S | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
£ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Newcastle Investment Corp. |
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) |
(212)798-6100 |
(Former name, former address and former fiscal year, if changed since last report) |
• | changes in global, national and local economic conditions, including, but not limited to, a prolonged economic slowdown and a downturn in the real estate market; |
• | reductions in cash flows received from our investments; |
• | the availability and cost of capital for future investments, particularly in a rising interest rate environment, and our ability to deploy capital accretively; |
• | our ability to profit from opportunistic investments, such as our investment in golf, and to mitigate the risks associated with managing operating businesses and asset classes with which we have limited experience; |
• | the relationship between yields on assets which are paid off and yields on assets in which such monies can be reinvested; |
• | changes in our asset portfolio and investment strategy as a result of a spin-off of our senior housing business or other factors; |
• | adverse changes in the financing markets we access affecting our ability to finance our investments; |
• | changing risk assessments by lenders that potentially lead to increased margin calls, not extending our repurchase agreements or other financings in accordance with their current terms or entering into new financings with us; |
• | changes in interest rates and/or credit spreads, as well as the success of any hedging strategy we may undertake in relation to such changes; |
• | the risks that default and recovery rates on our real estate securities and loan portfolios deteriorate compared to our underwriting estimates; |
• | impairments in the value of the collateral underlying our investments and the relation of any such impairments to our judgments as to whether changes in the market value of our securities, loans or real estate are temporary or not and whether circumstances bearing on the value of such assets warrant changes in carrying values; |
• | our dependence on our property managers and tenants in our senior housing business; |
• | the ability of our property managers and tenants to comply with laws, rules and regulations in the operation of our properties, to deliver high quality services, to attract and retain qualified personnel and to attract residents; |
• | increases in costs at our senior housing properties (including, but not limited to, the costs of labor, supplies, insurance and property taxes); |
• | geographical concentrations with respect to the mortgage loans underlying and collateral securing certain of our debt investments, our senior housing properties and our golf courses; |
• | legislative/regulatory changes, including but not limited to, any modification of the terms of loans or changes in the healthcare industry; |
• | competition within the finance, real estate, senior housing industries, as well as other industries, such as the golf industry, in which we have and/or may pursue additional investments; |
• | the impact of litigation or any financial, accounting, legal or regulatory issues that may affect us or our property managers and tenants; |
• | our ability and willingness to maintain our qualification as a REIT; and |
• | other risks detailed from time to time below, particularly under the heading “Risk Factors,” and in our other reports filed with or furnished to the Securities and Exchange Commission (the “SEC”). |
• | should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; |
• | have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; |
• | may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and |
• | were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. |
PAGE | |||
PART I. FINANCIAL INFORMATION | |||
Item 1. | Financial Statements | ||
March 31, 2014 | December 31, 2013 | ||||||
(Unaudited) | |||||||
Assets | |||||||
Real estate securities, available-for-sale | $ | 439,023 | $ | 984,263 | |||
Real estate related and other loans, held-for-sale, net | 313,250 | 437,530 | |||||
