||
2005/2004
|
|
2004/2003
|
|
2005/2004
|
|
2004/2003
|
|
2005/2004
|
|
2004/2003
|
|||||||||
Interest
income
|
$
|
122,755
|
$
|
92,578
|
54.4
|
%
|
69.5
|
%
|
(1
|
)
|
(1
|
)
|
|||||||
Rental
and escalation income
|
1,903
|
506
|
40.1
|
%
|
11.9
|
%
|
(2
|
)
|
(2
|
)
|
|||||||||
Gain
on sale of investments
|
1,991
|
5,135
|
10.9
|
%
|
39.0
|
%
|
(3
|
)
|
(3
|
)
|
|||||||||
Other
income
|
1,895
|
(634
|
)
|
222.9
|
%
|
(42.7
|
%)
|
(4
|
)
|
||||||||||
Interest
expense
|
90,048
|
59,521
|
66.0
|
%
|
77.4
|
%
|
(1
|
)
|
(1
|
)
|
|||||||||
Property
operating expense
|
(212
|
)
|
148
|
(8.2
|
%)
|
6.1
|
%
|
(2
|
)
|
(2
|
)
|
||||||||
Loan
and security servicing expense
|
2,936
|
903
|
96.0
|
%
|
41.9
|
%
|
(1
|
)
|
(1
|
)
|
|||||||||
Provision
for credit losses
|
8,421
|
-
|
N/A
|
N/A
|
(5
|
)
|
|||||||||||||
General
and administrative expense
|
(438
|
)
|
1,449
|
(9.5
|
%)
|
46.0
|
%
|
(6
|
)
|
(6
|
)
|
||||||||
Management
fee to affiliate
|
2,705
|
4,152
|
25.5
|
%
|
64.2
|
%
|
(7
|
)
|
(7
|
)
|
|||||||||
Incentive
compensation to affiliate
|
(332
|
)
|
1,733
|
(4.2
|
%)
|
27.8
|
%
|
(7
|
)
|
(7
|
)
|
||||||||
Depreciation
and amortization
|
190
|
46
|
42.1
|
%
|
11.4
|
%
|
(8
|
)
|
(8
|
)
|
|||||||||
Equity
in earnings of
|
|||||||||||||||||||
unconsolidated
subsidiaries, net of taxes on related taxable subsidiaries
|
(4,348
|
)
|
9,095
|
(43.7
|
%)
|
1,055.1
|
%
|
(9
|
)
|
(9
|
)
|
||||||||
Income
from continuing operations
|
$
|
20,878
|
$
|
38,728
|
22.2
|
%
|
70.1
|
%
|
(1)
|
Changes
in interest income and expense are primarily due to our acquisition
during
these periods of interest bearing
assets and related financings, as
follows
|
Year-to-Year
Increase
|
||||||||||
Interest
Income
|
Interest
Expense
|
|||||||||
2005/2004
|
2005/2004
|
|||||||||
Real
estate security and loan portfolios (A)
|
$
|
61,251
|
$
|
48,213
|
||||||
Agency
RMBS
|
18,350
|
16,981
|
||||||||
Residential
mortgage loan portfolio
|
1,147
|
5,727
|
||||||||
Manufactured
housing loan portfolio
|
27,717
|
13,164
|
||||||||
Other
real estate related loans
|
20,878
|
3,809
|
||||||||
Other
(B)
|
3,181
|
7,023
|
||||||||
ABS
- manufactured housing portfolio (C)
|
(2,777
|
)
|
(426
|
)
|
||||||
ICH
loan portfolio (C)
|
(3,963
|
)
|
(3,655
|
)
|
||||||
Other
real estate related loans (C)
|
(3,029
|
)
|
(788
|
)
|
||||||
$
|
122,755
|
$
|
90,048
|
|||||||
(A)
Represents our third through our eighth CBO financings and the
acquisition
of the
|
||||||||||
related
collateral.
|
||||||||||
(B)
Primarily due to increasing interest rates on floating rate assets
and
liabilities owned
|
||||||||||
during
the entire period.
|
||||||||||
(C)
These loans received paydowns during the period which served
to offset the
|
||||||||||
amounts
listed above.
|
Year-to-Year
Increase
|
||||||||||
Interest
Income
|
Interest
Expense
|
|||||||||
2004/2003
|
2004/2003
|
|||||||||
Real
estate security and loan portfolios (A)
|
$
|
43,682
|
$
|
31,856
|
||||||
ABS
- manufactured housing portfolio
|
14,211
|
4,824
|
||||||||
Residential
mortgage loan portfolio
|
7,113
|
4,701
|
||||||||
ICH
loan portfolio
|
13,870
|
11,878
|
||||||||
Other
real estate related loans
|
9,332
|
3,528
|
||||||||
Other
(B)
|
4,370
|
2,734
|
||||||||
$
|
92,578
|
$
|
59,521
|
|||||||
(A)
Represents our second through our seventh CBO financings and
the
acquisition of the
|
||||||||||
related
collateral.
|
||||||||||
(B)
Primarily due to increasing interest rates on floating rate assets
and
liabilities owned
|
||||||||||
during
the entire period.
|
(2)
|
These
changes are primarily the result of the effect of the termination
of a
lease (including the acceleration of lease termination income), offset
by
foreign currency fluctuations.
|
(3)
|
These
changes are primarily a result of the volume of sales of real estate
securities. Sales of real estate securities are based on a number
of
factors including credit, asset type and industry and can be expected
to
increase or decrease from time to time. Periodic fluctuations in
the
volume of sales of securities is dependent upon, among other things,
management's assessment of credit risk, asset concentration, portfolio
balance and other factors.
|
(4) |
The
increase from 2004 to 2005 is primarily the result of recent investments
in total return swaps which are treated
as non-hedge derivatives and marked to market through the income
statement.
|
(5)
|
The
increase from 2004 to 2005 is primarily the result of the acquisition
of
manufactured housing and residential mortgage loan pools at a discount
for
credit quality and $2.9 million of impairment recorded with respect
to the
ICH loans in 2005.
|
(6)
|
The
changes in general and administrative expense are primarily increases
as a
result of our increased size, resulting from our equity issuances
during
the periods presented, offset by decreases in insurance and professional
fees. Professional fees increased in 2004 due to the initial adoption
of
the Sarbanes-Oxley Act of 2002, then decreased in 2005 as a result
of cost
savings in the second year of
adoption.
|
(7) |
The
increases in management fees are a result of our increased size resulting
from our equity issuances during these periods. The changes in incentive
compensation are primarily a result of our increased earnings, offset
by
FFO losses recorded with respect to the sale of properties during
these
periods.
|
(8) |
The
increase in depreciation is primarily due to the acquisition of new
information systems.
|
(9)
|
The
changes in earnings from unconsolidated subsidiaries are primarily
a
result of our late 2003 acquisition of an interest in an LLC which
owns a
portfolio of real estate related loans and our early 2004 acquisition
of
an interest in an LLC which owns a portfolio of convenience and retail
gas
stores, offset by the fact that a significant portion of the latter
portfolio, which was held for sale from the date it was acquired,
was sold
during these periods. Note that the amounts shown are net of income
taxes
on related taxable subsidiaries.
|
Debt
Obligation/Collateral
|
Month
Issued
|
Current
Face Amount
|
Carrying
Value
|
Unhedged
Weighted
Average
Funding
Cost
|
Final
Stated Maturity
|
Weighted
Average
Funding
Cost
(1)
|
Weighted
Average Maturity
(Years)
|
Face
Amount
of
Floating Rate Debt
|
Collateral
Carrying
Value
|
Collateral
Weighted Average Maturity
(Years)
|
Face
Amount
of
Floating Rate Collateral
|
Aggregate
Notional
Amount
of
Current
Hedges
|
|||||||||||||||||||||||||
CBO
Bonds Payable
|
|||||||||||||||||||||||||||||||||||||
Real
estate securities
|
Jul
1999
|
$
|
426,653
|
$
|
423,191
|
5.67%
(2)
|
|
Jul
2038
|
4.89
|
%
|
3.18
|
$
|
331,653
|
$
|
562,803
|
5.01
|
$
|
-
|
$
|
262,732
|
|||||||||||||||||
Real
estate securities and loans
|
Apr
2002
|
444,000
|
441,054
|
5.43%
(2)
|
|
Apr
2037
|
6.56
|
%
|
4.46
|
372,000
|
498,998
|
5.61
|
56,526
|
290,000
|
|||||||||||||||||||||||
Real
estate securities and loans
|
Mar
2003
|
472,000
|
468,413
|
5.46%
(2
|
|
Mar
2038
|
5.08
|
%
|
6.30
|
427,800
|
516,042
|
5.25
|
142,775
|
276,060
|
|||||||||||||||||||||||
Real
estate securities and loans
|
Sep
2003
|
460,000
|
455,657
|
5.16%
(2)
|
|
Sep
2038
|
5.38
|
%
|
6.85
|
442,500
|
506,290
|
4.71
|
180,598
|
192,500
|
|||||||||||||||||||||||
Real
estate securities and loans
|
Mar
2004
|
414,000
|
410,511
|
5.15%
(2)
|
|
Mar
2039
|
4.94
|
%
|
6.61
|
382,750
|
444,037
|
5.27
|
214,876
|
165,300
|
|||||||||||||||||||||||
Real
estate securities and loans
|
Sep
2004
|
454,500
|
450,639
|
5.09%
(2)
|
|
Sep
2039
|
5.03
|
%
|
7.19
|
442,500
|
494,099
|
5.80
|
221,569
|
189,373
|
|||||||||||||||||||||||
Real
estate securities and loans
|
Apr
2005
|
447,000
|
442,379
|
4.85%
(2)
|
|
Apr
2040
|
5.10
|
%
|
8.17
|
439,600
|
481,954
|
6.54
|
193,471
|
243,337
|
|||||||||||||||||||||||
Real
estate securities
|
Dec
2005
|
442,800
|
438,540
|
4.83%
(2)
|
|
Dec
2050
|
5.14
|
%
|
9.53
|
436,800
|
497,935
|
8.49
|
97,349
|
341,506
|
|||||||||||||||||||||||
|
3,560,953
|
3,530,384
|
|
|
5.27
|
%
|
6.55
|
3,275,603
|
4,002,158
|
5.86
|
1,107,164
|
1,960,808
|
|||||||||||||||||||||||||
Other
Bonds Payable
|
|
|
|||||||||||||||||||||||||||||||||||
ICH
loans (3)
|
(3)
|
|
141,311
|
141,311
|
6.68%
(2)
|
|
Aug
2030
|
6.68
|
%
|
1.46
|
3,605
|
161,288
|
1.55
|
3,605
|
-
|
||||||||||||||||||||||
Manufactured
housing loans (4)
|
Jan
2005
|
212,019
|
212,019
|
LIBOR
+1.25%
|
|
Jan
2006(7)
|
|
5.45
|
%
|
0.08
|
212,019
|
267,456
|
5.78
|
6,356
|
227,576
|
||||||||||||||||||||||
|
353,330
|
353,330
|
|
|
5.94
|
%
|
0.63
|
215,624
|
428,744
|
4.23
|
9,961
|
227,576
|
|||||||||||||||||||||||||
Notes
Payable
|
|
|
|
||||||||||||||||||||||||||||||||||
Residential
mortgage loans (4)
|
Nov
2004
|
260,441
|
260,441
|
LIBOR+0.16%
|
|
Nov
2007
|
4.70
|
%
|
1.21
|
260,441
|
288,683
|
2.69
|
282,589
|
-
|
|||||||||||||||||||||||
|
260,441
|
260,441
|
|
|
4.70
|
%
|
1.21
|
260,441
|
288,683
|
2.69
|
282,589
|
-
|
|||||||||||||||||||||||||
Repurchase
Agreements (4) (10)
|
|
|
|||||||||||||||||||||||||||||||||||
Residential
mortgage loans
|
Rolling
|
41,853
|
41,853
|
LIBOR
+ 0.43%
|
|
Mar
2006
|
4.95
|
%
|
0.25
|
41,853
|
44,543
|
2.98
|
43,511
|
-
|
|||||||||||||||||||||||
Agency
RMBS (5)
|
Rolling
|
671,526
|
671,526
|
LIBOR
+ 0.13%
|
|
Jan
2006
|
4.48
|
%
|
0.08
|
671,526
|
692,486
|
4.90
|
-
|
665,965
|
|||||||||||||||||||||||
Real
estate securities
|
Rolling
|
149,546
|
149,546
|
LIBOR
+ 0.58%
|
|
Various
(8)
|
|
4.65
|
%
|
0.16
|
149,546
|
166,737
|
5.86
|
31,450
|
89,403
|
||||||||||||||||||||||
Real
estate related loans
|
Rolling
|
185,278
|
185,278
|
LIBOR
+ 1.01%
|
|
Various
(8)
|
|
5.38
|
%
|
0.08
|
185,278
|
266,669
|
1.82
|
266,630
|
-
|
||||||||||||||||||||||
1,048,203
|
1,048,203
|
|
|
4.68
|
%
|
0.10
|
1,048,203
|
1,170,435
|
4.29
|
341,591
|
755,368
|
||||||||||||||||||||||||||
Credit
facility (6)
|
20,000
|
20,000
|
LIBOR
+2.50% (9)
|
|
Jul
2008
|
6.86
|
%
|
2.55
|
20,000
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||
Total
debt obligations
|
$
|
5,242,927
|
$
|
5,212,358
|
|
5.17
|
%
|
4.59
|
$
|
4,819,871
|
$
|
5,890,020
|
5.27
|
$
|
1,741,305
|
$
|
2,943,752
|
||||||||||||||||||||
(1)
Including the effect of applicable hedges.
|
(2)
Weighted average, including floating and fixed rate
classes.
|
(3)
See "Business-Our Investing Activities-Real Estate Related Loans"
above.
|
(4)
Subject to potential mandatory prepayments based on collateral
value.
|
(5)
A maximum of $1 billion is available until November
2006.
|
(6)
A maximum of $100 million can be drawn (increased from $75 million
in
February 2006).
|
(7)
This financing was replaced with a new term financing in January
2006; the
new maturity date is January 2009.
|
(8)
The longest maturity is March 2006.
|
(9)
In addition, unused commitment fees of between 0.125% and 0.250%
are
paid.
|
(10)
The counterparties on our repurchase agreements include: Bank
of America
Securities LLC ($693.4 million), Bear Stearns Mortgage Capital
Corporation
($181.1 million), Greenwich Capital Markets Inc ($72.2 million),
Deutsche
Bank AG ($58.1 million), and other ($43.4
million).
|
2006
|
$
|
1,260,222
|
||
2007
|
260,441
|
|||
2008
|
20,000
|
|||
2009
|
-
|
|||
2010
|
-
|
|||
Thereafter
|
3,702,264
|
|||
Total
|
$
|
5,242,927
|
Reference
Asset
|
Notional
Amount
|
Margin
Amount
|
Receive
Interest
Rate
|
Pay
Interest
Rate
|
Maturity
Date
|
Fair
Value
|
|||||||||||||
Term
loan to a retail mall REIT
|
$
|
106,083
|
$
|
18,149
|
LIBOR
+
2.000% |
|
LIBOR
+
0.500% |
|
Nov
2008
|
$
|
1,008
|
||||||||
Term
loan to a diversified real estate
and finance company
|
97,997
|
19,599
|
LIBOR
+
3.000% |
|
LIBOR
+
0.625% |
|
Feb
2008
|
877
|
|||||||||||
Mezzanine
loan to a hotel
company
|
15,000
|
5,224
|
LIBOR
+
4.985% |
|
LIBOR
+
1.350% |
|
Jun
2007
|
101
|
|||||||||||
Term
loan to a diversified real estate
company
|
94,954
|
9,495
|
LIBOR
+
1.750% |
|
LIBOR
+
0.500% |
|
Aug
2007
|
904
|
|||||||||||
Term
loan to a retail company
|
100,000
|
19,960
|
LIBOR
+
3.000% |
|
LIBOR
+
0.500% |
|
Dec
2008
|
206
|
|||||||||||
$
|
414,034
|
$
|
72,427
|
$
|
3,096
|
Year
|
Shares
Issued
|
Range
of Issue Prices per Share (1)
|
Net
Proceeds (millions)
|
Options
Granted to Manager
|
|||||||||
Formation
|
16,488,517
|
N/A
|
N/A
|
N/A
|
|||||||||
2002
|
7,000,000
|
$
|
13.00
|
$
|
80.0
|
700,000
|
|||||||
2003
|
7,886,316
|
$
|
20.35-$22.85
|
$
|
163.4
|
788,227
|
|||||||
2004
|
8,484,648
|
$
|
26.30-$31.40
|
$
|
224.3
|
837,500
|
|||||||
2005
|
4,053,928
|
$
|
29.60
|
$
|
108.2
|
330,000
|
|||||||
December
31, 2005
|
43,913,409
|
(1)
|
Excludes
prices of shares issued pursuant to the exercise of options and
shares
issued to our independent
directors.
