Newcastle Investment Corp. (NYSE:NCT; “Newcastle”, the
“Company”) today reported the following information for the quarter
ended September 30, 2014.
3Q FINANCIAL HIGHLIGHTS
- GAAP Income of $4 million, or $0.06 per
WA basic share
- Adjusted Funds from Operations (AFFO)
of $41 million, or $0.66 per WA basic share
- Core Earnings of $29 million, or $0.47
per WA basic share
- Average uninvested capital of $112
million
3Q BUSINESS HIGHLIGHTS
- New Senior Investment Group (NYSE: SNR;
“New Senior”) distribution scheduled for November 6, 2014
- Acquired $77 million of senior housing
properties, investing $30 million of equity. New Senior portfolio
at spin-off will total $1.9 billion of assets and $619 million of
equity invested in 99 independent and assisted living
properties
- Realized $38 million return of capital
in real estate debt portfolio, leaving remaining recovery value of
approximately $350 to $400 million
- Completed a 3-for-1 reverse split of
the outstanding shares on August 18 and a 2-for-1 reverse split of
the outstanding shares on October 22. All per share data and share
amounts included in this release have been adjusted for the reverse
stock splits
3Q 2014 2Q 2014 Summary Operating
Results: GAAP Income $4 million* $31 million* GAAP Income per
WA Basic Share $0.06 $0.53
Non-GAAP Results: Adjusted
Funds From Operations (AFFO)** $41 million $62 million AFFO per WA
Basic Share** $0.66 $1.06 Core Earnings** $29 million $30
million Core Earnings per WA Basic Share** $0.47 $0.51
GAAP Book Value: $13.38 $12.48
WA: Weighted Average
*3Q 2014 GAAP Income includes $37 million, or $0.59 per WA basic
share, of depreciation and amortization. 2Q 2014 GAAP Income
includes depreciation and amortization of $31 million, or $0.53 per
WA basic share.
**For a reconciliation of GAAP Income to Core Earnings and AFFO,
please refer to the Reconciliation of Core Earnings and AFFO
below.
Highlights for the quarter ended September 30, 2014
- New Senior Investment Group (NYSE:
SNR) – On October 16, Newcastle’s Board of Directors
established November 6, 2014 as the distribution date for the
spin-off of New Senior Investment Group, a wholly owned subsidiary
of the Company. On the first trading day following the
distribution, November 7, 2014, New Senior will be an independent
publicly traded real estate investment trust with a diversified
portfolio of senior housing properties. As of September 30, New
Senior owned 99 senior housing properties, totaling $1.9 billion of
assets, throughout the United States.
- In the third quarter, New Senior
acquired 4 senior housing properties for approximately $77 million.
The transaction was funded with $47 million of debt and $30 million
of equity (including working capital and transaction costs). These
assets are managed by Blue Harbor, which is an affiliate of
Newcastle’s manager and of Fortress Investment Group LLC.
- New Senior is also in contract to
acquire 8 properties for a total purchase price of $160 million and
has an active acquisition pipeline of over $3 billion. There can be
no assurance that New Senior will complete investments under
contract, which are subject to the completion of diligence and
other closing conditions, or any other investments in the
pipeline.
- Real Estate Debt – Newcastle’s
debt portfolio generated total return of capital of $38 million
from asset sales, paydowns and financings.
- In July, the Company sold $38 million
of residential whole loans at an average price of 91.5% of par,
generating a net gain on sale of $7 million and realized $12
million of principal recovery.
- During the quarter, Newcastle’s CDOs
also received $76 million of asset pay downs, resulting in $24
million of principal recovery net to the Company.
- Capital Raise – In August,
Newcastle generated gross proceeds of approximately $201 million
through the sale of approximately 7.7 million shares of common
stock.
- Dividend – On September 17,
Newcastle declared a third quarter dividend of $0.60 per common
share.