Residential mortgage loans, held-for-investment, net | — | 255,450 | |||||
Residential mortgage loans, held-for-sale, net | 248,299 | 2,185 | |||||
Subprime mortgage loans subject to call option | 406,217 | 406,217 | |||||
Investments in senior housing real estate, net of accumulated depreciation | 1,374,710 | 1,362,900 | |||||
Investments in other real estate, net of accumulated depreciation | 262,403 | 266,170 | |||||
Intangibles, net of accumulated amortization | 187,101 | 199,725 | |||||
Other investments | 25,795 | 25,468 | |||||
Cash and cash equivalents | 122,053 | 74,133 | |||||
Restricted cash | 4,314 | 5,889 | |||||
Receivables and other assets | 137,444 | 141,887 | |||||
Assets of discontinued operations | — | 690,746 | |||||
Total Assets | $ | 3,520,609 | $ | 4,852,563 | |||
Liabilities and Equity | |||||||
Liabilities | |||||||
CDO bonds payable | $ | 408,813 | $ | 544,525 | |||
Other bonds and notes payable | 221,305 | 230,279 | |||||
Repurchase agreements | 74,863 | 556,347 | |||||
Mortgage notes payable | 1,091,823 | 1,076,828 | |||||
Credit facilities, golf | 152,961 | 152,498 | |||||
Financing of subprime mortgage loans subject to call option | 406,217 | 406,217 | |||||
Junior subordinated notes payable | 51,236 | 51,237 | |||||
Dividends payable | 36,075 | 36,075 | |||||
Accounts payable, accrued expenses and other liabilities | 271,841 | 277,166 | |||||
Liabilities of discontinued operations | — | 295,267 | |||||
Total Liabilities | $ | 2,715,134 | $ | 3,626,439 | |||
Equity | |||||||
Preferred stock, $0.01 par value, 100,000,000 shares authorized, 1,347,321 shares of 9.75% Series B Cumulative Redeemable Preferred Stock, 496,000 shares of 8.05% Series C Cumulative Redeemable Preferred Stock, and 620,000 shares of 8.375% Series D Cumulative Redeemable Preferred Stock, liquidation preference $25.00 per share, issued and outstanding as of March 31, 2014 and December 31, 2013 | $ | 61,583 | $ | 61,583 | |||
Common stock, $0.01 par value, 1,000,000,000 shares authorized, 351,453,495 shares issued and outstanding, at March 31, 2014 and December 31, 2013 | 3,515 | 3,515 | |||||
Additional paid-in capital | 2,970,786 | 2,970,786 | |||||
Accumulated deficit | (2,310,496 | ) | (1,947,913 | ) | |||
Accumulated other comprehensive income | 79,860 | 76,874 | |||||
Total Newcastle Stockholders' Equity | 805,248 | 1,164,845 | |||||
Noncontrolling interests | 227 | 61,279 | |||||
Total Equity | $ | 805,475 | $ | 1,226,124 | |||
Total Liabilities and Equity | $ | 3,520,609 | $ | 4,852,563 |
March 31, 2014 | December 31, 2013 | ||||||
(Unaudited) | |||||||
Assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | |||||||
Real estate securities, available-for-sale | $ | 431,617 | $ | 426,695 | |||
Real estate related and other loans, held-for-sale, net | 313,250 | 437,530 | |||||
Residential mortgage loans, held-for-sale, net | 215,991 | 223,628 | |||||
Subprime mortgage loans subject to call option | 406,217 | 406,217 | |||||
Investments in other real estate, net of accumulated depreciation | 6,573 | 6,597 | |||||
Other investments | 19,556 | 19,308 | |||||
Restricted cash | 1,338 | 2,377 | |||||
Receivables and other assets | 4,046 | 3,727 | |||||
Total assets of consolidated VIEs that can only be used to settle obligations of consolidated VIEs | $ | 1,398,588 | $ | 1,526,079 |
March 31, 2014 | December 31, 2013 | ||||||
(Unaudited) | |||||||
Liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Newcastle | |||||||
CDO bonds payable | $ | 408,813 | $ | 544,525 | |||
Other bonds and notes payable | 221,305 | 230,279 | |||||
Financing of subprime mortgage loans subject to call option | 406,217 | 406,217 | |||||
Derivative liabilities | 10,514 | 13,795 | |||||
Accounts payable, accrued expenses and other liabilities | 1,745 | 6,766 | |||||
Total liabilities of consolidated VIEs for which creditors or beneficial interest holders do not have recourse to the general credit of Newcastle | $ | 1,048,594 | $ | 1,201,582 |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Interest income | $ | 46,452 | $ | 61,332 | |||