|
Held
by our manager
|
1,170,317
|
|||
Issued
to our manager and subsequently assigned to
certain of our manager's employees
|
627,490
|
|||
Held
by directors and former directors
|
14,000
|
|||
Total
|
1,811,807
|
Accumulated
other comprehensive income, December 31, 2004
|
$
|
71,770
|
||
Net
unrealized (loss) on securities
|
(67,077
|
)
|
||
Reclassification
of net realized (gain) on securities into earnings
|
(16,015
|
)
|
||
Foreign
currency translation
|
(1,089
|
)
|
||
Reclassification
of net realized foreign currency translation into earnings
|
(626
|
)
|
||
Net
unrealized gain on derivatives designated as cash flow
hedges
|
56,426
|
|||
Reclassification
of net realized loss on derivatives designated as cash flow
hedges into earnings
|
2,175
|
|||
Accumulated
other comprehensive income, December 31, 2005
|
$
|
45,564
|
Declared
for the Period Ended
|
Paid
|
Amount
Per Share
|
||
March
31, 2003
|
April
2003
|
$0.450
|
||
June
30, 2003
|
July
2003
|
$0.500
|
||
September
30, 2003
|
October
2003
|
$0.500
|
||
December
31, 2003
|
January
2004
|
$0.500
|
||
March
31, 2004
|
April
2004
|
$0.600
|
||
June
30, 2004
|
July
2004
|
$0.600
|
||
September
30, 2004
|
October
2004
|
$0.600
|
||
December
31, 2004
|
January
2005
|
$0.625
|
||
March
31, 2005
|
April
2005
|
$0.625
|
||
June
30, 2005
|
July
2005
|
$0.625
|
||
September
30, 2005
|
October
2005
|
$0.625
|
||
December
31, 2005
|
January
2006
|
$0.625
|
Total
Portfolio (1)
|
Core
Investment Portfolio (2)
|
||||||||||||
December
31,
|
December
31,
|
||||||||||||
2005
|
|
2004
|
|
2005
|
|
2004
|
|||||||
Face
amount
|
$
|
6,111,464
|
$
|
4,493,274
|
$
|
5,413,142
|
$
|
4,294,092
|
|||||
Percentage
of total assets
|
99
|
%
|
91
|
%
|
87
|
%
|
87
|
%
|
|||||
Weighted
average asset yield
|
6.59
|
%
|
5.91
|
%
|
6.85
|
%
|
5.98
|
%
|
|||||
Weighted
average liability cost
|
5.12
|
%
|
4.15
|
%
|
5.22
|
%
|
4.17
|
%
|
|||||
Weighted
average net spread
|
1.47
|
%
|
1.76
|
%
|
1.63
|
%
|
1.81
|
%
|
|||||
(1)
Excluding the ICH loans, as described in "Business - Our
Strategy."
|
||||||||
(2)
Excluding the ICH loans and Agency RMBS, as described in "Business
- Our
Strategy."
|
Contract
|
Terms
|
|
CBO
bonds payable
|
Described
under “Quantitative and Qualitative Disclosures About Market
Risk”
|
|
Other
bonds payable
|
Described
under “Quantitative and Qualitative Disclosures About Market
Risk”
|
|
Notes
payable
|
Described
under “Quantitative and Qualitative Disclosures About Market
Risk”
|
|
Repurchase
agreements
|
Described
under “Quantitative and Qualitative Disclosures About Market
Risk”
|
|
Credit
facility
|
Described
under “Quantitative and Qualitative Disclosures About Market
Risk”
|
|
Interest
rate swaps, treated as hedges
|
Described
under “Quantitative and Qualitative Disclosures About Market
Risk”
|
|
Non-hedge
derivative obligations
|
Described
under “Quantitative and Qualitative Disclosures About Market
Risk”
|
|
CBO
wrap agreement
|
Two
classes of our CBO bonds, with an aggregate $718.0 million face amount,
were issued subject to remarketing procedures and related agreements
whereby such bonds are remarketed and sold on a periodic basis. $395.0
million of these bonds are fully insured by a third party with respect
to
the timely payment of interest and principal thereon, pursuant to
a
financial guaranty insurance policy (“wrap”). We pay annual fees of 0.12%
of the outstanding face amount of the bonds under this
agreement.
|
|
CBO
backstop agreements
|
In
connection with the remarketing procedures described above, backstop
agreements have been created whereby a third party financial institution
is required to purchase
the $718.0 million face amount of bonds at the end of any remarketing
period if such bonds could not be resold in the market by the remarketing
agent. We pay annual fees between 0.15% and 0.20% of the outstanding
face
amount of such bonds under these agreements.
|
|
CBO
remarketing agreements
|
In
connection with the remarketing procedures described above, the
remarketing agent is paid an annual fee of 0.05% of the outstanding
face
amount of the bonds under the remarketing agreements.
|
|
Loan
servicing agreements
|
We
are a party to servicing agreements with respect to our residential
mortgage loans, including manufactured housing loans, and our ICH
loans.
We pay annual fees generally equal to 0.38% of the outstanding face
amount
of the residential mortgage loans, 1.00% of the outstanding face
amount of
the manufactured housing loans, and approximately 0.11% of the outstanding
face amount of the ICH loans under these agreements.
|
|
Contract
|
Terms
|
|
Trustee
agreements
|
We
have entered into trustee agreements in connection with our securitized
investments, primarily our CBOs. We pay annual fees of between 0.015%
and
0.020% of the outstanding face amount of the CBO bonds under these
agreements.
|
|
Management
agreement
|
Our
manager is paid an annual management fee of 1.5% of our gross equity,
as
defined, an expense reimbursement, and incentive compensation equal
to 25%
of our FFO above a certain threshold. For more information on this
agreement, as well as historical amounts earned, see Note 10 to our
audited consolidated financial statements under “Financial Statements and
Supplementary Data.”
|
Actual
Payments
|
Fixed
and Determinable Payments Due by Period (2)
|
||||||||||||||||||
Contract
|
2005
(1)
|
2006
|
2007-2008
|
2009-2010
|
Thereafter
|
Total
|
|||||||||||||
CBO
bonds payable
|
$
|
130,722
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
3,560,953
|
$
|
3,560,953
|
|||||||
Other
bonds payable
|
138,380
|
212,019
|
-
|
-
|
141,311
|
353,330
|
|||||||||||||
Notes
payable
|
408,283
|
-
|
260,441
|
-
|
-
|
260,441
|
|||||||||||||
Repurchase
agreements
|
284,073
|
1,048,203
|
-
|
-
|
-
|
1,048,203
|
|||||||||||||
Credit
facility
|
42,204
|
-
|
20,000
|
-
|
-
|
20,000
|
|||||||||||||
Interest
rate swaps, treated as hedges
|
25,749
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
||||||||
Non-hedge
derivative obligations
|
907
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
||||||||
CBO
wrap agreement
|
481
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
||||||||
CBO
backstop agreements
|
1,147
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
||||||||
CBO
remarketing agreements
|
316
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
||||||||
Loan
servicing agreements
|
4,851
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
||||||||
Trustee
agreements
|
747
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
||||||||
Management
agreement
|
21,132
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
(3
|
)
|
||||||||
Total
|
$
|
1,058,992
|
$
|
1,260,222
|
$
|
280,441
|
$
|
-
|
$
|
3,702,264
|
$
|
5,242,927
|
|||||||
(1) |
Includes
all payments made under the respective agreements. The management
agreement payments shown include $13.1 million of management
fees and expense reimbursements and $8.0 million of incentive
compensation.
|
(2) |
Represents
debt principal due based on contractual
maturities.
|
(3)
|
These
contracts do not have fixed and determinable
payments.
|
For
the Year Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Income
available for common stockholders
|
$
|
110,271
|
$
|
92,321
|
$
|
51,345
|
||||
Operating
real estate depreciation
|
702
|
2,199
|
3,035
|
|||||||
Accumulated
depreciation on operating real estate sold
|
(6,942
|
)
|
(8,319
|
)
|
-
|
|||||
Funds
from operations (FFO)
|
$
|
104,031
|
$
|
86,201
|
$
|
54,380
|
Book
Equity December 31, 2005 (1)
|
Average
Invested Common Equity for the Year Ended
December
31, 2005 (2)
|
FFO
for the Year Ended
December
31, 2005
|
Return
on Invested Common Equity (ROE) for the Year Ended
December
31, 2005 (3)
|
ROE
for the Year Ended
December
31, 2004 (3)
|
ROE
for the Year Ended
December
31, 2003 (3)
|
||||||||||||||
Real
estate securities and real
estate related loans
|
$
|
790,990
|
$
|
700,146
|
$
|
125,028
|
17.9
|
%
|
20.5
|
%
|
23.2
|
%
|
|||||||
Residential
mortgage loans
|
86,024
|
95,148
|
8,706
|
9.1
|
%
|
16.7
|
%
|
25.7
|
%
|
||||||||||
Operating
real estate
|
35,976
|
47,579
|
1,686
|
3.5
|
%
|
9.2
|
%
|
12.2
|
%
|
||||||||||
Unallocated
(1)
|
(139,515
|
)
|
(66,508
|
)
|
(31,389
|
)
|
N/A
|
N/A
|
N/A
|
||||||||||
Total
(2)
|
773,475
|
$
|
776,365
|
$
|
104,031
|
13.4
|
%
|
14.5
|
%
|
16.4
|
%
|
||||||||
Preferred
stock
|
102,500
|
||||||||||||||||||
Accumulated
depreciation
|
(3,536
|
)
|
|||||||||||||||||
Accumulated
other comprehensive
income
|
45,564
|
||||||||||||||||||
Net
book equity
|
$
|
918,003
|
(1)
|
Unallocated
FFO represents ($0.4 million) of interest expense, ($6.7 million)
of
preferred dividends and ($24.3 million) of corporate general and
administrative expense, management fees and incentive
compensation.
|
(2)
|
Invested
common equity is equal to book equity excluding preferred stock,
accumulated depreciation and accumulated other comprehensive
income.
|
(3)
|
FFO
divided by average invested common
equity.
|
Carrying
Value
December
31, 2005
|
December
31, 2005
|
Fair
Value
December
31, 2005
|
||||||||||||||||||||
2005
|
2004
|
Principal
Balance or Notional Amount
|
Weighted
Average Yield/ Funding Cost
|
Maturity
Date
|
2005
|
2004
|
||||||||||||||||
Assets:
|
||||||||||||||||||||||
Real
estate securities,
|
||||||||||||||||||||||
available
for sale (1)
|
$
|
4,554,519
|
$
|
3,369,496
|
$
|
4,603,217
|
6.25
|
%
|
(1)
|
|
$
|
4,554,519
|
$
|
3,369,496
|
||||||||
Real
estate securities
|
||||||||||||||||||||||
portfolio
deposit (2)
|
-
|
25,411
|
-
|
N/A
|
N/A
|
-
|
25,411
|
|||||||||||||||
Real
estate related loans (3)
|
615,551
|
591,890
|
619,783
|
8.74
|
%
|
(3)
|
|
615,865
|
600,528
|
|||||||||||||
Residential
mortgage loans (4)
|
600,682
|
654,784
|
610,970
|
6.15
|
%
|
(4)
|
|
609,486
|
654,784
|
|||||||||||||
Interest
rate caps, treated as hedges (5)
|
2,145
|
3,554
|
342,351
|
N/A
|
(5)
|
|
2,145
|
3,554
|
||||||||||||||
Total
return swaps (6)
|
3,096
|
399
|
414,034
|
N/A
|
(6)
|
|
3,096
|
399
|
||||||||||||||
Liabilities:
|
|
|||||||||||||||||||||
CBO
bonds payable (7)
|
3,530,384
|
2,656,510
|
3,560,953
|
5.27
|
%
|
(7)
|
|
3,594,638
|
2,720,704
|
|||||||||||||
Other
bonds payable (8)
|
353,330
|
222,266
|
353,330
|
5.94
|
%
|
(8)
|
|
356,294
|
227,510
|
|||||||||||||
Notes
payable (9)
|
260,441
|
652,000
|
260,441
|
4.70
|
%
|
(9)
|
|
260,441
|
652,000
|
|||||||||||||
Repurchase
agreements (10)
|
1,048,203
|
490,620
|
1,048,203
|
4.68
|
%
|
(10)
|
|
1,048,203
|
490,620
|
|||||||||||||
Credit
facility (11)
|
20,000
|
-
|
20,000
|
6.86
|
%
|
(11)
|
|
20,000
|
-
|
|||||||||||||
Interest
rate swaps, treated as hedges (12)
|
(41,170
|
)
|
13,239
|
2,943,752
|
N/A
|
(12)
|
|
(41,170
|
)
|
13,239
|
||||||||||||
Non-hedge
derivative obligations (13)
|
90
|
796
|
(13
|
)
|
N/A
|
(13)
|
|
90
|
796
|
(1)
|
These
securities contain various terms, including fixed and floating rates,
self-amortizing and interest only. Their weighted average maturity
is 5.81
years. The fair value of these securities is estimated by obtaining
third
party broker quotations, if available and practicable, and counterparty
quotations.
|
(2)
|
The
fair value of the real estate securities portfolio deposit, which
is
treated as a non-hedge derivative, is estimated by obtaining third
party
broker quotations on the underlying securities, if available and
practicable, and counterparty quotations, including a counterparty
quotation on the portion of the fair value resulting from the Excess
Carry
Amount, as defined, earned on such deposit. See “Management’s Discussion
and Analysis of Financial Condition and Results of Operations-Liquidity
and Capital Resources” for a further discussion of this
deposit.
|
(3)
|
Represents
the following loans:
|
Loan
Type
|
Current
Face
Amount
|
Carrying
Value
|
Weighted
Avg.