ADDITIONAL INFORMATION
For additional information that management believes to be useful
for investors, please refer to the presentation posted on the
Investor Relations section of Newcastle’s website,
www.newcastleinv.com. For consolidated investment portfolio
information, please refer to the Company’s Quarterly Report on Form
10-Q and Annual Report on Form 10-K, which are available on
the Company’s website, www.newcastleinv.com.
EARNINGS CONFERENCE CALL
Newcastle’s management will host a conference call on Tuesday,
November 4, 2014 at 10:00 A.M. Eastern Time. A copy of the earnings
release will be posted to the Investor Relations section of
Newcastle’s website, www.newcastleinv.com.
All interested parties are welcome to participate on the live
call. The conference call may be accessed by dialing 1-888-243-2046
(from within the U.S.) or 1-706-679-1533 (from outside of the U.S.)
ten minutes prior to the scheduled start of the call; please
reference “Newcastle Third Quarter 2014 Earnings Call.”
A simultaneous webcast of the conference call will be available
to the public on a listen-only basis at www.newcastleinv.com.
Please allow extra time prior to the call to visit the website and
download any necessary software required to listen to the internet
broadcast.
A telephonic replay of the conference call will also be
available two hours following the call’s completion through 11:59
P.M. Eastern Time on Tuesday, November 18, 2014 by dialing
1-855-859-2056 (from within the U.S.) or 1-404-537-3406 (from
outside of the U.S.); please reference access code “24936748.”
Investment Portfolio
as of September 30, 2014
($ in millions, except where otherwise
noted)
Percentage Weighted of Total Average Outstanding Face
Amortized Amortized Carrying Number of Life (years) Amount
Cost Basis (1) Cost Basis Value Investments
Credit (2) (3)
Debt
Investment
Commercial Assets CMBS $ 240 $ 168 6.6 % $ 206 39 B+ 2.2
Mezzanine Loans 132 100 4.0 % 100 7 88% 1.2 B-Notes 22 19 0.8 % 19
1 123% 4.3 Whole Loans 1 1
-
% 1 1 12% 0.4 CDO Securities (4) 21 6 0.2 % 14 3 B- 7.7 Other
Investments (5) 26 26 1.0 % 26 1
-
-
Total Commercial Assets 442 320 12.6 % 366 2.3
Residential Assets Residential Loans 5 4 0.2 % 4 8
727 1.7 Non-Agency RMBS 87 38 1.5 % 60 33 CCC+ 6.2 Real Estate ABS
8
-
-
%
-
1 C
-
Total Residential Assets 100 42 1.7 % 64 5.4
Corporate Assets REIT Debt 29 29 1.1 % 30 5 BB+ 0.8
Corporate Bank Loans 170 106 4.2 % 106 5 D 1.8
Total Corporate Assets 199 135 5.3 % 136 1.7
Total Debt Investments 741 497 19.6 % 566 2.6
Other
Investments
Senior Housing Investments (6) 1,805 1,697 67.2 % 1,697
Golf Investment (6) 371 333 13.2 % 333
Total Portfolio/Weighted Average $ 2,917 $
2,527 100.0 % $ 2,596 Reconciliation to GAAP
total assets: Other Assets
Subprime mortgage loans subject to call
option (7)
406 Cash and restricted cash 262 Assets of discontinued operations
7
Other 112 GAAP total assets $ 3,383 (1)
Net of impairment. (2) Credit represents the weighted average of
minimum rating for rated assets, the loan-to-value ratio (based on
the appraised value at the time of purchase or refinancing) for
non-rated commercial assets, or the FICO score for non-rated
residential assets. Ratings provided above were determined by third
party rating agencies, represent the most recent credit ratings
available as of the reporting date and may not be current. (3)
Weighted average life is based on the timing of expected principal
reduction on the asset. (4) Represents non-consolidated CDO
securities, excluding eight securities with a zero value, which had
an aggregate face amount of $112.5 million. (5) Represents an
equity investment in a real estate owned property. (6) Face amount
of senior housing and golf investments represents the gross
carrying amount, including intangibles, and excludes accumulated
depreciation and amortization. (7) Our subprime mortgage loans
subject to call option are excluded from the presentation of our
consolidated investment portfolio because they represent an option,
not an obligation, to repurchase loans and the option is a
noneconomic interest until exercised, and is offset by a liability
in an amount equal to the GAAP asset on the consolidated balance
sheet.