Interest expense | 35,855 | 22,710 | |||||
Net interest income | 10,597 | 38,622 | |||||
Impairment/(Reversal) | |||||||
Valuation allowance (reversal) on loans | 1,246 | 2,234 | |||||
Other-than-temporary impairment on securities | — | 422 | |||||
Portion of other-than-temporary impairment on securities recognized in other comprehensive income (loss), net of the reversal of other comprehensive loss into net income (loss) | — | 117 | |||||
Total impairment (reversal) | 1,246 | 2,773 | |||||
Net interest income after impairment/reversal | 9,351 | 35,849 | |||||
Operating Revenues | |||||||
Rental income | 52,890 | 12,887 | |||||
Care and ancillary income | 5,461 | 613 | |||||
Golf course operations | 40,389 | — | |||||
Sales of food and beverages - golf | 13,539 | — | |||||
Other golf revenue | 9,350 | — | |||||
Total operating revenues | 121,629 | 13,500 | |||||
Other Income | |||||||
Gain (loss) on settlement of investments, net | 2,332 | (3 | ) | ||||
Gain on extinguishment of debt | — | 1,206 | |||||
Other income, net | 13,474 | 4,567 | |||||
Total other income | 15,806 | 5,770 | |||||
Expenses | |||||||
Loan and security servicing expense | 857 | 1,034 | |||||
Property operating expenses | 23,804 | 8,670 | |||||
Operating expenses - golf | 58,338 | — | |||||
Cost of sales - golf | 5,956 | — | |||||
General and administrative expense | 9,212 | 3,906 | |||||
Management fee to affiliate | 8,037 | 9,565 | |||||
Depreciation and amortization | 30,359 | 4,079 | |||||
Total expenses | 136,563 | 27,254 | |||||
Income from continuing operations before income tax | 10,223 | 27,865 | |||||
Income tax expense | 295 | — | |||||
Income from continuing operations | 9,928 | 27,865 | |||||
Income (loss) from discontinued operations, net of tax | (5,305 | ) | 10,148 | ||||
Net Income | 4,623 | 38,013 | |||||
Preferred dividends | (1,395 | ) | (1,395 | ) | |||
Net loss attributable to noncontrolling interests | 661 | — | |||||
Income Applicable to Common Stockholders | $ | 3,889 | $ | 36,618 |
Income Per Share of Common Stock | |||||||
Basic | $ | 0.01 | $ | 0.16 | |||
Diluted | $ | 0.01 | $ | 0.15 | |||
Income from continuing operations per share of common stock, after preferred dividends and noncontrolling interests | |||||||
Basic | $ | 0.03 | $ | 0.11 | |||
Diluted | $ | 0.03 | $ | 0.11 | |||
Income (loss) from discontinued operations per share of common stock | |||||||
Basic | $ | (0.02 | ) | $ | 0.05 | ||
Diluted | $ | (0.02 | ) | $ | 0.04 | ||
Weighted Average Number of Shares of Common Stock Outstanding | |||||||
Basic | 351,453,495 | 235,136,756 | |||||
Diluted | 363,066,769 | 240,079,144 | |||||
Dividends Declared per Share of Common Stock | $ | 0.10 | $ | 0.22 |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Net income | $ | 4,623 | $ | 38,013 | |||
Other comprehensive income (loss): | |||||||
Net unrealized gain on securities | 4,588 | 29,454 | |||||
Reclassification of net realized (gain) loss on securities into earnings | (2,334 | ) | 539 | ||||
Net unrecognized gain and pension prior service cost (discontinued operations) | 9 | — | |||||
Net unrealized gain on derivatives designated as cash flow hedges | 1,203 | 1,841 | |||||
Reclassification of net realized (gain) loss on derivatives designated as cash flow hedges into earnings | (13 | ) | — | ||||
Other comprehensive income | 3,453 | 31,834 | |||||
Total comprehensive income | $ | 8,076 | $ | 69,847 | |||
Comprehensive income attributable to Newcastle stockholders' equity | $ | 8,737 | $ | 69,847 | |||
Comprehensive loss attributable to noncontrolling interests | $ | (661 | ) | $ | — |
Newcastle Stockholders | |||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Additional Paid- | Accumulated | Accumulated Other Comp. | Total Newcastle Stockholders' | Noncontrolling | Total Equity | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | in Capital | Deficit | Income (Loss) | Equity | Interests | (Deficit) | ||||||||||||||||||||||||||||
Equity - December 31, 2013 | 2,463,321 | $ | 61,583 | 351,453,495 | $ | 3,515 | $ | 2,970,786 | $ | (1,947,913 | ) | $ | 76,874 | $ | 1,164,845 | $ | 61,279 | $ | 1,226,124 | ||||||||||||||||||