Yield
|
Weighted
Average
Maturity
(Years)
|
Floating
Rate Loans
as
a % of
Carrying
Value
|
Fair
Value
|
|||||||||||||
B-Notes
|
$
|
72,173
|
$
|
72,520
|
8.46
|
%
|
2.40
|
73.69
|
%
|
$
|
72,631
|
||||||||
Mezzanine
Loans
|
302,740
|
302,816
|
8.44
|
%
|
1.94
|
100.00
|
%
|
302,190
|
|||||||||||
Bank
Loans
|
56,274
|
56,563
|
6.58
|
%
|
2.51
|
100.00
|
%
|
56,677
|
|||||||||||
Real
Estate Loans
|
23,082
|
22,364
|
20.02
|
%
|
2.00
|
0.00
|
%
|
23,079
|
|||||||||||
ICH
Loans
|
165,514
|
161,288
|
8.64
|
%
|
1.55
|
2.24
|
%
|
161,288
|
|||||||||||
$
|
619,783
|
$
|
615,551
|
8.74
|
%
|
1.94
|
67.06
|
%
|
$
|
615,865
|
(4)
|
This
aggregate portfolio of residential loans consists of a portfolio
of
floating rate residential mortgage loans as well as a portfolio of
primarily fixed rate manufactured housing loans. The $333.2 million
portfolio of residential mortgage loans has a weighted average maturity
of
2.73 years. The $267.5 million portfolio of manufactured housing
loans has
a weighted average maturity of 5.78 years. These loans were valued
by
discounting expected future cash flows by a rate calculated based
on
current market conditions for comparable financial instruments, including
market interest rates and credit spreads.
|
(5)
|
Represents
cap agreements as follows:
|
Notional
Balance
|
Effective
Date
|
Maturity
Date
|
Capped
Rate
|
Strike
Rate
|
Fair
Value
|
|||||
$ 262,732
|
Current
|
March
2009
|
1-Month
LIBOR
|
6.50%
|
$
184
|
|||||
18,000
|
January
2010
|
October
2015
|
3-Month
LIBOR
|
8.00%
|
342
|
|||||
8,619
|
December
2010
|
June
2015
|
3-Month
LIBOR
|
7.00%
|
567
|
|||||
53,000
|
May
2011
|
September
2015
|
1-Month
LIBOR
|
7.50%
|
1,052
|
|||||
$ 342,351
|
$
2,145
|
(6)
|
Represents
total return swaps which are treated as non-hedge derivatives. The
fair
value of these agreements, which is included in Derivative Assets,
is
estimated by obtaining counterparty quotations. See “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources” for a further discussion of
these swaps.
|
(7)
|
These
bonds were valued by discounting expected future cash flows by a
rate
calculated based on current market conditions for comparable financial
instruments, including market interest rates and credit spreads.
The
weighted average maturity of the CBO bonds payable is 6.55 years.
The CBO
bonds payable amortize principal prior to maturity based on collateral
receipts, subject to reinvestment
requirements.
|
(8)
|
These
bonds were valued by discounting expected future cash flows by a
rate
calculated based on current market conditions for comparable financial
instruments, including market interest rates and credit spreads.
The ICH
bonds amortize principal prior to maturity based on collateral receipts
and have a weighted average maturity of 1.46 years. The manufactured
housing loan bonds have a weighted average maturity of 0.08 years,
bear a
floating rate of interest, and are subject to adjustment monthly
based on
the agreed upon market value of the loan
portfolio.
|
(9)
|
The
residential mortgage loan financing has a weighted average maturity
of
1.21 years, bears a floating rate of interest, and is subject to
adjustment monthly based on the agreed upon market value of the loan
portfolio. This
financing was valued by discounting expected future cash flows by
a rate
calculated based on current market conditions for comparable financial
instruments, including market interest rates and credit spreads.
|
(10)
|
These
agreements bear floating rates of interest, which reset monthly or
quarterly to a market credit spread, and we believe that, for similar
financial instruments with comparable credit risks, the effective
rates
approximate market rates. Accordingly, the carrying amounts outstanding
are believed to approximate fair value. These agreements have a weighted
average maturity of 0.10 years.
|
(11)
|
This
facility, which has a weighted average maturity of 2.55 years, bears
a
floating rate of interest. We believe that, for similar financial
instruments with comparable credit risk, the effective rate approximates
a
market rate. We note that two new banks joined the lending group
in
December 2005 at the same rate. Accordingly, the carrying amount
outstanding is believed to approximate fair
value.
|
(12)
|
Represents
current swap agreements as follows (in
thousands):
|
Notional
Balance
|
Maturity
Date
|
Swapped
Rate
|
Fixed
Rate
|
Fair
Value
|
||||
$
262,732
|
March
2009
|
1-Month
LIBOR*
|
3.1250%
|
$ (10,106)
|
||||
290,000
|
April
2011
|
3-Month
LIBOR
|
5.9325%
|
12,628
|
||||
276,060
|
March
2013
|
3-Month
LIBOR
|
3.8650%
|
(14,599)
|
||||
192,500
|
March
2015
|
1-Month
LIBOR
|
4.8880%
|
478
|
||||
165,300
|
March
2014
|
3-Month
LIBOR
|
3.9945%
|
(8,492)
|
||||
189,373
|
September
2014
|
3-Month
LIBOR
|
4.3731%
|
(6,566)
|
||||
243,337
|
March
2015
|
1-Month
LIBOR
|
4.8495%
|
(331)
|
||||
307,355
|
December
2015
|
1-Month
LIBOR
|
4.9885%
|
2,179
|
||||
34,151
|
December
2015
|
1-Month
LIBOR
|
5.0098%
|
335
|
||||
227,576
|
February
2014
|
1-Month
LIBOR
|
4.2070%
|
(5,010)
|
||||
5,000
|
November
2008
|
1-Month
LIBOR
|
3.5400%
|
(165)
|
||||
4,500
|
November
2018
|
1-Month
LIBOR
|
4.4800%
|
(88)
|
||||
45,600
|
January
2009
|
1-Month
LIBOR
|
3.6500%
|
(1,467)
|
||||
12,000
|
January
2015
|
1-Month
LIBOR
|
4.5100%
|
(334)
|
||||
68,606
|
October
2009
|
1-Month
LIBOR
|
3.7150%
|
(1,763)
|
||||
65,257
|
September
2009
|
1-Month
LIBOR
|
3.7090%
|
(1,665)
|
||||
22,465
|
December
2009
|
1-Month
LIBOR
|
3.8290%
|
(534)
|
||||
7,614
|
August
2009
|
1-Month
LIBOR
|
4.0690%
|
(128)
|
||||
22,091
|
February
2010
|
1-Month
LIBOR
|
4.1030%
|
(386)
|
||||
34,692
|
April
2010
|
1-Month
LIBOR
|
4.5310%
|
(245)
|
||||
30,062
|
March
2010
|
1-Month
LIBOR
|
4.5260%
|
(212)
|
||||
25,328
|
April
2010
|
1-Month
LIBOR
|
4.1640%
|
(413)
|
||||
42,954
|
March
2010
|
1-Month
LIBOR
|
4.0910%
|
(760)
|
||||
44,113
|
May
2010
|
1-Month
LIBOR
|
3.9900%
|
(925)
|
||||
22,037
|
April
2010
|
1-Month
LIBOR
|
3.9880%
|
(457)
|
||||
38,293
|
September
2010
|
1-Month
LIBOR
|
4.3980%
|
(421)
|
||||
18,698
|
September
2010
|
1-Month
LIBOR
|
4.4300%
|
(190)
|
||||
45,174
|
August
2010
|
1-Month
LIBOR
|
4.4865%
|
(378)
|
||||
28,336
|
August
2010
|
1-Month
LIBOR
|
4.4210%
|
(290)
|
||||
21,666
|
June
2010
|
1-Month
LIBOR
|
4.4870%
|
(180)
|
||||
22,818
|
August
2010
|
1-Month
LIBOR
|
4.4900%
|
(192)
|
||||
44,776
|
July
2010
|
1-Month
LIBOR
|
4.4290%
|
(455)
|
||||
60,985
|
December
2010
|
1-Month
LIBOR
|
4.7710%
|
(78)
|
||||
5,433
|
December
2015
|
3-Month
LIBOR
|
4.9618%
|
8
|
||||
16,870
|
December
2015
|
3-Month
LIBOR
|
4.9670%
|
32
|
||||
$ 2,943,752
|
$ (41,170)
|
* |
up
to 6.50%
|
(13)
|
These
are two essentially offsetting interest rate caps and two essentially
offsetting interest rate swaps, each with notional amounts of $32.5
million, an interest rate cap with a notional balance of $17.5 million,
and four interest rate swaps with an aggregate notional amount of
$19.2
million. The maturity date of the purchased swap is July 2009; the
maturity date of the sold swap is July 2014, the maturity date of
the
$32.5 million caps is July 2038, the maturity date of the $17.5 million
cap is July 2009, and the maturity dates of the latter four interest
rate
swaps range between November 2008 and January 2009. The fair value
of
these agreements is estimated by obtaining counterparty quotations.
|
December
31,
|
|||||||
2005
|
2004
|
||||||
Assets
|
|||||||
Real
estate securities, available for sale - Note 4
|
$
|
4,554,519
|
$
|
3,369,496
|
|||
Real
estate securities portfolio deposit - Note 4
|
—
|
25,411
|
|||||
Real
estate related loans, net - Note 5
|
615,551
|
591,890
|
|||||
Residential
mortgage loans, net - Note 5
|
600,682
|
654,784
|
|||||
Investments
in unconsolidated subsidiaries - Note 3
|
29,953
|
41,230
|
|||||
Operating
real estate, net - Note 6
|
16,673
|
57,193
|
|||||
Real
estate held for sale - Note 6
|
—
|
12,376
|
|||||
Cash
and cash equivalents
|
21,275
|
37,911
|
|||||
Restricted
cash
|
268,910
|
77,974
|
|||||
Derivative
assets - Note 7
|
63,834
|
27,122
|
|||||
Receivables
and other assets
|
38,302
|
37,333
|
|||||
$
|
6,209,699
|
$
|
4,932,720
|
||||
Liabilities
and Stockholders' Equity
|
|||||||
Liabilities
|
|||||||
CBO
bonds payable - Note 8
|
$
|
3,530,384
|
$
|
2,656,510
|
|||
Other
bonds payable - Note 8
|
353,330
|
222,266
|
|||||
Notes
payable - Note 8
|
260,441
|
652,000
|
|||||
Repurchase
agreements - Note 8
|
1,048,203
|
490,620
|
|||||
Credit
facility - Note 8
|
20,000
|
—
|
|||||
Derivative
liabilities - Note 7
|
18,392
|
39,661
|
|||||
Dividends
payable
|
29,052
|
25,928
|
|||||
Due
to affiliates - Note 10
|
8,783
|
8,963
|
|||||
Accrued
expenses and other liabilities
|
23,111
|
40,057
|
|||||
5,291,696
|
4,136,005
|
||||||
Commitments
and contingencies - Notes 9, 10 and 11
|
—
|
—
|
|||||
Stockholders'
Equity
|
|||||||
Preferred
stock, $0.01 par value, 100,000,000 shares authorized,
2,500,000
|
|||||||
Redeemable
preferred stock, $.01 par value, 100,000,000 shares
authorized,
|
|||||||
shares
of 9.75% Series B Cumulative Redeemable Preferred Stock
|
|||||||
and
1,600,000 shares of 8.05% Series C Cumulative Redeemable Preferred
Stock,
|
|||||||
liquidation
preference $25.00 per share, issued and outstanding
|
102,500
|
62,500
|
|||||
(Series
C issued in 2005)
|
|||||||
Common
stock, $0.01 par value, 500,000,000 shares authorized,
43,913,409
|
|||||||
and
39,859,481 shares issued and outstanding at
|
|||||||
December
31, 2005 and 2004, respectively
|
439
|
399
|
|||||
Additional
paid-in capital
|
782,735
|
676,015
|
|||||
Dividends
in excess of earnings - Note 2
|
(13,235
|
)
|
(13,969
|
)
|
|||
Accumulated
other comprehensive income - Note 2
|
45,564
|
71,770
|
|||||
918,003
|
796,715
|
||||||
$
|
6,209,699
|
$
|
4,932,720
|
||||
Year
Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Revenues
|
||||||||||
Interest
income
|
$
|
348,516
|
$
|
225,761
|
$
|
133,183
|
||||
Rental
and escalation income
|
6,647
|
4,744
|
4,238
|
|||||||
Gain
on sale of investments, net
|
20,305
|
18,314
|
13,179
|
|||||||
Other
income
|
2,745
|
850
|
1,484
|
|||||||
378,213
|
249,669
|
152,084
|
||||||||
Expenses
|
||||||||||
Interest
expense
|
226,446
|
136,398
|
76,877
|
|||||||
Property
operating expense
|
2,363
|
2,575
|
2,427
|
|||||||
Loan
and security servicing expense
|
5,993
|
3,057
|
2,154
|
|||||||
Provision
for credit losses
|
8,421
|
-
|
-
|
|||||||
General
and administrative expense
|
4,159
|
4,597
|
3,148
|
|||||||
Management
fee to affiliate - Note 10
|
13,325
|
10,620
|
6,468
|
|||||||
Incentive
compensation to affiliate - Note 10
|
7,627
|
7,959
|
6,226
|
|||||||
Depreciation
and amortization
|
641
|
451
|
405
|
|||||||
268,975
|
165,657
|
97,705
|
||||||||
Income
before equity in earnings of unconsolidated subsidiaries
|
109,238
|
84,012
|
54,379
|
|||||||
Equity
in earnings of unconsolidated subsidiaries - Note 3
|
5,930
|
12,465
|
862
|
|||||||
Income
taxes on related taxable subsidiaries - Note 12
|
(321
|
)
|
(2,508
|
)
|
-
|
|||||
Income
from continuing operations
|
114,847
|
93,969
|
55,241
|
|||||||
Income
from discontinued operations - Note 6
|
2,108
|
4,446
|
877
|
|||||||
Net
Income
|
116,955
|
98,415
|
56,118
|
|||||||
Preferred
dividends
|
(6,684
|
)
|
(6,094
|
)
|
(4,773
|
)
|
||||
Income
available for common stockholders
|
$
|
110,271
|
$
|
92,321
|
$
|
51,345
|
||||
Net
Income Per Share of Common Stock
|
||||||||||
Basic
|
$
|
2.53
|
$
|
2.50
|
$
|
1.98
|
||||
Diluted
|
$
|
2.51
|
$
|
2.46
|
$
|
1.96
|
||||
Income
from continuing operations per share of common stock,
after preferred dividends
|
||||||||||
Basic
|
$
|
2.48
|
$
|
2.38
|
$
|
1.95
|
||||
Diluted
|
$
|
2.46
|
$
|
2.34
|
$
|
1.93
|
||||
Income
(loss) from discontinued operations per share of common
stock
|
||||||||||
Basic
|
$
|
0.05
|
$
|
0.12
|
$
|
0.03
|
||||
Diluted
|
$
|
0.05
|
$
|
0.12
|
$
|
0.03
|
||||
Weighted
Average Number of Shares of Common Stock
|
||||||||||
Outstanding
|
||||||||||
Basic
|
43,671,517
|
36,943,752
|
25,898,288
|
|||||||
Diluted
|
43,985,642
|
37,557,790
|
26,140,777
|
|||||||
Dividends
Declared per Share of Common Stock
|
$
|
2.500
|
$
|
2.425
|
$
|
1.950
|
Preferred
Stock
|
Common
Stock
|
||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Additional
Pd. in Capital
|
Dividends
in Excess of Earnings
|
Accum.