Unaudited Consolidated Statements of
Income
($ in thousands, except per share
data)
Three Months Ended Nine Months Ended
September 30, September 30, 2014
2013 2014 2013
Interest income $ 27,544 $ 47,486 $ 103,889 $ 171,642 Interest
expense 32,549 20,555 102,340 65,263
Net interest income (expense) (5,005 ) 26,931 1,549
106,379
Impairment/(Reversal) Valuation allowance
(reversal) on loans (4,015 ) (12,998 ) (1,243 ) (11,473 )
Other-than-temporary impairment on securities
-
-
-
4,405
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)
-
-
-
44 Total impairment (reversal) (4,015 ) (12,998 )
(1,243 ) (7,024 ) Net interest income (expense) after
impairment/reversal (990 ) 39,929 2,792 113,403
Operating
Revenues Rental income 60,828 20,607 167,208 42,799 Care and
ancillary income 6,428 3,763 17,555 8,081 Golf course operations
50,414
-
140,699
-
Sales of food and beverages - golf 18,871
-
52,333
-
Other golf revenue 12,209
-
33,832
-
Total operating revenues 148,750 24,370
411,627 50,880
Other Income Gain on settlement
of investments, net 7,007 1,388 49,742 6,451 Gain (loss) on
extinguishment of debt
-
3,359 (3,410 ) 4,565 Other income, net 7,092 1,963
25,258 9,554 Total other income 14,099 6,710
71,590 20,570
Expenses Loan and
security servicing expense 159 908 1,424 2,963 Property operating
expenses 26,519 15,542 74,092 31,827 Operating expenses - golf
67,576
-
191,119
-
Cost of sales - golf 8,420
-
23,183
-
General and administrative expense 8,539 9,350 27,380 23,495
Management fee to affiliate 8,106 7,166 23,618 24,879 Depreciation
and amortization 37,023 7,678 97,812 15,717
Total expenses 156,342 40,644 438,628
98,881 Income from continuing operations before income tax
5,517 30,365 47,381 85,972 Income tax expense 334
-
1,169
-
Income from continuing operations 5,183 30,365 46,212 85,972
Income (loss) from discontinued operations, net of tax 127
(1,121 ) (4,748 ) 35,008
Net Income 5,310 29,244
41,464 120,980 Preferred dividends (1,395 ) (1,395 ) (4,185 )
(4,185 ) Net loss attributable to noncontrolling interests 21
-
711
-
Income Applicable to Common Stockholders $ 3,936
$ 27,849 $ 37,990 $ 116,795
Continued on next page.
Unaudited Consolidated Statements of Income
($ in thousands, except per share
data)
Three Months Ended September 30, Nine Months Ended
September 30, 2014 2013 2014
2013 Income Applicable to Common Stock, per
share (1) Basic $ 0.06 $ 0.57 $ 0.63 $ 2.67
Diluted $ 0.06 $ 0.56 $ 0.62 $ 2.60
Income from continuing operations per
share of common stock, after preferred dividends and noncontrolling
interests (1)
Basic $ 0.06 $ 0.59 $ 0.71 $ 1.87 Diluted $ 0.06 $
0.58 $ 0.69 $ 1.82
Income (loss) from discontinued
operations per share of common stock (1) Basic $
-
$ (0.02 ) $ (0.08 ) $ 0.80 Diluted $
-
$ (0.02 ) $ (0.08 ) $ 0.78
Weighted Average Number of Shares of
Common Stock Outstanding (1) Basic 62,329,023 48,895,648
59,848,506 43,798,831 Diluted 63,865,796 50,171,319
61,630,175 44,842,947
Dividends Declared per Share
of Common Stock (1) $ 0.60 $ 0.60 $ 1.80 $ 2.94
(1) All per share amounts and shares outstanding for all periods
reflect the 3-for-1 reverse stock split, which was effective after
the close of trading on August 18, 2014 and the 2-for-1 reverse
stock split, which was effective after the close of trading on
October 22, 2014.