Dividends declared | — | — | — | — | — | (36,540 | ) | — | (36,540 | ) | — | (36,540 | ) | ||||||||||||||||||||||||
Spin-off of New Media | — | — | — | — | — | (331,327 | ) | (467 | ) | (331,794 | ) | (60,391 | ) | (392,185 | ) | ||||||||||||||||||||||
Comprehensive income (loss) | |||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | — | 5,284 | — | 5,284 | (661 | ) | 4,623 | ||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | — | — | 3,453 | 3,453 | — | 3,453 | |||||||||||||||||||||||||||
Total comprehensive income (loss) | 8,737 | (661 | ) | 8,076 | |||||||||||||||||||||||||||||||||
Equity - March 31, 2014 | 2,463,321 | $ | 61,583 | 351,453,495 | $ | 3,515 | $ | 2,970,786 | $ | (2,310,496 | ) | $ | 79,860 | $ | 805,248 | $ | 227 | $ | 805,475 |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Cash Flows From Operating Activities | |||||||
Net income | $ | 4,623 | $ | 38,013 | |||
Adjustments to reconcile net income to net cash provided by operating activities (inclusive of amounts related to discontinued operations): | |||||||
Depreciation and amortization | 34,955 | 4,079 | |||||
Accretion of discount and other amortization | (8,639 | ) | (8,539 | ) | |||
Interest income in CDOs redirected for reinvestment or CDO bond paydown | (328 | ) | (536 | ) | |||
Interest income on investments accrued to principal balance | (7,214 | ) | (6,181 | ) | |||
Interest expense on debt accrued to principal balance | 109 | 109 | |||||
Valuation allowance on loans | 1,246 | 2,234 | |||||
Other-than-temporary impairment on securities | — | 539 | |||||
Change in fair value of investments in excess mortgage servicing rights | — | (1,858 | ) | ||||
Change in fair value of investments in equity method investees | — | (969 | ) | ||||
Straight-lining of rental income | (6,107 | ) | — | ||||
Equity in earnings from equity method investments | 39 | — | |||||
Distributions of earnings from equity method investees | — | 1,344 | |||||
(Gain)/loss on settlement of investments (net) | (2,332 | ) | 3 | ||||
Unrealized gain on non-hedge derivatives and hedge ineffectiveness | (12,748 | ) | (3,126 | ) | |||
Gain on extinguishment of debt | — | (1,206 | ) | ||||
Change in: | |||||||
Restricted cash | 2,018 | 995 | |||||
Receivables and other assets | 8,434 | (2,277 | ) | ||||
Accounts payable, accrued expenses and other liabilities | (9,419 | ) | 1,995 | ||||
Net cash provided by operating activities | 4,637 | 24,619 | |||||
Cash Flows From Investing Activities | |||||||
Principal repayments from repurchased CDO debt | 4,398 | 8,656 | |||||
Principal repayments from CDO securities | 601 | 1,290 | |||||
Principal repayments from non-Agency RMBS | — | 17,472 | |||||
Return of investments in excess mortgage servicing rights | — | 10,272 | |||||
Principal repayments from loans and non-CDO securities (excluding non-Agency RMBS) | 25,435 | 74,944 | |||||
Principal repayment from security accounted for as a linked transaction | 26,709 | — | |||||
Purchase of real estate securities | — | (871,127 | ) | ||||
Purchase of real estate related and other loans | — | (101,313 | ) | ||||
Proceeds from sale of investments | 532,236 | — | |||||
Acquisition of investments in real estate | (22,800 | ) | — | ||||
Additions to investments in real estate | (3,578 | ) | (259 | ) | |||
Contributions to equity method investees | — | (109,588 | ) | ||||
Distributions of capital from equity method investees | — | 6,625 | |||||
Deposits paid on investments | (2,448 | ) | (2,700 | ) | |||
Net cash provided by (used in) investing activities | 560,553 | (965,728 | ) |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Cash Flows From Financing Activities | |||||||
Repurchases of CDO bonds payable | $ | — | $ | (9,722 | ) | ||
Repayments of other bonds and notes payable | (8,384 | ) | (9,922 | ) | |||
Borrowings under repurchase agreements | 34,713 | 1,379,928 | |||||
Borrowings under repurchase agreements accounted for as linked transactions | 970 | — | |||||
Repayments of repurchase agreements | (516,197 | ) | (835,777 | ) | |||
Repayments under repurchase agreements accounted for as linked transactions | (7,366 | ) | — | ||||