Other Comp. Income
|
Total
Stock-Holders' Equity
|
||||||||||||||||||
Stockholders'
equity - December 31, 2004
|
2,500,000
|
$
|
62,500
|
39,859,481
|
$
|
399
|
$
|
676,015
|
$
|
(13,969
|
)
|
$
|
71,770
|
$
|
796,715
|
||||||||||
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
(116,221
|
)
|
-
|
(116,221
|
)
|
|||||||||||||||
Issuance
of common stock
|
-
|
-
|
3,300,000
|
33
|
96,449
|
-
|
-
|
96,482
|
|||||||||||||||||
Issuance
of common stock to directors
|
-
|
-
|
2,008
|
-
|
67
|
-
|
-
|
67
|
|||||||||||||||||
Exercise
of common stock options
|
-
|
-
|
751,920
|
7
|
11,687
|
-
|
-
|
11,694
|
|||||||||||||||||
Issuance
of preferred stock
|
1,600,000
|
40,000
|
-
|
-
|
(1,483
|
)
|
-
|
-
|
38,517
|
||||||||||||||||
Comprehensive
income:
|
|||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
116,955
|
-
|
116,955
|
|||||||||||||||||
Net
unrealized (loss) on securities
|
-
|
-
|
-
|
-
|
-
|
-
|
(67,077
|
)
|
(67,077
|
)
|
|||||||||||||||
Reclassification
of net realized (gain) on securities into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(16,015
|
)
|
(16,015
|
)
|
|||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,089
|
)
|
(1,089
|
)
|
|||||||||||||||
Reclassification
of net realized foreign currency translation into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(626
|
)
|
(626
|
)
|
|||||||||||||||
Net
unrealized gain on derivatives designated as cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
-
|
56,426
|
56,426
|
|||||||||||||||||
Reclassification
of net realized loss on derivatives designated cash flow
hedges into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
2,175
|
2,175
|
|||||||||||||||||
Total
comprehensive income
|
90,749
|
||||||||||||||||||||||||
Stockholders'
equity - December 31, 2005
|
4,100,000
|
$
|
102,500
|
43,913,409
|
$
|
439
|
$
|
782,735
|
$
|
(13,235
|
)
|
$
|
45,564
|
$
|
918,003
|
||||||||||
|
|||||||||||||||||||||||||
Stockholders'
equity - December 31, 2003
|
2,500,000
|
$
|
62,500
|
31,374,833
|
$
|
314
|
$
|
451,806
|
$
|
(14,670
|
)
|
$
|
39,413
|
$
|
539,363
|
||||||||||
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
(97,714
|
)
|
-
|
(97,714
|
)
|
|||||||||||||||
Issuance
of common stock
|
-
|
-
|
8,375,000
|
84
|
222,721
|
-
|
-
|
222,805
|
|||||||||||||||||
Issuance
of common stock to directors
|
-
|
-
|
2,148
|
-
|
60
|
-
|
-
|
60
|
|||||||||||||||||
Exercise
of common stock options
|
-
|
-
|
107,500
|
1
|
1,428
|
-
|
-
|
1,429
|
|||||||||||||||||
Comprehensive
income:
|
|||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
98,415
|
-
|
98,415
|
|||||||||||||||||
Net
unrealized gain on securities
|
-
|
-
|
-
|
-
|
-
|
-
|
34,088
|
34,088
|
|||||||||||||||||
Reclassification
of net realized (gain) on securities into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(14,574
|
)
|
(14,574
|
)
|
|||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
1,984
|
1,984
|
|||||||||||||||||
Reclassification
of net realized foreign currency translation into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(1,478
|
)
|
(1,478
|
)
|
|||||||||||||||
Net
unrealized gain on derivatives designated as cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
-
|
11,973
|
11,973
|
|||||||||||||||||
Reclassification
of net realized loss on derivatives designated as cash flow
hedges into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
364
|
364
|
|||||||||||||||||
Total
comprehensive income
|
130,772
|
||||||||||||||||||||||||
Stockholders'
equity - December 31, 2004
|
2,500,000
|
$
|
62,500
|
39,859,481
|
$
|
399
|
$
|
676,015
|
$
|
(13,969
|
)
|
$
|
71,770
|
$
|
796,715
|
Preferred
Stock
|
Common
Stock
|
Additional
Pd. in
|
Dividends
in Excess of
|
Accum.
Other Comp.
|
Total
Stock-Holders'
|
||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Earnings
|
Income
|
Equity
|
||||||||||||||||||
Stockholders'
equity - December 31, 2002
|
-
|
$
|
-
|
23,488,517
|
$
|
235
|
$
|
290,935
|
$
|
(13,966
|
)
|
$
|
7,037
|
$
|
284,241
|
||||||||||
Dividends
declared
|
-
|
-
|
-
|
-
|
-
|
(56,822
|
)
|
-
|
(56,822
|
)
|
|||||||||||||||
Issuance
of preferred stock
|
2,500,000
|
62,500
|
-
|
-
|
(2,436
|
)
|
-
|
-
|
60,064
|
||||||||||||||||
Issuance
of common stock
|
-
|
-
|
7,882,276
|
79
|
163,242
|
-
|
-
|
163,321
|
|||||||||||||||||
Issuance
of common stock to directors
|
-
|
-
|
1,540
|
-
|
30
|
-
|
-
|
30
|
|||||||||||||||||
Exercise
of common stock options
|
-
|
-
|
2,500
|
-
|
35
|
-
|
-
|
35
|
|||||||||||||||||
Comprehensive
income:
|
|||||||||||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
56,118
|
-
|
56,118
|
|||||||||||||||||
Net
unrealized gain on securities
|
-
|
-
|
-
|
-
|
-
|
-
|
23,670
|
23,670
|
|||||||||||||||||
Reclassification
of net realized (gain) on securities into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
(13,185
|
)
|
(13,185
|
)
|
|||||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
-
|
-
|
4,653
|
4,653
|
|||||||||||||||||
Reclassification
of net realized foreign currency translation into earnings
|
-
|
-
|
-
|
-
|
-
|
-
|
396
|
396
|
|||||||||||||||||
Net
unrealized (loss) on derivatives designated as cash flow
hedges
|
-
|
-
|
-
|
-
|
-
|
-
|
16,842
|
16,842
|
|||||||||||||||||
Total
comprehensive income
|
88,494
|
||||||||||||||||||||||||
Stockholders'
equity - December 31, 2003
|
2,500,000
|
$
|
62,500
|
31,374,833
|
$
|
314
|
$
|
451,806
|
$
|
(14,670
|
)
|
$
|
39,413
|
$
|
539,363
|
Year
Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Cash
Flows From Operating Activities
|
||||||||||
Net
income
|
$
|
116,955
|
$
|
98,415
|
$
|
56,118
|
||||
Adjustments
to reconcile net income to net cash provided by operating activities
(inclusive of amounts related to discontinued
operations):
|
||||||||||
Depreciation
and amortization
|
818
|
2,253
|
3,085
|
|||||||
Accretion
of discount and other amortization
|
(2,645
|
)
|
1,898
|
(3,761
|
)
|
|||||
Equity
in earnings of unconsolidated subsidiaries
|
(5,930
|
)
|
(12,465
|
)
|
(862
|
)
|
||||
Distributions
of earnings from unconsolidated subsidiaries
|
5,930
|
12,465
|
862
|
|||||||
Deferred
rent
|
(2,539
|
)
|
(1,380
|
)
|
(1,853
|
)
|
||||
Gain
on sale of investments
|
(20,811
|
)
|
(22,029
|
)
|
(11,789
|
)
|
||||
Unrealized
gain on non-hedge derivatives
|
(2,839
|
)
|
(3,332
|
)
|
(3,696
|
)
|
||||
Provision
for credit losses
|
8,421
|
-
|
-
|
|||||||
Non-cash
directors' compensation
|
67
|
60
|
30
|
|||||||
Change
in
|
||||||||||
Restricted
cash
|
(7,980
|
)
|
(8,137
|
)
|
(2,564
|
)
|
||||
Receivables
and other assets
|
218
|
(5,431
|
)
|
(9,403
|
)
|
|||||
Due
to affiliates
|
(180
|
)
|
6,518
|
1,110
|
||||||
Accrued
expenses and other liabilities
|
9,278
|
21,520
|
11,177
|
|||||||
Net
cash provided by operating activities:
|
98,763
|
90,355
|
38,454
|
|||||||
Cash
Flows From Investing Activities
|
||||||||||
Purchase
of real estate securities
|
(1,463,581
|
)
|
(1,426,762
|
)
|
(1,407,948
|
)
|
||||
Proceeds
from sale of real estate securities
|
60,254
|
193,246
|
255,030
|
|||||||
Deposit
on real estate securities (treated as a derivative)
|
(57,149
|
)
|
(80,311
|
)
|
(59,676
|
)
|
||||
Purchase
of and advances on loans
|
(584,270
|
)
|
(631,728
|
)
|
(685,311
|
)
|
||||
Proceeds
from settlement of loans
|
1,901
|
124,440
|
164,404
|
|||||||
Repayments
of loan and security principal
|
698,002
|
428,091
|
105,848
|
|||||||
Purchase
of derivative instruments
|
-
|
-
|
(5,482
|
)
|
||||||
Margin
deposit on derivative instruments
|
(53,518
|
)
|
-
|
-
|
||||||
Proceeds
from sale of derivative instruments
|
1,338
|
-
|
-
|
|||||||
Payments
on settlement of derivative instruments
|
(1,112
|
)
|
-
|
-
|
||||||
Purchase
and improvement of operating real estate
|
(182
|
)
|
(141
|
)
|
(576
|
)
|
||||
Proceeds
from sale of operating real estate
|
52,333
|
71,871
|
5,331
|
|||||||
Contributions
to unconsolidated subsidiaries
|
-
|
(26,789
|
)
|
(30,871
|
)
|
|||||
Distributions
of capital from unconsolidated subsidiaries
|
11,277
|
16,199
|
225
|
|||||||
Payment
of deferred transaction costs
|
(39
|
)
|
(280
|
)
|
-
|
|||||
Net
cash used in investing activities
|
(1,334,746
|
)
|
(1,332,164
|
)
|
(1,659,026
|
)
|
Year
Ended December 31,
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Cash
Flows From Financing Activities
|
||||||||||
Issuance
of CBO bonds payable
|
880,570
|
859,719
|
921,503
|
|||||||
Repayments
of CBO bonds payable
|
(10,241
|
)
|
(604
|
)
|
-
|
|||||
Issuance
of other bonds payable
|
246,547
|
-
|
-
|
|||||||
Repayments
of other bonds payable
|
(114,780
|
)
|
(41,759
|
)
|
(6,413
|
)
|
||||
Borrowings
under notes payable
|
-
|
614,106
|
80,000
|
|||||||
Repayments
of notes payable
|
(391,559
|
)
|
(119,407
|
)
|
(906
|
)
|
||||
Borrowings
under repurchase agreements
|
815,840
|
654,254
|
663,120
|
|||||||
Repayments
of repurchase agreements
|
(258,257
|
)
|
(879,417
|
)
|
(195,506
|
)
|
||||
Draws
under credit facility
|
62,000
|
-
|
-
|
|||||||
Repayments
of credit facility
|
(42,000
|
)
|
-
|
-
|
||||||
Issuance
of common stock
|
97,680
|
222,805
|
168,610
|
|||||||
Costs
related to issuance of common stock
|
(1,198
|
)
|
-
|
(5,289
|
)
|
|||||
Exercise
of common stock options
|
11,694
|
1,429
|
35
|
|||||||
Issuance
of preferred stock
|
40,000
|
-
|
62,500
|
|||||||
Costs
related to issuance of preferred stock
|
(1,483
|
)
|
-
|
(2,436
|
)
|
|||||
Dividends
paid
|
(113,097
|
)
|
(88,489
|
)
|
(49,280
|
)
|
||||
Payment
of deferred financing costs
|
(2,369
|
)
|
(3,320
|
)
|
(426
|
)
|
||||
Net
cash provided by financing activities
|
1,219,347
|
1,219,317
|
1,635,512
|
|||||||
Net
Increase (Decrease) in Cash and Cash Equivalents
|
(16,636
|
)
|
(22,492
|
)
|
14,940
|
|||||
Cash
and Cash Equivalents, Beginning of Period
|
37,911
|
60,403
|
45,463
|
|||||||
Cash
and Cash Equivalents, End of Period
|
$
|
21,275
|
$
|
37,911
|
$
|
60,403
|
||||
Supplemental
Disclosure of Cash Flow Information
|
||||||||||
Cash
paid during the period for interest expense
|
$
|
213,070
|
$
|
135,172
|
$
|
80,522
|
||||
Cash
paid during the period for income taxes
|
$
|
448
|
$
|
2,639
|
$
|
-
|
||||
Supplemental
Schedule of Non-cash Investing and Financing
Activities
|
||||||||||
Common
stock dividends declared but not paid
|
$
|
27,446
|
$
|
24,912
|
$
|
15,687
|
||||
Preferred
stock dividends declared but not paid
|
$
|
1,606
|
$
|
1,016
|
$
|
1,016
|
||||
Deposits
used in acquisiton of real estate securities (treated as
derivatives)
|
$
|
82,334
|
$
|
75,824
|
$
|
81,492
|
||||
Consolidation
of ICH CMO
|
$
|
-
|
$
|
-
|
$
|
221,773
|
1. |
ORGANIZATION
|
Year |
Shares
Issued
|
Range
of Issue Prices (1)
|
Net
Proceeds
(millions)
|
|||||||
Formation
|
16,488,517
|
N/A
|
N/A
|
|||||||
2002
|
7,000,000
|
$
|
13.00
|
$
|
80.0
|
|||||
2003
|
7,886,316
|
$
|
20.35-$22.85
|
$
|
163.4
|
|||||
2004
|
8,484,648
|
$
|
26.30-$31.40
|
$
|
224.3
|
|||||
2005
|
4,053,928
|
$
|
29.60
|
$
|
108.2
|
|||||
December
31, 2005
|
43,913,409
|
|||||||||
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
December
31,
|
|||||||
2005
|
2004
|
||||||
Net
unrealized gains on securities
|
$
|
16,782
|
$
|
99,875
|
|||
Net
unrealized gains (losses) on derivatives
designated
as cash flow hedges
|
26,738
|
(31,862
|
)
|
||||
Net
foreign currency translation adjustments
|
2,044
|
3,757
|
|||||
Accumulated
other comprehensive income
|
$
|
45,564
|
$
|
71,770
|
1)
|
Interest
rate risk, existing debt obligations - Newcastle generally hedges
the risk
of interest rate fluctuations with respect to its borrowings, regardless
of the form of such borrowings, which require payments based on a
variable
interest rate index. Newcastle generally intends to hedge only the
risk
related to changes in the benchmark interest rate (LIBOR or a Treasury
rate). In order to reduce such risks, Newcastle may enter into swap
agreements whereby Newcastle would receive floating rate payments
in
exchange for fixed rate payments, effectively converting the borrowing
to
fixed rate. Newcastle may also enter into cap agreements whereby,
in
exchange for a premium, Newcastle would be reimbursed for interest
paid in
excess of a certain cap rate.
|
2)
|
Interest
rate risk, anticipated transactions - Newcastle may hedge the aggregate
risk of interest rate fluctuations with respect to anticipated
transactions, primarily anticipated borrowings. The primary risk
involved
in an anticipated borrowing is that interest rates may increase between
the date the transaction becomes probable and the date of consummation.