Consolidated Balance Sheet
($ in thousands, except per share
data)
September 30, 2014 December 31, 2013
(Unaudited) Assets Real estate securities,
available-for-sale $ 310,639 $ 984,263 Real estate related and
other loans, held-for-sale, net 224,992 437,530 Residential
mortgage loans, held-for-investment, net
-
255,450 Residential mortgage loans, held-for-sale, net 4,036 2,185
Subprime mortgage loans subject to call option 406,217 406,217
Investments in senior housing real estate, net of accumulated
depreciation 1,582,477 1,362,900 Investments in other real estate,
net of accumulated depreciation 245,510 250,208 Intangibles, net of
accumulated amortization 201,909 196,407 Other investments 26,456
25,468 Cash and cash equivalents 257,584 73,984 Restricted cash
4,624 5,856 Receivables and other assets 111,996 139,595 Assets of
discontinued operations 6,863 697,572
Total
Assets $ 3,383,303 $ 4,837,635
Liabilities and Equity Liabilities CDO bonds payable
$ 230,858 $ 544,525 Other bonds and notes payable 82,063 230,279
Repurchase agreements 63,804 556,347 Mortgage notes payable
1,148,008 1,076,828 Credit facilities and obligations under capital
leases, golf 160,692 152,498 Financing of subprime mortgage loans
subject to call option 406,217 406,217 Junior subordinated notes
payable 51,233 51,237 Dividends payable 40,770 36,075 Accounts
payable, accrued expenses and other liabilities 249,065 261,825
Liabilities of discontinued operations 412 295,680
Total Liabilities $ 2,433,122 $ 3,611,511
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 September 30, 2014 and December 31, 2013 $ 61,583 $ 61,583
Common stock, $0.01 par value, 1,000,000,000 shares authorized,
66,399,857 and 58,575,583 shares issued and outstanding, at
September 30, 2014 and December 31, 2013, respectively 664 586
Additional paid-in capital 3,171,983 2,973,715 Accumulated deficit
(2,350,567 ) (1,947,913 ) Accumulated other comprehensive income
66,342 76,874 Total Newcastle Stockholders' Equity
950,005 1,164,845 Noncontrolling interests 176 61,279
Total Equity $ 950,181 $ 1,226,124
Total Liabilities and Equity $ 3,383,303 $ 4,837,635
Reconciliation of Core Earnings
($ in thousands)
3Q 2014 2Q 2014 Income available
for common stockholders $ 3,936 $ 31,029 Add (Deduct): Impairment
(reversal) (4,015 ) 1,526 Other (income) loss(A) (12,716 ) (39,488
) Impairment (reversal), other (income) loss, depreciation and
amortization and other adjustments from discontinued operations 65
— Depreciation and amortization(B) 38,262 32,405 Acquisition and
spin-off related expenses 3,308 4,484 Restructuring expenses 558
— Core earnings $ 29,398 $ 29,956 (A)
Net of $1.1 million of deal expenses relating to the sale of
the residential loan portfolio during Q3 2014 and net of $1.9
million of deal expenses relating to the sale of the manufactured
housing portfolio during Q2 2014. These deal expenses were recorded
to general and administrative expense under GAAP during 2014. (B)
Including accretion of membership deposit liability of $1.2 million
in 3Q 2014 and $1.4 million in 2Q 2014.