Repayments of credit facilities, media and golf | (4,248 | ) | — | ||||
Margin deposits under repurchase agreements | (12,277 | ) | (62,100 | ) | |||
Return of margin deposits under repurchase agreements | 11,867 | 56,788 | |||||
Borrowings under mortgage notes payable | 17,250 | — | |||||
Repayment of mortgage notes payable | (2,739 | ) | — | ||||
Issuance of common stock | — | 764,759 | |||||
Costs related to issuance of common stock | — | (592 | ) | ||||
New Media spin-off | (23,845 | ) | — | ||||
Common stock dividends paid | (35,145 | ) | (37,954 | ) | |||
Preferred stock dividends paid | (1,395 | ) | (1,395 | ) | |||
Payment of financing costs | (2,285 | ) | (30 | ) | |||
Net cash provided by (used in) financing activities | (549,081 | ) | 1,243,983 | ||||
Net Increase in Cash and Cash Equivalents | 16,109 | 302,874 | |||||
Cash and Cash Equivalents of Continuing Operations, Beginning of Period | 74,133 | 231,898 | |||||
Cash and Cash Equivalents of Discontinued Operations, Beginning of Period | 31,811 | — | |||||
Cash and Cash Equivalents, End of Period | $ | 122,053 | $ | 534,772 | |||
Supplemental Disclosure of Cash Flow Information | |||||||
Cash paid during the period for income taxes | $ | 76 | $ | — | |||
Cash paid during the period for interest expense | $ | 20,477 | $ | 12,953 | |||
Supplemental Schedule of Non-Cash Investing and Financing Activities | |||||||
Preferred stock dividends declared but not paid | $ | 930 | $ | 930 | |||
Common stock dividends declared but not paid | $ | 35,145 | $ | 55,666 | |||
Reduction of Assets and Liabilities relating to the spin-off of New Media | |||||||
Property, plant and equipment, net | $ | 266,385 | $ | — | |||
Goodwill and intangibles, net | $ | 271,350 | $ | — | |||
Restricted cash | $ | 6,477 | $ | — | |||
Receivables and other assets | $ | 101,940 | $ | — | |||
Credit facilities, media | $ | 177,955 | $ | — | |||
Accounts payable, accrued expenses and other liabilities | $ | 99,857 | $ | — |
Allocation of Purchase Price (A) | |||
Investments in Real Estate | $ | 20,630 | |
Resident Lease Intangibles | 2,370 | ||
Other Assets, net of other Liabilities | (200 | ) | |
Total purchase price | $ | 22,800 | |
Mortgage Notes Payable (B) | (17,250 | ) | |
Net assets acquired | $ | 5,550 | |
Total acquisition related costs (C) | $ | 258 |
(A) | Due to the timing of the acquisition, Newcastle is still obtaining additional information relating to the purchase price allocation. Therefore, the review process of the purchase price allocation is not complete. Newcastle expects to complete this process within twelve months of the acquisition. |
(B) | See Note 10. |
(C) | Acquisition related costs are expensed as incurred and included within general and administrative expense on the consolidated statements of income. |
Assets | |||
Property, plant and equipment, net | $ | 266,385 | |
Intangibles, net | 144,664 | ||
Goodwill | 126,686 | ||
Cash and cash equivalents | 23,845 | ||
Restricted cash | 6,477 | ||
Receivables and other assets | 101,940 | ||
Total Assets | $ | 669,997 | |
Liabilities | |||
Credit facilities - media | $ | 177,955 | |
Accounts payable, accrued expenses and other liabilities | 99,857 | ||
Total Liabilities | $ | 277,812 | |
Net Assets | $ | 392,185 |
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Interest Income | $ | — | $ | 10,035 | |||
Interest Expense | 2,096 | — | |||||
Net interest income (loss) | (2,096 | ) | 10,035 | ||||
Media income | 68,213 | — | |||||
Change in fair value of investments in excess mortgage servicing rights | — | 1,858 | |||||
Change in fair value of investments in equity method investees | — | 969 | |||||
Other income | — | 2,827 | |||||
Media operating expenses | 65,826 | — | |||||
Property operating costs | — | 7 | |||||
General and administrative expenses | 1,904 | 2,707 | |||||
Depreciation and amortization | 4,596 | — | |||||
Income tax (benefit) expense | (915 | ) | — | ||||
Total expenses | 71,411 | 2,714 | |||||
Net income attributable to noncontrolling interest | 522 | — | |||||
Income (loss) from discontinued operations | $ | (4,772 | ) | $ | 10,148 |