Newcastle generally intends to hedge only the risk related to changes
in
the benchmark interest rate (LIBOR or a Treasury rate). This is generally
accomplished through the use of interest rate
swaps.
|
3)
|
Interest
rate risk, fair value of investments - Newcastle occasionally hedges
the
fair value of investments acquired outside of its warehouse agreements
(Note 4) prior to such investments being included in a CBO financing
(Note
8). The primary risk involved is the risk that the fair value of
such an
investment will change between the acquisition date and the date
the terms
of the related financing are “locked in.” Newcastle generally intends to
hedge only the risk related to changes in the benchmark interest
rate
(LIBOR or a Treasury rate). This is generally accomplished through
the use
of interest rate swaps.
|
Derivative
Assets
|
2005
|
2004
|
|||||
Interest
rate caps (A)
|
$
|
2,145
|
$
|
3,554
|
|||
Interest
rate swaps (A)
|
56,829
|
21,001
|
|||||
Total
return swaps
|
3,096
|
399
|
|||||
Non-hedge
derivatives (B)
|
1,764
|
2,168
|
|||||
$
|
63,834
|
$
|
27,122
|
||||
Derivative
Liabilities
|
|||||||
Interest
rate swaps (A)
|
$
|
15,659
|
$
|
34,240
|
|||
Interest
payable
|
1,059
|
2,457
|
|||||
Non-hedge
derivatives (B)
|
1,674
|
2,964
|
|||||
$
|
18,392
|
$
|
39,661
|
(A)
Treated as hedges
|
|||||||
(B)
Interest rate swaps and caps
|
December
31,
|
|||||||
2005
|
2004
|
||||||
Held
in CBO structures (Note 8) pending
reinvestment
|
$
|
173,438
|
$
|
44,719
|
|||
Total
return swap margin accounts
|
72,427
|
18,190
|
|||||
Bond
sinking funds
|
9,532
|
207
|
|||||
Trustee
accounts
|
9,047
|
9,652
|
|||||
Reserve
accounts
|
2,558
|
2,084
|
|||||
Derivative
margin accounts
|
1,908
|
2,573
|
|||||
Restricted
property operating accounts
|
-
|
549
|
|||||
$
|
268,910
|
$
|
77,974
|
2005
|
2004
|
2003
|
||||||||
Accretion
of net discount on securities and loans
|
$
|
(13,432
|
)
|
$
|
(4,282
|
)
|
$
|
(4,532
|
)
|
|
Amortization
of net discount on debt obligations
|
4,574
|
4,132
|
3,800
|
|||||||
Amortization
of deferred financing costs and interest rate cap premiums
|
4,417
|
3,979
|
1,531
|
|||||||
Amortization
of net deferred hedge gains and losses - debt
|
1,587
|
(2,118
|
)
|
(4,752
|
)
|
|||||
Amortization
of deferred hedge loss - leases
|
209
|
187
|
192
|
|||||||
$
|
(2,645
|
)
|
$
|
1,898
|
$
|
(3,761
|
)
|
3. |
INFORMATION
REGARDING BUSINESS SEGMENTS AND UNCONSOLIDATED
SUBSIDIARIES
|
Real
Estate Securities and Real Estate Related Loans
|
Residential
Mortgage Loans
|
Operating
Real Estate
|
Unallocated
|
Total
|
||||||||||||
December
31, 2005 and the Year then Ended
|
||||||||||||||||
Gross
revenues
|
$
|
321,889
|
$
|
48,844
|
$
|
6,772
|
$
|
708
|
$
|
378,213
|
||||||
Operating
expenses
|
(4,163
|
)
|
(10,384
|
)
|
(2,456
|
)
|
(24,885
|
)
|
(41,888
|
)
|
||||||
Operating
income (loss)
|
317,726
|
38,460
|
4,316
|
(24,177
|
)
|
336,325
|
||||||||||
Interest
expense
|
(196,026
|
)
|
(29,754
|
)
|
(251
|
)
|
(415
|
)
|
(226,446
|
)
|
||||||
Depreciation
and amortization
|
-
|
-
|
(528
|
)
|
(113
|
)
|
(641
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
3,328
|
-
|
2,281
|
-
|
5,609
|
|||||||||||
Income
(loss) from continuing operations
|
125,028
|
8,706
|
5,818
|
(24,705
|
)
|
114,847
|
||||||||||
Income
(loss) from discontinued operations
|
-
|
-
|
2,108
|
-
|
2,108
|
|||||||||||
Net
income (loss)
|
$
|
125,028
|
$
|
8,706
|
$
|
7,926
|
$
|
(24,705
|
)
|
$
|
116,955
|
|||||
Revenue
derived from non-US sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
12,157
|
$
|
-
|
$
|
12,157
|
||||||
Belgium
|
$
|
-
|
$
|
-
|
$
|
125
|
$
|
-
|
$
|
125
|
||||||
Total
assets
|
$
|
5,544,818
|
$
|
606,320
|
$
|
36,306
|
$
|
22,255
|
$
|
6,209,699
|
||||||
Long-lived
assets outside the US:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
16,673
|
$
|
-
|
$
|
16,673
|
||||||
December
31, 2004 and the Year then Ended
|
||||||||||||||||
Gross
revenues
|
$
|
225,236
|
$
|
19,135
|
$
|
4,745
|
$
|
553
|
$
|
249,669
|
||||||
Operating
expenses
|
(828
|
)
|
(2,319
|
)
|
(2,678
|
)
|
(22,983
|
)
|
(28,808
|
)
|
||||||
Operating
income (loss)
|
224,408
|
16,816
|
2,067
|
(22,430
|
)
|
220,861
|
||||||||||
Interest
expense
|
(124,930
|
)
|
(10,863
|
)
|
(605
|
)
|
-
|
(136,398
|
)
|
|||||||
Depreciation
and amortization
|
-
|
-
|
(445
|
)
|
(6
|
)
|
(451
|
)
|
||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
3,767
|
-
|
6,190
|
-
|
9,957
|
|||||||||||
Income
(loss) from continuing operations
|
103,245
|
5,953
|
7,207
|
(22,436
|
)
|
93,969
|
||||||||||
Income
(loss) from discontinued operations
|
-
|
-
|
4,446
|
-
|
4,446
|
|||||||||||
Net
income (loss)
|
$
|
103,245
|
$
|
5,953
|
$
|
11,653
|
$
|
(22,436
|
)
|
$
|
98,415
|
|||||
Revenue
derived from non-US sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
13,203
|
$
|
-
|
$
|
13,203
|
||||||
Belgium
|
$
|
-
|
$
|
-
|
$
|
10,602
|
$
|
-
|
$
|
10,602
|
||||||
Total
assets
|
$
|
4,136,203
|
$
|
658,643
|
$
|
108,322
|
$
|
29,552
|
$
|
4,932,720
|
||||||
Long-lived
assets outside the US:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
57,193
|
$
|
-
|
$
|
57,193
|
||||||
Belgium
|
$
|
-
|
$
|
-
|
$
|
12,376
|
$
|
-
|
$
|
12,376
|
Real
Estate Securities and Real Estate Related Loans
|
Residential
Mortgage Loans
|
Operating
Real Estate
|
Unallocated
|
Total
|
||||||||||||
December
31, 2003 and the Year then Ended
|
||||||||||||||||
Gross
revenues
|
$
|
134,348
|
$
|
12,892
|
$
|
4,264
|
$
|
580
|
$
|
152,084
|
||||||
Operating
expenses
|
(821
|
)
|
(1,506
|
)
|
(2,493
|
)
|
(15,603
|
)
|
(20,423
|
)
|
||||||
Operating
income (loss)
|
133,527
|
11,386
|
1,771
|
(15,023
|
)
|
131,661
|
||||||||||
Interest
expense
|
(70,192
|
)
|
(6,162
|
)
|
(523
|
)
|
-
|
(76,877
|
)
|
|||||||
Depreciation
and amortization
|
-
|
-
|
(405
|
)
|
-
|
(405
|
)
|
|||||||||
Equity
in earnings of unconsolidated subsidiaries (A)
|
861
|
-
|
-
|
1
|
862
|
|||||||||||
Income
(loss) from continuing operations
|
64,196
|
5,224
|
843
|
(15,022
|
)
|
55,241
|
||||||||||
Income
(loss) from discontinued operations
|
-
|
-
|
877
|
-
|
877
|
|||||||||||
Net
income (loss)
|
$
|
64,196
|
$
|
5,224
|
$
|
1,720
|
$
|
(15,022
|
)
|
$
|
56,118
|
|||||
Revenue
derived from non-US sources:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
16,940
|
$
|
-
|
$
|
16,940
|
||||||
Belgium
|
$
|
-
|
$
|
-
|
$
|
5,999
|
$
|
-
|
$
|
5,999
|
||||||
Total
assets
|
$
|
2,756,262
|
$
|
587,831
|
$
|
146,635
|
$
|
59,571
|
$
|
3,550,299
|
||||||
Long-lived
assets outside the US:
|
||||||||||||||||
Canada
|
$
|
-
|
$
|
-
|
$
|
54,250
|
$
|
-
|
$
|
54,250
|
||||||
Belgium
|
$
|
-
|
$
|
-
|
$
|
78,149
|
$
|
-
|
$
|
78,149
|
Operating
Real Estate Subsidiary
|
Real
Estate Loan Subsidiary
|
||||||
Balance
at December 31, 2003
|
$
|
-
|
$
|
30,640
|
|||
Contributions
to unconsolidated subsidiaries
|
26,789
|
-
|
|||||
Distributions
from unconsolidated subsidiaries
|
(17,709
|
)
|
(10,955
|
)
|
|||
Equity
in earnings of unconsolidated subsidiaries
|
8,698
|
3,767
|
|||||
Balance
at December 31, 2004
|
$
|
17,778
|
$
|
23,452
|
|||
Contributions
to unconsolidated subsidiaries
|
-
|
-
|
|||||
Distributions
from unconsolidated subsidiaries
|
(8,229
|
)
|
(8,978
|
)
|
|||
Equity
in earnings of unconsolidated subsidiaries
|
2,602
|
3,328
|
|||||
Balance
at December 31, 2005
|
$
|
12,151
|
$
|
17,802
|
Operating
Real
Estate
Subsidiary
(A) (B)
|
Real
Estate Loan Subsidiary (A) (C)
|
|||||||||||||||
December
31,
|
December
31,
|
|||||||||||||||
2005
|
2004
|
2005
|
2004
|
2003
|
||||||||||||
Assets
|
$
|
77,758
|
$
|
89,222
|
$
|
35,806
|
$
|
47,170
|
$
|
61,628
|
||||||
Liabilities
|
(53,000
|
)
|
(53,000
|
)
|
-
|
-
|
-
|
|||||||||
Minority
interest
|
(455
|
)
|
(666
|
)
|
(202
|
)
|
(266
|
)
|
(348
|
)
|
||||||
Equity
|
$
|
24,303
|
$
|
35,556
|
$
|
35,604
|
$
|
46,904
|
$
|
61,280
|
||||||
Equity
held by Newcastle (D)
|
$
|
12,151
|
$
|
17,778
|
$
|
17,802
|
$
|
23,452
|
$
|
30,640
|
||||||
2005
|
2004
|
2005
|
2004
|
2003
|
||||||||||||
Revenues
|
$
|
10,196
|
$
|
25,011
|
$
|
6,738
|
$
|
7,852
|
$
|
1,885
|
||||||
Expenses
|
(4,896
|
)
|
(7,159
|
)
|
(42
|
)
|
(111
|
)
|
(152
|
)
|
||||||
Minority
interest
|
(97
|
)
|
(328
|
)
|
(39
|
)
|
(44
|
)
|
(10
|
)
|
||||||
Net
income
|
$
|
5,203
|
$
|
17,524
|
$
|
6,657
|
$
|
7,697
|
$
|
1,723
|
||||||
Newcastle's
equity in net income (D)
|
$
|
2,602
|
$
|
8,698
|
$
|
3,328
|
$
|
3,767
|
$
|
862
|
(A)
|
The
unconsolidated subsidiaries’ summary financial information is presented on
a fair value basis, consistent with their internal basis of
accounting.
|
(B) |
Included
in the operating real estate segment.
|
(C)
|
Included
in the real estate securities and real estate related loans
segment.
|
(D)
|
With
respect to the operating real estate subsidiary, $0.8 million and
$7.2
million of Newcastle’s equity in net income was derived from the company
holding assets available for sale in 2005 and 2004, respectively,
while
$1.8 million and $1.5 million of Newcastle’s equity in net income was
derived from the company holding assets for investment in 2005 and
2004,
respectively. As of December 31, 2004, $5.6 million of the equity
held by
Newcastle related to the company holding assets available for sale
and
$12.2 million related to the company holding assets for investment.
As of
December 31, 2005, all of the equity held by Newcastle related to
the
company holding assets for investment. This subsidiary is more fully
described below.
|
4. |
REAL
ESTATE SECURITIES
|
Gross
Unrealized
|
Weighted
Average
|
||||||||||||||||||||||||||||||
Asset
Type
|
Current
Face Amount
|
Amortized
Cost Basis
|
Gains
|
Losses
|
Carrying
Value
|
Number
of
Securities
|
S&P
Equivalent
Rating
|
Coupon
|
Yield
|
Maturity
(Years)
|
|||||||||||||||||||||
CMBS-Conduit
|
$
|
1,455,345
|
$
|
1,397,868
|
$
|
26,367
|
$
|
(26,906
|
)
|
$
|
1,397,329
|
197
|
BBB-
|
5.84
|
%
|
6.61
|
%
|
7.87
|
|||||||||||||
CMBS-Large
Loan
|
578,331
|
575,444
|
9,096
|
(377
|
)
|
584,163
|
61
|
BBB-
|
6.64
|
%
|
6.75
|
%
|
2.10
|
||||||||||||||||||
CMBS-
B-Note
|
180,201
|
176,228
|
4,732
|
(329
|
)
|
180,631
|
32
|
BBB-
|
6.62
|
%
|
6.95
|
%
|
5.97
|
||||||||||||||||||
Unsecured
REIT Debt
|
916,262
|
931,777
|
20,804
|
(9,835
|
)
|
942,746
|
99
|
BBB-
|
6.34
|
%
|
5.96
|
%
|
6.95
|
||||||||||||||||||
ABS-Manufactured
Housing
|
178,915
|
162,410
|
2,422
|
(1,766
|
)
|
163,066
|
10
|
A-
|
7.12
|
%
|
8.65
|
%
|
6.64
|
||||||||||||||||||
ABS-Home
Equity
|
525,004
|
523,363
|
3,429
|
(2,315
|
)
|
524,477
|
89
|
B
|
6.03
|
%
|
6.10
|
%
|
3.16
|
||||||||||||||||||
ABS-Franchise
|
70,837
|
69,732
|
1,113
|
(1,223
|
)
|
69,622
|
18
|
BBB+
|
6.66
|
%
|
8.12
|
%
|
5.14
|
||||||||||||||||||
Agency
RMBS
|
698,322
|
700,912
|
145
|
(8,572
|
)
|
692,485
|
19
|
AAA
|
4.76
|
%
|
4.67
|
%
|
4.90
|
||||||||||||||||||
Total/Average
(A)
|
$
|
4,603,217
|
$
|
4,537,734
|
$
|
68,108
|
$
|
(51,323
|
)
|
$
|
4,554,519
|
525
|
BBB+
|
5.99
|
%
|
6.25
|
%
|
5.81
|
(A)
|
The
total current face amount of fixed rate securities was $3,584.4
million,
and of floating rate securities was $1,018.8
million.
|
Gross
Unrealized
|
Weighted
Average
|
||||||||||||||||||||||||||||||
Current
Face Amount
|
Amortized
Cost Basis
|
Gains
|
Losses
|
Carrying
Value
|
Number
of
Securities
|
S&P
Equivalent
Rating
|
Coupon
|
Yield
|
Maturity
(Years)
|
||||||||||||||||||||||
Securities
in an Unrealized Loss Position
|
|||||||||||||||||||||||||||||||
Less
Than Twelve Months
|
$
|
2,212,833
|
$
|
2,201,085
|
$
|
-
|
$
|
(38,770
|
)
|
$
|
2,162,315
|
264
|
A-
|
5.65
|
%
|
5.67
|
%
|
6.20
|
|||||||||||||
Twelve
or More Months
|
274,127
|
279,868
|
-
|
(12,756
|
)
|
267,112
|
42
|
BBB+
|
5.71
|
%
|
5.32
|
%
|
7.15
|
||||||||||||||||||
Total
|
$
|
2,486,960
|
$
|
2,480,953
|
$
|
-
|
$
|
(51,526
|
)
|
$
|
2,429,427
|
306
|
A-
|
5.66
|
%
|
5.63
|
%
|
6.31
|
Gross
Unrealized
|
Weighted
Average
|
||||||||||||||||||||||||||||||
Asset
Type
|
|
Current
Face Amount
|
|
Amortized
Cost Basis
|
|
Gains
|
|
Losses
|
|
Carrying
Value
|
|
Number
of Securities
|
|
S&P
Equivalent
Rating
|
Coupon
|
Yield
|
Maturity
(Years)
|
||||||||||||||
CMBS-Conduit
|
$
|
1,024,762
|
$
|
995,194
|
$
|
54,506
|
$
|
(7,240
|
)
|
$
|
1,042,460
|
162
|
BBB-
|
6.17
|
%
|
6.80
|
%
|
7.53
|
|||||||||||||
CMBS-Large
Loan
|
583,758
|
580,383
|
9,781
|
(168
|
)
|
589,996
|
68
|
BBB
|
5.16
|
%
|
5.41
|
%
|
2.35
|
||||||||||||||||||
CMBS-
B-Note
|
173,587
|
170,884
|
2,614
|
(379
|
)
|
173,119
|
28
|
BB+
|
6.31
|
%
|
6.58
|
%
|
6.12
|
||||||||||||||||||
Unsecured
REIT Debt
|
735,402
|
750,489
|
38,433
|
(3,200
|
)
|
785,722
|
90
|
BBB-
|
6.51
|
%
|
6.15
|
%
|
7.34
|
||||||||||||||||||
ABS-Manufactured
Housing
|
221,803
|
198,181
|
5,328
|
(4,494
|
)
|
199,015
|
11
|
B
|
7.10
|
%
|
8.83
|
%
|
5.67
|
||||||||||||||||||
ABS-Home
Equity
|
298,934
|
297,083
|
3,072
|
(83
|
)
|
300,072
|
44
|
A-
|
4.16
|
%
|
4.29
|
%
|
4.06
|
||||||||||||||||||
ABS-Franchise
|
77,825
|
75,631
|
2,493
|
(540
|
)
|
77,584
|
17
|
BBB+
|
7.13
|
%
|
8.79
|
%
|
5.25
|
||||||||||||||||||
Agency
RMBS
|
199,182
|
201,803
|
-
|
(275
|
)
|
201,528
|
3
|
AAA
|
4.69
|
%
|
4.41
|
%
|
3.35
|
||||||||||||||||||
Total/Average
(A)
|
$
|
3,315,253
|
$
|
3,269,648
|
$
|
116,227
|
$
|
(16,379
|
)
|
$
|
3,369,496
|
423
|
BBB
|
5.89
|
%
|
6.19
|
%
|
5.76
|
Current
Face
Amount
|
Market
(Discount) / Premium
|
Loss
Allowance
|
Amortized
Cost Basis
|
||||||||||
December
31, 2003
|
$
|
2,173,538
|
$
|
(61,173
|
)
|
$
|
-
|
$
|
2,112,365
|
||||
Purchases
|
1,500,549
|
4,084
|
-
|
1,504,633
|
|||||||||
Collection
of principal
|
(181,008
|
)
|
-
|
-
|
(181,008
|
)
|
|||||||
Cost
of securities sold
|
(177,826
|
)
|
4,677
|
-
|
(173,149
|
)
|
|||||||
Accretion
|
-
|
6,807
|
-
|
6,807
|
|||||||||
December
31, 2004
|
$
|
3,315,253
|
$
|
(45,605
|
)
|
$
|
-
|
$
|
3,269,648
|
||||
Purchases
|
1,895,580
|
(45,385
|
)
|
-
|
1,850,195
|
||||||||
Collection
of principal
|
(382,872
|
)
|
-
|
-
|
(382,872
|
)
|
|||||||
Cost
of securities sold
|
(224,744
|
)
|
18,912
|
-
|
(205,832
|
)
|
|||||||
Accretion
|
-
|
6,595
|
-
|
6,595
|
|||||||||
December
31, 2005
|
$
|
4,603,217
|
$
|
(65,483
|
)
|
$
|
-
|
$
|
4,537,734
|
5. |
REAL
ESTATE RELATED LOANS AND RESIDENTIAL MORTGAGE
LOANS
|
December
31,
|
December
31, 2005
|
||||||||||||||||||||||||
2005
|
2004
|
2005
|
2004
|
|
|||||||||||||||||||||
Loan
Type
|
Current
Face
Amount
|
Carrying
Value (C)
|
Loan
Count
|
Wtd.
Avg. Yield
|
Weighted
Average Maturity
(Years)
(D)
|
Delinquent
Carrying Amount (E)
|
|||||||||||||||||||
B-Notes
|
$
|
72,173
|
$
|
132,777
|
$
|
72,520
|
$
|
133,344
|
13
|
8.46
|
%
|
2.40
|
$
|
-
|
|||||||||||
Mezzanine
Loans (A)
|
302,740
|
80,000
|
302,816
|
80,052
|
8
|
8.44
|
%
|
1.94
|
-
|
||||||||||||||||
Bank
Loans
|
56,274
|
146,909
|
56,563
|
146,909
|
3
|
6.58
|
%
|
2.51
|
-
|
||||||||||||||||
Real
Estate Loans
|
23,082
|
29,555
|
22,364
|
28,911
|
1
|
20.02
|
%
|
2.00
|
-
|
||||||||||||||||
ICH
Loans (B)
|
165,514
|
205,147
|
161,288
|
202,674
|
96
|
8.64
|
%
|
1.55
|
22,136
|
||||||||||||||||
Total
Real Estate
|
|||||||||||||||||||||||||
Related
Loans
|
$
|
619,783
|
$
|
594,388
|
$
|
615,551
|
$
|
591,890
|
121
|
8.74
|
%
|
1.94
|
$
|
22,136
|
|||||||||||
Residential
Loans
|
$
|
326,100
|
$
|
645,381
|
$
|
333,226
|
$
|
654,784
|
919
|
4.79
|
%
|
2.73
|
$
|
3,699
|
|||||||||||
Manufactured
|
|||||||||||||||||||||||||
Housing
Loans
|
284,870
|
-
|
267,456
|
-
|
7,067
|
7.84
|
%
|
5.78
|
2,927
|
||||||||||||||||
Total
Residential
|
|||||||||||||||||||||||||
Mortgage
Loans
|
$
|
610,970
|
$
|
645,381
|
$
|
600,682
|
$
|
654,784
|
7,986
|
6.15
|
%
|
4.15
|
$
|
6,626
|
(A) |
One
of these loans has a contractual exit fee which Newcastle will begin
to
accrue if and when management believes
it is probable that such exit fee will be received. These loans are
comprised of the following:
|
$
50,000
|
$
|
50,000
|
$
|
50,003
|
$
|
50,008
|
1
|
7.10
|
%
|
0.71
|
$
|
-
|
||||||||||
38,000
|
-
|
38,016
|
-
|
1
|
8.51
|
%
|
1.81
|
-
|
||||||||||||||
100,000
|
-
|
100,052
|
-
|
1
|
7.60
|
%
|
2.53
|
-
|
||||||||||||||
58,630
|
-
|
58,662
|
-
|
1
|
8.87
|
%
|
1.70
|
-
|
||||||||||||||
56,110
|
30,000
|
56,083
|
30,044
|
4
|
10.64
|
%
|
2.32
|
-
|
||||||||||||||
$
302,740
|
$
|
80,000
|
$
|
302,816
|
$
|
80,052
|
8
|
8.44
|
%
|
1.94
|
$
|
-
|
(B) |
In
October 2003, pursuant to FIN No. 46, Newcastle consolidated an entity
which holds a portfolio of commercial mortgage loans which has been
securitized. This investment, which is referred to as ICH, was previously
treated as a non-consolidated residual interest in such securitization.
The primary effect of the consolidation is the requirement that Newcastle
reflect the gross loan assets and gross bonds payable of this entity
in
its financial statements.
|
(C)
|
The
aggregate United States federal income tax basis for such assets
at
December 31, 2005 was approximately equal to their book
basis.
|
(D)
|
The
weighted average maturity for the residential loan portfolio and
the
manufactured housing loan portfolio were calculated based on constant
prepayment rates (CPR) of approximately 30% and 10%,
respectively.
|
(E)
|
This
face amount of loans is 60 or more days delinquent. $14.8 million
of the
delinquent ICH Loans were transferred out of the securitization trust
and
the related properties were foreclosed on in
2006.
|
|
|||||||||||||||||||||||||
Real
Estate Related Loans
|
Residential
Mortgage Loans
|
||||||||||||||||||||||||
Current
Face Amount
|
Market
(Discount)/
Premium
|
Loss
Allowance
|
Carrying
Value
|
Current
Face Amount
|
Market
(Discount)/
Premium
|
Loss
Allowance
|
Carrying
Value
|
||||||||||||||||||
Balance
at December 31, 2003
|
$
|
405,308
|
$
|
(49
|
)
|
$
|
(2,475
|
)
|
$
|
402,784
|
$
|
578,330
|
$
|
8,007
|
$
|
(100
|
)
|
$
|
586,237
|
||||||
Purchases/advances
|
281,340
|
15
|
-
|
281,355
|
347,318
|
3,055
|
-
|
350,373
|
|||||||||||||||||
Collections
of principal
|
(92,425
|
)
|
-
|
2
|
(92,423
|
)
|
(154,660
|
)
|
-
|
-
|
(154,660
|
)
|
|||||||||||||
Cost
of loans sold
|
-
|
-
|
-
|
-
|
(125,607
|
)
|
874
|
-
|
(124,733
|
)
|
|||||||||||||||
Accretion
|
165
|
9
|
-
|
174
|
-
|
(2,533
|
)
|
-
|
(2,533
|
)
|
|||||||||||||||
Loss
allowance
|
-
|
-
|
-
|
-
|
-
|
-
|
100
|
100
|
|||||||||||||||||
Balance
at December 31, 2004
|
$
|
594,388
|
$
|
(25
|
)
|
$
|
(2,473
|
)
|
$
|
591,890
|
$
|
645,381
|
$
|
9,403
|
$
|
-
|
$
|
654,784
|
|||||||
Purchases/advances
|
341,676
|
(505
|
)
|
-
|
341,171
|
327,855
|
(18,150
|
)
|
-
|
309,705
|
|||||||||||||||
Collections
of principal
|
(319,830
|
)
|
-
|
-
|
(319,830
|
)
|
(359,905
|
)
|
-
|
-
|
(359,905
|
)
|
|||||||||||||
Accretion
|
-
|
524
|
-
|
524
|
-
|
1,666
|
-
|
1,666
|
|||||||||||||||||
Paid-in-kind
interest
|
4,648
|
-
|
-
|
4,648
|
-
|
-
|
-
|
-
|
|||||||||||||||||
Loss
allowance
|
-
|
-
|
(2,852
|
)
|
(2,852
|
)
|
-
|
-
|
(5,568
|
)
|
(5,568
|
)
|
|||||||||||||
Realized
losses
|
(1,099
|
)
|
-
|
1,099
|
-
|
(2,361
|
)
|
-
|
2,361
|
-
|
|||||||||||||||
Balance
at December 31, 2005
|
$
|
619,783
|
$
|
(6
|
)
|
$
|
(4,226
|
)
|
$
|
615,551
|
$
|
610,970
|
$
|
(7,081
|
)
|
$
|
(3,207
|
)
|
$
|
600,682
|
Reference
Asset
|
Notional
Amount
|
Margin
Amount
|
Receive
Interest
Rate
|
Pay
Interest
Rate
|
Maturity
Date
|
Fair
Value
|
|||||||||||||
Term
loan to a retail mall REIT
|
$
|
106,083
|
$
|
18,149
|
LIBOR
+ 2.000%
|
%
|
LIBOR
+ 0.500%
|
|
Nov
2008
|
$
|
1,008
|
||||||||
Term
loan to a diversified real
estate
and finance company
|
97,997
|
19,599
|
LIBOR
+ 3.000%
|
%
|
LIBOR
+ 0.625%
|
|
Feb
2008
|
877
|
|||||||||||
Mezzanine
loan to a hotel company
|
15,000
|
5,224
|
LIBOR
+ 4.985%
|
%
|
LIBOR
+ 1.350%
|
|
Jun
2007
|
101
|
|||||||||||
Term
loan to a diversified real
estate
company
|
94,954
|
9,495
|
LIBOR
+
1.750%
|
%
|
LIBOR
+ 0.500%
|
|
Aug
2007
|
904
|
|||||||||||
Term
loan to a retail company
|
100,000
|
19,960
|
LIBOR
+
3.000%
|
%
|
LIBOR
+ 0.500%
|
|
Dec
2008
|
206
|
|||||||||||
$
|
414,034
|
$
|
72,427
|
$
|
3,096
|
6. |
OPERATING
REAL ESTATE
|
Operating
Real Estate
|
Gross
|
Accumulated
Depreciation
|
Net
|
|||||||
Balance
at December 31, 2003
|
$
|
114,330
|
$
|
(11,335
|
)
|
$
|
102,995
|
|||
Improvements
|
148
|
-
|
148
|
|||||||
Foreign
currency translation
|
8,899
|
(1,094
|
)
|
7,805
|
||||||
Depreciation
|
-
|
(2,137
|
)
|
(2,137
|
)
|
|||||
Transferred
to Real Estate Held for Sale
|
(57,686
|
)
|
6,068
|
(51,618
|
)
|
|||||
Balance
at December 31, 2004
|
$
|
65,691
|
$
|
(8,498
|
)
|
$
|
57,193
|
|||
Improvements
|
-
|
-
|
-
|
|||||||
Foreign
currency translation
|
(422
|
)
|
(28
|
)
|
(450
|
)
|
||||
Depreciation
|
-
|
(704
|
)
|
(704
|
)
|
|||||
Transferred
to Real Estate Held for Sale
|
(45,060
|
)
|
5,694
|
(39,366
|
)
|
|||||
Balance
at December 31, 2005
|
$
|
20,209
|
$
|
(3,536
|
)
|
$
|
16,673
|
|||
Real
Estate Held for Sale
|
||||||||||
Balance
at December 31, 2003
|
$
|
29,404
|
||||||||
Improvements
|
73
|
|||||||||
Foreign
currency translation
|
(735
|
)
|
||||||||
Sold
|
(67,984
|
)
|
||||||||
Transferred
from Operating Real Estate
|
51,618
|
|||||||||
Balance
at December 31, 2004
|
$
|
12,376
|
||||||||
Improvements
|
182
|
|||||||||
Foreign
currency translation
|
(1,620
|
)
|
||||||||
Sold
|
(50,304
|
)
|
||||||||
Transferred
from Operating Real Estate
|
39,366
|
|||||||||
Balance
at December 31, 2005
|
$
|
-
|
2006
|
$
|
745
|
||
2007
|
1,114
|
|||
2008
|
1,111
|
|||
2009
|
1,111
|
|||
2010
|
278
|
|||
$
|
4,359
|
Type
of
Property |
Location
|
Net
Rentable
Sq.
Ft. (A)
|
Acq'n
Date (A)
|
Year
Built/
Renovated
(A)
|
|||||
Off.
Bldg.
|
London,
ON
|
323,411
|
10/98
|
1980
|
December
31, 2005
|
|||||||||||||||||||
Initial
Cost (B)
|
Costs
Capitalized
Subseq.
to Acq'n (B)
|
Gross
Carrying
Amount
|
Accum.
Depr.
|
Net
Carrying Value (C)
|
Encumb.
|
Occ.