Senior | Debt Investments (A) | Inter-segment Elimination and | |||||||||||||||||||||||||
Housing (A) | CDOs | Other Debt (B) | Golf | Corporate | Discontinued Operations (C) | Total | |||||||||||||||||||||
Three Months Ended March 31, 2014 | |||||||||||||||||||||||||||
Interest income | $ | — | $ | 30,722 | $ | 16,952 | $ | 41 | $ | 11 | $ | (1,274 | ) | $ | 46,452 | ||||||||||||
Interest expense | 13,701 | 6,128 | 12,663 | 3,682 | 955 | (1,274 | ) | 35,855 | |||||||||||||||||||
Net interest income (expense) | (13,701 | ) | 24,594 | 4,289 | (3,641 | ) | (944 | ) | — | 10,597 | |||||||||||||||||
Impairment (reversal) | — | 432 | 814 | — | — | — | 1,246 | ||||||||||||||||||||
Operating revenues | 57,810 | — | 541 | 63,278 | — | — | 121,629 | ||||||||||||||||||||
Other income (loss) | (2 | ) | 13,610 | 2,198 | — | — | — | 15,806 | |||||||||||||||||||
Property operating expenses | 23,520 | — | 284 | — | — | — | 23,804 | ||||||||||||||||||||
Operating expenses - golf | — | — | — | 58,338 | — | — | 58,338 | ||||||||||||||||||||
Cost of sales - golf | — | — | — | 5,956 | — | — | 5,956 | ||||||||||||||||||||
Depreciation and amortization | 22,835 | — | 57 | 7,430 | 37 | — | 30,359 | ||||||||||||||||||||
Other operating expenses | 7,792 | 156 | 702 | 1,081 | 8,375 | — | 18,106 | ||||||||||||||||||||
Income tax expense | 155 | — | — | 140 | — | — | 295 | ||||||||||||||||||||
Income (loss) from continuing operations | (10,195 | ) | 37,616 | 5,171 | (13,308 | ) | (9,356 | ) | — | 9,928 | |||||||||||||||||
Income (loss) from discontinued operations, net of tax | — | — | — | — | — | (5,305 | ) | (5,305 | ) | ||||||||||||||||||
Net income (loss) | (10,195 | ) | 37,616 | 5,171 | (13,308 | ) | (9,356 | ) | (5,305 | ) | 4,623 | ||||||||||||||||
Preferred dividends | — | — | — | — | (1,395 | ) | — | (1,395 | ) | ||||||||||||||||||
Net loss attributable to noncontrolling interests | — | — | — | 139 | — | 522 | 661 | ||||||||||||||||||||
Income (loss) applicable to common stockholders | $ | (10,195 | ) | $ | 37,616 | $ | 5,171 | $ | (13,169 | ) | $ | (10,751 | ) | $ | (4,783 | ) | $ | 3,889 |
Senior | Debt Investments (A) | Inter-segment Elimination and | |||||||||||||||||||||||||
Housing (A) | CDOs | Other Debt (B) | Golf | Corporate | Discontinued Operations (C) | Total | |||||||||||||||||||||
March 31, 2014 | |||||||||||||||||||||||||||
Investments | $ | 1,465,735 | $ | 807,388 | $ | 718,082 | $ | 351,906 | $ | — | $ | (86,313 | ) | $ | 3,256,798 | ||||||||||||
Cash and restricted cash | 36,095 | 1,304 | 752 | 12,916 | 75,300 | — | 126,367 | ||||||||||||||||||||
Other assets | 63,969 | 36,733 | 1,350 | 34,455 | 1,089 | (152 | ) | 137,444 | |||||||||||||||||||
Total assets | 1,565,799 | 845,425 | 720,184 | 399,277 | 76,389 | (86,465 | ) | 3,520,609 | |||||||||||||||||||
Debt | 1,091,823 | 543,859 | 624,240 | 182,373 | 51,236 | (86,313 | ) | 2,407,218 | |||||||||||||||||||
Other liabilities | 69,440 | 10,918 | 2,123 | 181,165 | 44,422 | (152 | ) | 307,916 | |||||||||||||||||||
Total liabilities | 1,161,263 | 554,777 | 626,363 | 363,538 | 95,658 | (86,465 | ) | 2,715,134 | |||||||||||||||||||
Preferred stock | — | — | — | — | 61,583 | — | 61,583 | ||||||||||||||||||||
Noncontrolling interests | — | — | — | 227 | — | — | 227 | ||||||||||||||||||||
GAAP book value | $ | 404,536 | $ | 290,648 | $ | 93,821 | $ | 35,512 | $ | (80,852 | ) | $ | — | $ | 743,665 | ||||||||||||
Additions to investments in real estate | $ | 24,640 | $ | — | $ | 33 | $ | 1,892 | $ | — | $ | — | $ | 26,565 |
Senior | Debt Investments (A) | Inter-segment Elimination and | |||||||||||||||||||||||||
Housing (A) | CDOs | Other Debt (B) | Golf | Corporate | Discontinued Operations (C) | Total | |||||||||||||||||||||
Three Months Ended March 31, 2013 | |||||||||||||||||||||||||||
Interest income | $ | — | $ | 31,828 | $ | 30,298 | $ | — | $ | 72 | $ | (866 | ) | $ | 61,332 | ||||||||||||
Interest expense | 1,232 | 7,135 | 14,257 | — | 952 | (866 | ) | 22,710 | |||||||||||||||||||
Net interest income (expense) | (1,232 | ) | 24,693 | 16,041 | — | (880 | ) | — | 38,622 | ||||||||||||||||||