(A)
|
|||||||||||||
$
19,790
|
$
|
419
|
$
|
20,209
|
$
|
(3,536
|
)
|
$
|
16,673
|
$
|
-
|
95.2
|
%
|
7. |
FAIR
VALUE OF FINANCIAL
INSTRUMENTS
|
Carrying
Value
|
Principal
Balance or Notional Amount
|
Estimated
Fair Value
|
||||||||||||||
December
31,
|
December
31,
|
December
31,
|
||||||||||||||
2005
|
2004
|
2005
|
2005
|
2004
|
||||||||||||
Assets:
|
||||||||||||||||
Real
estate securities, available for sale
|
$
|
4,554,519
|
$
|
3,369,496
|
$
|
4,603,217
|
$
|
4,554,519
|
$
|
3,369,496
|
||||||
Real
estate securities portfolio deposit
|
-
|
25,411
|
-
|
-
|
25,411
|
|||||||||||
Real
estate related loans
|
615,551
|
591,890
|
619,783
|
615,865
|
600,528
|
|||||||||||
Residential
mortgage loans
|
600,682
|
654,784
|
610,970
|
609,486
|
654,784
|
|||||||||||
Interest
rate caps, treated as hedges (A)
|
2,145
|
3,554
|
342,351
|
2,145
|
3,554
|
|||||||||||
Total
return swaps (A)
|
3,096
|
399
|
414,034
|
3,096
|
399
|
|||||||||||
Liabilities:
|
||||||||||||||||
CBO
bonds payable
|
3,530,384
|
2,656,510
|
3,560,953
|
3,594,638
|
2,720,704
|
|||||||||||
Other
bonds payable
|
353,330
|
222,266
|
353,330
|
356,294
|
227,510
|
|||||||||||
Notes
payable
|
260,441
|
652,000
|
260,441
|
260,441
|
652,000
|
|||||||||||
Repurchase
agreements
|
1,048,203
|
490,620
|
1,048,203
|
1,048,203
|
490,620
|
|||||||||||
Credit
facility
|
20,000
|
-
|
20,000
|
20,000
|
-
|
|||||||||||
Interest
rate swaps, treated as hedges (B)
|
(41,170
|
)
|
13,239
|
2,943,752
|
(41,170
|
)
|
13,239
|
|||||||||
Non-hedge
derivative obligations (C)
|
90
|
796
|
See
below
|
90
|
796
|
|||||||||||
8. |
DEBT
OBLIGATIONS
|
Debt
Obligation/Collateral
|
Month
Issued
|
Current
Face
Amount
|
Carrying
Value
|
Unhedged
Weighted
Average
Funding
Cost
|
Final
Stated Maturity
|
Weighted
Average
Funding
Cost
(1)
|
Weighted
Average Maturity
(Years)
|
Face
Amount
of
Floating Rate
Debt
|
Collateral
Carrying
Value
|
Collateral
Weighted Average Maturity
(Years)
|
Face
Amount
of
Floating
Rate Collateral
|
Aggregate
Notional
Amount
of
Current
Hedges
|
|||||||||||||||||||||||||||||||
December
31,
|
December
31,
|
December
31, 2005
|
|||||||||||||||||||||||||||||||||||||||||
CBO
Bonds Payable
|
2005
|
2004
|
2005
|
2004
|
|||||||||||||||||||||||||||||||||||||||
Real
estate securities
|
Jul
1999
|
$
|
426,653
|
$
|
436,895
|
$
|
423,191
|
$
|
432,893
|
5.67%
(2)
|
|
Jul
2038
|
4.89
|
%
|
3.18
|
$
|
331,653
|
$
|
562,803
|
5.01
|
$
|
-
|
$
|
262,732
|
|||||||||||||||||||
Real
estate securities and loans
|
Apr
2002
|
444,000
|
444,000
|
441,054
|
440,427
|
5.43%
(2)
|
|
Apr
2037
|
6.56
|
%
|
4.46
|
372,000
|
498,998
|
5.61
|
56,526
|
290,000
|
|||||||||||||||||||||||||||
Real
estate securities and loans
|
Mar
2003
|
472,000
|
472,000
|
468,413
|
467,905
|
5.46%
(2)
|
|
Mar
2038
|
5.08
|
%
|
6.30
|
427,800
|
516,042
|
5.25
|
142,775
|
276,060
|
|||||||||||||||||||||||||||
Real
estate securities and loans
|
Sep
2003
|
460,000
|
460,000
|
455,657
|
455,115
|
5.16%
(2)
|
|
Sep
2038
|
5.38
|
%
|
6.85
|
442,500
|
506,290
|
4.71
|
180,598
|
192,500
|
|||||||||||||||||||||||||||
Real
estate securities and loans
|
Mar
2004
|
414,000
|
414,000
|
410,511
|
410,018
|
5.15%
(2)
|
|
Mar
2039
|
4.94
|
%
|
6.61
|
382,750
|
444,037
|
5.27
|
214,876
|
165,300
|
|||||||||||||||||||||||||||
Real
estate securities and loans
|
Sep
2004
|
454,500
|
454,500
|
450,639
|
450,152
|
5.09%
(2)
|
|
Sep
2039
|
5.03
|
%
|
7.19
|
442,500
|
494,099
|
5.80
|
221,569
|
189,373
|
|||||||||||||||||||||||||||
Real
estate securities and loans
|
Apr
2005
|
447,000
|
-
|
442,379
|
-
|
4.85%
(2)
|
|
Apr
2040
|
5.10
|
%
|
8.17
|
439,600
|
481,954
|
6.54
|
193,471
|
243,337
|
|||||||||||||||||||||||||||
Real
estate securities and loans
|
Dec
2005
|
442,800
|
-
|
438,540
|
-
|
4.82%
(2)
|
|
Dec
2050
|
5.14
|
%
|
9.53
|
436,800
|
497,935
|
8.49
|
97,349
|
341,506
|
|||||||||||||||||||||||||||
3,560,953
|
2,681,395
|
3,530,384
|
2,656,510
|
5.27
|
%
|
6.55
|
3,275,603
|
4,002,158
|
5.86
|
1,107,164
|
1,960,808
|
||||||||||||||||||||||||||||||||
Other
Bonds Payable
|
|||||||||||||||||||||||||||||||||||||||||||
Bell
Canada portfolio
|
Apr
2002
|
-
|
42,885
|
-
|
42,422
|
7.02%
|
|
Repaid
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||
ICH
loans (3)
|
(3)
|
|
141,311
|
179,844
|
141,311
|
179,844
|
6.68%
(2)
|
|
Aug
2030
|
6.68
|
%
|
1.46
|
3,605
|
161,288
|
1.55
|
3,605
|
-
|
||||||||||||||||||||||||||
Manufactured
housing loans (4)
|
Jan
2005
|
212,019
|
-
|
212,019
|
-
|
LIBOR
+1.25%
|
|
Jan
2006(7)
|
|
5.45
|
%
|
0.08
|
212,019
|
267,456
|
5.78
|
6,356
|
227,576
|
||||||||||||||||||||||||||
353,330
|
222,729
|
353,330
|
222,266
|
5.94
|
%
|
0.63
|
215,624
|
428,744
|
4.23
|
9,961
|
227,576
|
||||||||||||||||||||||||||||||||
Notes
Payable
|
|||||||||||||||||||||||||||||||||||||||||||
Real
estate related loan
|
Nov
2003
|
-
|
67,523
|
-
|
67,523
|
LIBOR
+1.50%
|
|
Repaid
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||
Real
estate related loan
|
Feb
2004
|
-
|
40,000
|
-
|
40,000
|
LIBOR
+1.50%
|
|
Repaid
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||
Residential
mortgage loans (4)
|
Nov
2004
|
260,441
|
544,477
|
260,441
|
544,477
|
LIBOR
+0.15%
|
|
Nov
2007
|
4.70
|
%
|
1.21
|
260,441
|
288,683
|
2.69
|
282,589
|
-
|
|||||||||||||||||||||||||||
260,441
|
652,000
|
260,441
|
652,000
|
4.70
|
%
|
1.21
|
260,441
|
288,683
|
2.69
|
282,589
|
-
|
||||||||||||||||||||||||||||||||
Repurchase
Agreements (4) (10)
|
|||||||||||||||||||||||||||||||||||||||||||
Residential
mortgage loans
|
Rolling
|
41,853
|
67,382
|
41,853
|
67,382
|
LIBOR
+ 0.43%
|
|
Mar
2006
|
4.95
|
%
|
0.25
|
41,853
|
44,543
|
2.81
|
43,511
|
-
|
|||||||||||||||||||||||||||
Agency
RMBS (5)
|
Rolling
|
671,526
|
195,754
|
671,526
|
195,754
|
LIBOR
+ 0.13%
|
|
Jan
2006
|
4.48
|
%
|
0.08
|
671,526
|
692,486
|
4.90
|
-
|
665,965
|
|||||||||||||||||||||||||||
Real
estate securities
|
Rolling
|
149,546
|
171,209
|
149,546
|
171,209
|
LIBOR
+ 0.39%
|
|
Various
(8)
|
|
4.65
|
%
|
0.16
|
149,546
|
166,737
|
5.84
|
31,450
|
89,403
|
||||||||||||||||||||||||||
Real
estate related loans
|
Rolling
|
185,278
|
56,275
|
185,278
|
56,275
|
LIBOR
+ 1.01%
|
|
Various
(8)
|
|
5.38
|
%
|
0.08
|
185,278
|
266,669
|
1.82
|
266,630
|
-
|
||||||||||||||||||||||||||
1,048,203
|
490,620
|
1,048,203
|
490,620
|
4.68
|
%
|
0.10
|
1,048,203
|
1,170,435
|
4.29
|
341,591
|
755,368
|
||||||||||||||||||||||||||||||||
Credit
facility (6)
|
20,000
|
-
|
20,000
|
-
|
LIBOR
+ 2.50% (9)
|
|
Jul
2008
|
6.86
|
%
|
2.55
|
20,000
|
-
|
-
|
-
|
-
|
||||||||||||||||||||||||||||
Total
debt obligations
|
$
|
5,242,927
|
$
|
4,046,744
|
$
|
5,212,358
|
$
|
4,021,396
|
5.17
|
%
|
4.59
|
$
|
4,819,871
|
$
|
5,890,020
|
5.25
|
$
|
1,741,305
|
$
|
2,943,752
|
(1)
|
Including
the effect of applicable
hedges.
|
(2)
|
Weighted
average, including floating and fixed rate
classes.
|
(3)
|
See
Note 5.
|
(4)
|
Subject
to potential mandatory prepayments based on collateral
value.
|
(5)
|
A
maximum of $1 billion is available until November
2006.
|
(6)
|
A
maximum of $100 million can be drawn (increased from $75 million
in
February 2006).
|
(7)
|
This
financing was replaced with a new term financing in January 2006;
the new
maturity date is January
2009.
|
(8)
|
The
longest maturity is March
2006.
|
(9)
|
In
addition, unused commitment fees of between 0.125% and 0.250% are
paid.
|
(10)
|
The
counterparties on our repurchase agreements include: Bank of America
Securities LLC ($693.4million), Bear Stearns Mortgage Capital Corporation
($181.1 million), Greenwich Capital Markets Inc ($72.2 million),
Deutsche
Bank AG ($58.1 million), and other ($43.4
million).
|
2006
|
$
|
1,260,222
|
||
2007
|
260,441
|
|||
2008
|
20,000
|
|||
2009
|
-
|
|||
2010
|
-
|
|||
Thereafter
|
3,702,264
|
|||
$
|
5,242,927
|
9. |
STOCK
OPTION PLAN AND EARNINGS PER
SHARE
|
Recipient
|
Date
of Grant/
Exercise
|
Number
of Options
|
Weighted
Average
Exercise
Price
|
Fair
Value
At
Grant Date
(millions)
|
|||||||||
Directors
|
Various
|
18,000
|
$
|
17.38
|
Not
Material
|
||||||||
Manager
(B)
|
October
2002
|
700,000
|
$
|
13.00
|
$
|
0.4
(A
|
)
|
||||||
Manager
(B)
|
July
2003
|
460,000
|
$
|
20.35
|
$
|
0.8
(A
|
)
|
||||||
Manager
(B)
|
December
2003
|
328,227
|
$
|
22.85
|
$
|
0.4
(A
|
)
|
||||||
Manager
(B)
|
January
2004
|
330,000
|
$
|
26.30
|
$
|
0.6
(A
|
)
|
||||||
Manager
(B)
|
May
2004
|
345,000
|
$
|
25.75
|
$
|
0.5
(A
|
)
|
||||||
Manager
(B)
|
November
2004
|
162,500
|
$
|
31.40
|
$
|
0.5
(A
|
)
|
||||||
Manager
(B)
|
January
2005
|
330,000
|
$
|
29.60
|
$
|
1.1
(A
|
)
|
||||||
Exercised
(B)
|
Prior
to 2005
|
(110,000
|
)
|
$
|
13.31
|
||||||||
Exercised
(B)
|
2005
|
(751,920
|
)
|
$
|
15.55
|
||||||||
Outstanding
|
1,811,807
|
$
|
25.14
|
(A) |
The
fair value of the options was estimated using a binomial option pricing
model. Since the Newcastle Option Plan has characteristics significantly
different from those of traded options, and since the assumptions
used in
such model, particularly the volatility assumption, are subject to
significant judgment and variability, the actual value of the options
could vary materially from management’s estimate. The assumptions used in
such model were as follows:
|
Date
of Grant
|
Volatility
|
Dividend
Yield
|
Expected
Life (Years)
|
Risk-Free
Rate
|
|||||||||
October
2002
|
15
|
%
|
13.85
|
%
|
10
|
4.05
|
%
|
||||||
July
2003
|
15
|
%
|
9.83
|
%
|
10
|
3.63
|
%
|
||||||
December
2003
|
15
|
%
|
8.75
|
%
|
10
|
4.23
|
%
|
||||||
January
2004
|
15
|
%
|
7.60
|
%
|
10
|
4.23
|
%
|
||||||
May
2004
|
15
|
%
|
9.32
|
%
|
10
|
4.77
|
%
|
||||||
November
2004
|
18
|
%
|
7.64
|
%
|
10
|
4.21
|
%
|
||||||
January
2005
|
21
|
%
|
8.45
|
%
|
10
|
4.27
|
%
|
(B)
|
The
Manager assigned certain of its options to its employees as
follows:
|
Year
Assigned
|
||||||||||
|
||||||||||
Strike
Price
|
2004
|
2003
|
Total Inception
to Date |
|||||||
$13.00
|
267,750
|
1,750
|
269,500
|
|||||||
$20.35
|
192,050
|
1,150
|
193,200
|
|||||||
$22.85
|
139,355
|
-
|
139,355
|
|||||||
$26.30
|
127,050
|
-
|
127,050
|
|||||||
$31.40
|
62,563
|
-
|
62,563
|
|||||||
Total
|
788,768
|
2,900
|
791,668
|
10. |
MANAGEMENT
AGREEMENT AND RELATED PARTY
TRANSACTIONS
|
Amounts
Incurred (in millions)
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Management
Fee
|
$
|
12.8
|
$
|
10.1
|
$
|
6.0
|
||||
Expense
Reimbursement
|
0.5
|
0.5
|
0.5
|
|||||||
Incentive
Compensation
|
7.6
|
8.0
|
6.2
|
11. |
COMMITMENTS
AND CONTINGENCIES
|
12. |
INCOME
TAXES AND DIVIDENDS
|
|
Book
Basis
Dividends
Per Share (A)
|
Tax
Basis
Dividends
Per Share (A)
|
Ordinary/
Qualified
Income
|
Captial
Gains
|
Return
of Capital
|
|||||||||||
2005
|
$
|
2.500
|
$
|
2.540
|
86.41
|
%
|
13.59
|
%
|
None
|
|||||||
2004
|
$
|
2.425
|
$
|
2.432
|
76.60
|
%
|
23.40
|
%
|
None
|
|||||||
2003
|
$
|
1.950
|
$
|
1.843
|
77.66
|
%
|
22.34
|
%
|
None
|
|||||||
|
13. |
SUBSEQUENT
EVENTS
|
14. |
SUMMARY
QUARTERLY CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
|
2005
|
||||||||||||||||
Quarter
Ended
|
||||||||||||||||
March
31 (A)
|
June
30 (A)
|
September
30 (A)
|
December
31
|
Year
Ended
December
31
|
||||||||||||
Gross
Revenues
|
$
|
83,663
|
$
|
92,065
|
$
|
99,850
|
$
|
102,635
|
$
|
378,213
|
||||||
Operating
expenses
|
(9,114
|
)
|
(8,832
|
)
|
(12,934
|
)
|
(11,008
|
)
|
(41,888
|
)
|
||||||
Operating
income
|
74,549
|
83,233
|
86,916
|
91,627
|
336,325
|
|||||||||||
Interest
expense
|
(48,766
|
)
|
(55,791
|
)
|
(58,681
|
)
|
(63,208
|
)
|
(226,446
|
)
|
||||||
Depreciation
and amortization
|
(136
|
)
|
(135
|
)
|
(182
|
)
|
(188
|
)
|
(641
|
)
|
||||||
Equity
in earnings of unconsolidated subsidiaries (B)
|
1,853
|
1,393
|
1,061
|
1,302
|
5,609
|
|||||||||||
Income
from continuing operations
|
27,500
|
28,700
|
29,114
|
29,533
|
114,847
|
|||||||||||
Income
(loss) from discontinued operations
|
1,184
|
781
|
86
|
57
|
2,108
|
|||||||||||
Preferred
dividends
|
(1,523
|
)
|
(1,524
|
)
|
(1,523
|
)
|
(2,114
|
)
|
(6,684
|
)
|
||||||
Income
available for common stockholders
|
$
|
27,161
|
$
|
27,957
|
$
|
27,677
|
$
|
27,476
|
$
|
110,271
|
||||||
Net
Income per share of common stock
|
||||||||||||||||
Basic
|
$
|
0.63
|
$
|
0.64
|
$
|
0.63
|
$
|
0.63
|
$
|
2.53
|
||||||
Diluted
|
$
|
0.62
|
$
|
0.63
|
$
|
0.63
|
$
|
0.63
|
$
|
2.51
|
||||||
Income
from continuing operations per share of common
|
||||||||||||||||
stock,
after preferred dividends and related accretion
|
||||||||||||||||
Basic
|
$
|
0.60
|
$
|
0.62
|
$
|
0.63
|
$
|
0.63
|
$
|
2.48
|
||||||
Diluted
|
$
|
0.59
|
$
|
0.61
|
$
|
0.63
|
$
|
0.63
|
$
|
2.46
|
||||||
Income
(loss) from discontinued operations per share of common
|
||||||||||||||||
stock
|
||||||||||||||||
Basic
|
$
|
0.03
|
$
|
0.02
|
$
|
0.00
|
$
|
0.00
|
$
|
0.05
|
||||||
Diluted
|
$
|
0.03
|
$
|
0.02
|
$
|
0.00
|
$
|
0.00
|
$
|
0.05
|
||||||
Weighted
average number of shares of common stock
|
||||||||||||||||
outstanding
|
||||||||||||||||
Basic
|
43,222
|
43,768
|
43,790
|
43,897
|
43,672
|
|||||||||||
Diluted
|
43,629
|
44,127
|
44,121
|
44,059
|
43,986
|
2004
|
||||||||||||||||
Quarter
Ended
|
||||||||||||||||
March
31 (A)
|
June
30 (A)
|
September
30 (A)
|
December
31
|
Year
Ended
December
31
|
||||||||||||
Gross
Revenues
|
$
|
55,309
|
$
|
61,612
|
$
|
63,146
|
$
|
69,602
|
$
|
249,669
|
||||||
Operating
expenses
|
(7,333
|
)
|
(6,354
|
)
|
(7,822
|
)
|
(7,299
|
)
|
(28,808
|
)
|
||||||
Operating
income
|
47,976
|
55,258
|
55,324
|
62,303
|
220,861
|
|||||||||||
Interest
expense
|
(28,091
|
)
|
(32,615
|
)
|
(33,612
|
)
|
(42,080
|
)
|
(136,398
|
)
|
||||||
Depreciation
and amortization
|
(113
|
)
|
(95
|
)
|
(108
|
)
|
(135
|
)
|
(451
|
)
|
||||||
Equity
in earnings of unconsolidated subsidiaries (B)
|
1,223
|
2,218
|
3,179
|
3,337
|
9,957
|
|||||||||||
Income
from continuing operations
|
20,995
|
24,766
|
24,783
|
23,425
|
93,969
|
|||||||||||
Income
(loss) from discontinued operations
|
856
|
(1,591
|
)
|
185
|
4,996
|
4,446
|
||||||||||
Preferred
dividends
|
(1,523
|
)
|
(1,524
|
)
|
(1,523
|
)
|
(1,524
|
)
|
(6,094
|
)
|
||||||
Income
available for common stockholders
|
$
|
20,328
|
$
|
21,651
|
$
|
23,445
|
$
|
26,897
|
$
|
92,321
|
||||||
Net
Income per share of common stock
|
||||||||||||||||
Basic
|
$
|
0.59
|
$
|
0.60
|
$
|
0.61
|
$
|
0.70
|
$
|
2.50
|
||||||
Diluted
|
$
|
0.58
|
$
|
0.59
|
$
|
0.60
|
$
|
0.69
|
$
|
2.46
|
||||||
Income
from continuing operations per share of common
|
||||||||||||||||
stock,
after preferred dividends and related accretion
|
||||||||||||||||
Basic
|
$
|
0.57
|
$
|
0.64
|
$
|
0.61
|
$
|
0.56
|
$
|
2.38
|
||||||
Diluted
|
$
|
0.56
|
$
|
0.63
|
$
|
0.60
|
$
|
0.55
|
$
|
2.34
|
||||||
Income
(loss) from discontinued operations per share of common
|
||||||||||||||||
stock
|
||||||||||||||||
Basic
|
$
|
0.02
|
$
|
(0.04
|
)
|
$
|
0.00
|
$
|
0.14
|
$
|
0.12
|
|||||
Diluted
|
$
|
0.02
|
$
|
(0.04
|
)
|
$
|
0.00
|
$
|
0.14
|
$
|
0.12
|
|||||
Weighted
average number of shares of common stock
|
||||||||||||||||
outstanding
|
||||||||||||||||
Basic
|
34,402
|
36,161
|
38,234
|
38,941
|
36,944
|
|||||||||||
Diluted
|
34,976
|
36,671
|
38,883
|
39,663
|
37,558
|
2003
|
||||||||||||||||
Quarter
Ended
|
||||||||||||||||
March
31 (A)
|
June
30 (A)
|
September
30 (A)
|
December
31
|
Year
Ended
December
31
|
||||||||||||
Gross
Revenues
|
$
|
28,429
|
$
|
35,577
|
$
|
37,905
|
$
|
50,173
|
$
|
152,084
|
||||||
Operating
expenses
|
(4,231
|
)
|
(4,880
|
)
|
(5,004
|
)
|
(6,308
|
)
|
(20,423
|
)
|
||||||
Operating
income
|
24,198
|
30,697
|
32,901
|
43,865
|
131,661
|
|||||||||||
Interest
expense
|
(13,336
|
)
|
(18,348
|
)
|
(18,693
|
)
|
(26,500
|
)
|
(76,877
|
)
|
||||||
Depreciation
and amortization
|
(80
|
)
|
(101
|
)
|
(105
|
)
|
(119
|
)
|
(405
|
)
|
||||||
Equity
in earnings of unconsolidated subsidiaries (B)
|
-
|
-
|
-
|
862
|
862
|
|||||||||||
Income
from continuing operations
|
10,782
|
12,248
|
14,103
|
18,108
|
55,241
|
|||||||||||
Income
(loss) from discontinued operations
|
321
|
1,169
|
603
|
(1,216
|
)
|
877
|
||||||||||
Preferred
dividends
|
(203
|
)
|
(1,524
|
)
|
(1,523
|
)
|
(1,523
|
)
|
(4,773
|
)
|
||||||
Income
available for common stockholders
|
$
|
10,900
|
$
|
11,893
|
$
|
13,183
|
$
|
15,369
|
$
|
51,345
|
||||||
Net
Income per share of common stock
|
||||||||||||||||
Basic
|
$
|
0.46
|
$
|
0.51
|
$
|
0.48
|
$
|
0.53
|
$
|
1.98
|
||||||
Diluted
|
$
|
0.46
|
$
|
0.50
|
$
|
0.48
|
$
|
0.52
|
$
|
1.96
|
||||||
Income
from continuing operations per share of common
|
||||||||||||||||
stock,
after preferred dividends and related accretion
|
||||||||||||||||
Basic
|
$
|
0.45
|
$
|
0.46
|
$
|
0.46
|
$
|
0.57
|
$
|
1.94
|
||||||
Diluted
|
$
|
0.45
|
$
|
0.45
|
$
|
0.46
|
$
|
0.56
|
$
|
1.92
|
||||||
Income
(loss) from discontinued operations per share of common
|
||||||||||||||||
stock
|
||||||||||||||||
Basic
|
$
|
0.01
|
$
|
0.05
|
$
|
0.02
|
$
|
(0.04
|
)
|
$
|
0.04
|
|||||
Diluted
|
$
|
0.01
|
$
|
0.05
|
$
|
0.02
|
$
|
(0.04
|
)
|
$
|
0.04
|
|||||
Weighted
average number of shares of common stock
|
||||||||||||||||
outstanding
|
||||||||||||||||
Basic
|
23,489
|
23,489
|
27,340
|
29,197
|
25,898
|
|||||||||||
Diluted
|
23,620
|
23,679
|
27,620
|
29,563
|
26,141
|
(A) |
The
Income Available for Common Stockholders shown agrees with Newcastle’s
quarterly report(s) on Form 10-Q as filed with the Securities and
Exchange
Commission. However, individual line items may vary from such report(s)
due to the operations of properties sold, or classified as held for
sale,
during subsequent periods being retroactively reclassified to Income
for
Discontinued Operations for all periods presented (Note
5).
|
(B)
|
Net
of income taxes on related taxable
subsidiaries.
|
(a) |
Disclosure
Controls and Procedures. The Company’s management, with the participation
of the Company’s Chief Executive Officer and Chief Financial Officer, has
evaluated the effectiveness of the Company’s disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d -15(e)
under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) as of the end of the period covered by this report. The Company’s
disclosure controls and procedures are designed to provide reasonable
assurance that information is recorded, processed, summarized and
reported
accurately and on a timely basis. Based on such evaluation, the Company’s
Chief Executive Officer and Chief Financial Officer have concluded
that,
as of the end of such period, the Company’s disclosure controls and
procedures are effective.
|
(b) |
Internal
Control Over Financial Reporting. There have not been any changes
in the
Company’s internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Acts)
during
the most recent fiscal quarter to which this report relates that
have
materially affected, or are reasonably likely to materially affect,
the
Company’s internal control over financial
reporting.
|
·
|
pertain
to the maintenance of records that in reasonable detail accurately
and
fairly reflect the transactions and dispositions of the assets of
the
Company;
|
·
|
provide
reasonable assurance that transactions are recorded as necessary
to permit
preparation of financial statements in accordance with accounting
principles generally accepted in the United States, and that receipts
and
expenditures of the Company are being made only in accordance with
authorizations of management and directors of the Company; and
|
·
|
provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Company’s assets that
could have a material effect on the financial
statements.
|
By: /s/ Wesley R. Edens | |||
Wesley R. Edens |
|||
Chairman of the Board | |||
By: /s/ Debra A. Hess | |||
Debra A. Hess |
|||
Chief Financial Officer | |||
(a)
|
and
(c) Financial statements and
schedules:
|
(b)
|
Exhibits
filed with this Form 10-K:
|
3.1
|
Articles
of Amendment and Restatement (incorporated by reference to the
Registrant’s Registration Statement on Form S-11 (File No. 333-90578),
Exhibit 3.1).
|
3.2
|
Articles
Supplementary relating to the Series B Preferred Stock (incorporated
by
reference to the Registrant’s Quarterly Report on Form 10-Q for the period
ended March 31, 2003, Exhibit 3.3).
|
3.3
|
Articles
Supplementary relating to the Series C Preferred Stock (incorporated
by
reference to the Registrant’s Report on Form 8-K, Exhibit 3.3, filed on
October 25, 2005).
|
3.4
|
By-laws
(incorporated by reference to the Registrant’s Registration Statement on
Form S-11, (File No. 333-90578), Exhibit
3.2).
|
4.1
|
Rights
Agreement between the Registrant and American Stock Transfer and
Trust
Company, as Rights Agent, dated October 16, 2002 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q for the period
ended September 30, 2003, Exhibit
4.1).
|
10.1
|
Amended
and Restated Management and Advisory Agreement by and among the Registrant
and Fortress Investment Group LLC, dated June 23 2003 (incorporated
by
reference to the Registrant’s Statement on Form S-11 (File No.
333-106135), Exhibit 10.1).
|
10.2
|
Newcastle
Investment Corp. Nonqualified Stock Option and Incentive Award Plan
Amended and Restated Effective as of February 11,
2004.
|
12.1 |
Statements
re: Computation of Ratios
|
21.1
|
Subsidiaries
of the Registrant.
|
23.1 |
Consent
of Ernst & Young LLP, independent
accountants.
|
31.1
|
Certification
of Chief Executive Officer as adopted pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer as adopted pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
NEWCASTLE INVESTMENT CORP. | ||
March 15, 2006 | ||
|
|
|
By: | /s/ Wesley R. Edens | |
Wesley R. Edens |
||
Chairman of the Board |
March 15, 2006 | |||
By: /s/ Wesley R. Edens | |||
Wesley R. Edens |
|||
Chief Executive Officer |
March 15, 2006 | |||
By: /s/ Debra A. Hess | |||
Debra A. Hess |
|||
Chief Financial Officer |
March 15, 2006 | |||
By: /s/ Kevin J. Finnerty | |||
Kevin J. Finnerty |
|||
Director |
March 15, 2006 | |||
By: /s/ Stuart A. McFarland | |||
Stuart A. McFarland |
|||
Director |
March 15, 2006 | |||
By: /s/ David K. McKown | |||
David K. McKown |
|||
Director |
March 15, 2006 | |||
By: /s/ Peter M. Miller | |||
Peter M. Miller |
|||
Director |
3.1
|
Articles
of Amendment and Restatement (incorporated by reference to the
Registrant’s Registration Statement on Form S-11 (File No. 333-90578),
Exhibit 3.1).
|
3.2
|
Articles
Supplementary relating to the Series B Preferred Stock (incorporated
by
reference to the Registrant’s Quarterly Report on Form 10-Q for the period
ended March 31, 2003, Exhibit 3.3).
|
3.3
|
Articles
Supplementary relating to the Series C Preferred Stock (incorporated
by
reference to the Registrant’s Report on Form 8-K, Exhibit 3.3, filed on
October 25, 2005).
|
3.4 |
By-laws
(incorporated by reference to the Registrant’s Registration Statement on
Form S-11, (File No. 333-90578), Exhibit
3.2).
|
4.1 |
Rights
Agreement between the Registrant and American Stock Transfer and
Trust
Company, as Rights Agent, dated October 16, 2002 (incorporated by
reference to the Registrant’s Quarterly Report on Form 10-Q for the period
ended September 30, 2002, Exhibit
4.1).
|
10.1
|
Amended
and Restated Management and Advisory Agreement by and among the Registrant
and Fortress Investment Group LLC, dated June 23, 2003 (incorporated
by
reference to the Registrant’s Statement on Form S-11 (File No.
333-106135), Exhibit 10.1).
|
10.2
|
Newcastle
Investment Corp. Nonqualified Stock Option and Incentive Award Plan
Amended and Restated Effective as of February 11,
2004.
|
12.1 |
Statements
re: Computation of Ratios
|
21.1
|
Subsidiaries
of the Registrant.
|
23.1 |
Consent
of Ernst & Young LLP, independent
accountants.
|
31.1 |
Certification
of Chief Executive Officer as adopted pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer as adopted pursuant to Section 302 of
the
Sarbanes-Oxley Act of 2002.
|
32.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
32.2
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|