Impairment (reversal) | — | 3,182 | (409 | ) | — | — | — | 2,773 | |||||||||||||||||||
Operating revenues | 12,997 | — | 503 | — | — | — | 13,500 | ||||||||||||||||||||
Other income (loss) | 8 | 4,572 | 1,190 | — | — | — | 5,770 | ||||||||||||||||||||
Property operating expenses | 8,423 | — | 247 | — | — | — | 8,670 | ||||||||||||||||||||
Depreciation and amortization | 4,022 | — | 57 | — | — | — | 4,079 | ||||||||||||||||||||
Other operating expenses | 2,081 | 194 | 855 | — | 11,375 | — | 14,505 | ||||||||||||||||||||
Income (loss) from continuing operations | (2,753 | ) | 25,889 | 16,984 | — | (12,255 | ) | — | 27,865 | ||||||||||||||||||
Income (loss) from discontinued operations | — | — | — | — | — | 10,148 | 10,148 | ||||||||||||||||||||
Net income (loss) | (2,753 | ) | 25,889 | 16,984 | — | (12,255 | ) | 10,148 | 38,013 | ||||||||||||||||||
Preferred dividends | — | — | — | — | (1,395 | ) | — | (1,395 | ) | ||||||||||||||||||
Income (loss) applicable to common stockholders | $ | (2,753 | ) | $ | 25,889 | $ | 16,984 | $ | — | $ | (13,650 | ) | 10,148 | $ | 36,618 |
(A) | Assets held within non-recourse structures, including all of the assets in the senior housing and CDO segments, are not available to satisfy obligations outside of such financings, except to the extent net cash flow distributions are received from such structures. Furthermore, creditors or beneficial interest holders of these structures generally have no recourse to the general credit of Newcastle. Therefore, the exposure to the economic losses from such structures generally is limited to invested equity in them and economically their book value cannot be less than zero. Therefore, impairment recorded in excess of Newcastle’s investment, which results in negative GAAP book value for a given non-recourse financing structure, cannot economically be incurred and will eventually be reversed through amortization, sales at gains, or as gains at the deconsolidation or termination of such non-recourse financing structure. |
(B) | The following table summarizes the investments and debt in the other debt segment: |
March 31, 2014 | |||||||||||||||
Investments | Debt | ||||||||||||||
Non-Recourse | Outstanding Face Amount | Carrying Value | Outstanding Face Amount* | Carrying Value* | |||||||||||
Manufactured housing loan portfolio I | $ | 98,925 | $ | 89,113 | $ | 70,943 | $ | 63,325 | |||||||
Manufactured housing loan portfolio II | 123,611 | 123,277 | 88,785 | 88,524 | |||||||||||
Subprime mortgage loans subject to call options | 406,217 | 406,217 | 406,217 | 406,217 | |||||||||||
Real estate securities | 54,446 | 50,226 | 38,253 | 34,811 | |||||||||||
Operating real estate | N/A | 6,573 | 6,000 | 6,000 | |||||||||||
Subtotal | 683,199 | 675,406 | 610,198 | 598,877 | |||||||||||
Other | |||||||||||||||
Unlevered real estate securities | 128,032 | 4,129 | — | — | |||||||||||
Other investments | N/A | 6,239 | — | — | |||||||||||
Residential mortgage loans | 44,183 | 32,308 | 25,363 | 25,363 | |||||||||||
$ | 855,414 | $ | 718,082 | $ | 635,561 | $ | 624,240 |
(C) | Represents the elimination of investments and financings and their related income and expenses between the CDO segment, the other debt segment and the golf segment as the corresponding inter-segment investments and financings are presented on a gross basis within each of these segments. In addition, includes the results of discontinued segments. |
Entity | Gross Assets (A) | Debt (A) (B) | Carrying Value of Newcastle's Investment (C) | |||||||||
Newcastle CDO V | $ | 177,764 | $ | 204,882 | $ | 3,278 | ||||||
CDO VIII Repack | $ | 90,097 | $ | 90,097 | $ | 88,272 |
(A) | Face amount. |
(B) | Newcastle CDO V includes $40.3 million face amount of debt owned by Newcastle with a carrying value of $3.3 million at March 31, 2014. CDO VIII Repack includes $90.1 million face amount of debt owned by Newcastle with a carrying value of $88.3 million at March 31, 2014. |
(C) | This amount represents Newcastle’s maximum exposure to loss from this entity. |
Amortized Cost Basis | Gross Unrealized | Weighted Average | |||||||||||||||||||||||||||||||||||||||||||
Asset Type | Outstanding Face Amount | Before Impairment | Other-Than- Temporary Impairment | After Impairment | Gains | Losses | Carrying Value (A) | Number of Securities | Rating (B) | Coupon | Yield | Life (Years) (C) | Principal Subordination (D) | ||||||||||||||||||||||||||||||||
CMBS-Conduit | $ | 235,635 | $ | 217,189 | $ | (68,980 | ) | $ | 148,209 | $ | 52,221 | $ | (97 | ) | $ | 200,333 | 33 | BB- | 5.47 | % | 18.84 | % | 2.5 | 10.2 | % | ||||||||||||||||||||
CMBS- Single Borrower | 91,349 | 90,813 | (12,364 | ) | 78,449 | 4,345 | (15 | ) | 82,779 | 15 | BB | 5.60 | % | 7.15 | % | 2.1 | 7.8 | % | |||||||||||||||||||||||||||
CMBS-Large Loan | 3,229 | 3,229 | — | 3,229 | — | — | 3,229 | 1 | BBB- | 6.63 | % | 6.63 | % | 0.1 | 4.4 | % | |||||||||||||||||||||||||||||
REIT Debt | 29,200 | 28,729 | — | 28,729 | 2,228 | — | 30,957 | 5 | BB+ | 5.89 | % | 6.87 | % | 1.3 | N/A | ||||||||||||||||||||||||||||||
Non-Agency RMBS | 93,221 | 99,881 | (59,987 | ) | 39,894 | 21,639 | (9 | ) | 61,524 | 33 | CCC+ | 1.04 | % | 11.90 | % | 4.7 | 26.2 | % | |||||||||||||||||||||||||||
ABS-Franchise | 8,464 | 7,647 | (7,647 | ) | — | — | — | — | 1 | C | 6.69 | % | 0.00 | % | — | 0.0 | % | ||||||||||||||||||||||||||||
CDO (E) | 71,632 | 55,851 | — | 55,851 | 4,350 | — | 60,201 | 2 | BB+ | 0.51 | % | 7.59 | % | 3.2 | 49.1 | % | |||||||||||||||||||||||||||||
Total / Average (F) | $ | 532,730 | $ | 503,339 | $ | (148,978 | ) | $ | 354,361 | $ | 84,783 | $ | (121 | ) | $ | 439,023 | 90 | B+ | 4.10 | % | 12.62 | % | 2.8 |
(A) | See Note 12 regarding the estimation of fair value, which is equal to carrying value for all securities. |
(B) | Represents the weighted average of the ratings of all securities in each asset type, expressed as an S&P equivalent rating. For each security rated by multiple rating agencies, the lowest rating is used. Ratings provided were determined by third party rating agencies, represent the most recent credit ratings available as of the reporting date and may not be current. |
(C) | The weighted average life is based on the timing of expected principal reduction on the assets. |
(D) | Percentage of the outstanding face amount of securities and residual interests that is subordinate to Newcastle’s investments. |
(E) | Represents non-consolidated CDO securities, excluding nine securities with a zero value, which had an aggregate face amount of $115.3 million. |
(F) | The total outstanding face amount was $340.6 million for fixed rate securities and $192.1 million for floating rate securities. |
Amortized Cost Basis | ||||||||||||||||||||||||||||||||||||||||||
Securities in | Outstanding | Other-than- | Number | Weighted Average | ||||||||||||||||||||||||||||||||||||||
an Unrealized | Face | Before | Temporary | After | Gross Unrealized | Carrying | of | Life | ||||||||||||||||||||||||||||||||||
Loss Position | Amount | Impairment | Impairment | Impairment | Gains | Losses | Value | Securities | Rating | Coupon | Yield | (Years) | ||||||||||||||||||||||||||||||
Less Than Twelve Months | $ | 15,084 | $ | 15,590 | $ | (1,443 | ) | $ | 14,147 | $ | — | $ | (24 | ) | $ | 14,123 | 5 | BBB | 2.31 | % | 4.97 | % | 2.4 | |||||||||||||||||||
Twelve or More Months | 6,700 | 6,519 | — | 6,519 | — | (97 | ) | 6,422 | 2 | B+ | 5.98 | % | 6.63 | % | 4.4 | |||||||||||||||||||||||||||
Total | $ | 21,784 | $ | 22,109 | $ | (1,443 | ) | $ | 20,666 | $ | — | $ | (121 | ) | $ | 20,545 | 7 | BB+ | 3.43 | % | 5.50 | % | 3.0 |
March 31, 2014 | |||||||||||||||
Amortized | |||||||||||||||
Cost Basis | Unrealized Losses | ||||||||||||||
Fair Value | After Impairment | Credit (B) | Non-Credit (C) | ||||||||||||
Securities Newcastle intends to sell | $ | — | $ | — | $ | — | $ N/A | ||||||||
Securities Newcastle is more likely than not to be required to sell (A) | — | — | — | N/A | |||||||||||
Securities Newcastle has no intent to sell and is not more likely than not to be required to sell: | |||||||||||||||
Credit impaired securities | 1,358 | 1,367 | — | (9 | ) | ||||||||||
Non credit impaired securities | 19,187 | 19,299 | — | (112 | ) | ||||||||||
Total debt securities in an unrealized loss position | $ | 20,545 |