CORE EARNINGS
Newcastle has the following primary variables that impact its
operating performance: (i) the current yield earned on its
investments that are not included in non-recourse financing
structures (i.e., unlevered investments, including investments in
equity method investees and investments subject to recourse debt),
(ii) the net yield it earns from its non-recourse financing
structures, (iii) the interest expense and dividends incurred under
its recourse debt and preferred stock, (iv) the net operating
income on its real estate and golf investments, (v) its operating
expenses and (vi) its realized and unrealized gains or losses,
including any impairment, on its investments, derivatives and debt
obligations.
Core earnings is a non-GAAP measure of the operating performance
of Newcastle excluding the sixth variable listed above. It also
excludes depreciation and amortization charges including the
accretion of membership deposit liability, acquisition and spin-off
related expenses and restructuring expenses. Core earnings is used
by management to gauge the current performance of Newcastle without
taking into account gains and losses, which, although they
represent a part of our recurring operations, are subject to
significant variability and are only a potential indicator of
future economic performance. It is the judgment of management that
depreciation and amortization charges and restructuring expenses
are not indicative of operating performance and that acquisition
and spin-off related expenses are not part of our core operations.
Management believes that the exclusion from core earnings of the
items specified above allows investors and analysts to readily
identify the operating performance of the assets that form the core
of our activity, assists in comparing the core operating results
between periods, and enables investors to evaluate Newcastle’s
current performance using the same measure that management uses to
operate the business, which is among the factors considered when
determining the amount of distributions to our shareholders.
Core earnings does not represent cash generated from operating
activities in accordance with GAAP and therefore should not be
considered an alternative to net income (loss) 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 or of cash available to make
distributions to stockholders. Our calculation of core earnings may
be different from the calculation used by other companies and,
therefore, comparability may be limited.
Reconciliation of Adjusted Funds from Operations
(“AFFO”)
($ in thousands)
3Q 2014
2Q 2014
Income available for common stockholders $ 3,936 $ 31,029 Add:
Depreciation and amortization 37,023 31,031 Adjusted Funds from
Operations (“AFFO”) $ 40,959 $ 62,060
ADJUSTED FUNDS FROM OPERATIONS
The Company defines Adjusted Funds from Operations (“AFFO”) as
net income available for common stockholders plus depreciation and
amortization. The Company believes AFFO provides useful information
to investors regarding the performance of the Company, because it
provides a measure of operating performance without regard to
depreciation and amortization, which reduce the value of real
estate assets over time even though actual real estate values may
fluctuate with market conditions. AFFO does not represent cash
generated from operating activities in accordance with GAAP and
therefore should not be considered an alternative to net income
(loss) as an indicator of our operating performance or as an
alternative to cash flow as a measure of our liquidity, and it is
not necessarily indicative of cash available to fund cash needs.
Our calculation of AFFO may be different from the calculation used
by other companies and, therefore, comparability may be limited.
The Company’s definition of AFFO differs from the definition of FFO
established by the National Association of Real Estate Investment
Trusts (“NAREIT”), which defines FFO as net income (or loss)
(computed in accordance with GAAP) excluding losses or gains from
sales of depreciable property, impairment of depreciable real
estate, real estate-related depreciation and amortization and the
portion of such items related to unconsolidated affiliates.
ABOUT NEWCASTLE
Newcastle focuses on investing in, and actively managing, real
estate related assets. Newcastle conducts its operations to qualify
as a REIT for federal income tax purposes. Newcastle is managed by
an affiliate of Fortress Investment Group LLC, a global investment
management firm.
FORWARD-LOOKING STATEMENTS
Certain items in this press release may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, such as statements
regarding the New Senior spin-off, and the expected senior housing
acquisition pipeline. These statements are based on management's
current expectations and beliefs and are subject to a number of
trends and uncertainties that could cause actual results to differ
materially from those described in the forward-looking statements,
many of which are beyond our control. The Company can give no
assurance that its expectations will be attained. Accordingly, you
should not place undue reliance on any forward-looking statements
contained in this press release. For a discussion of some of the
risks and important factors that could cause actual results to
differ from such forward-looking statements, see the sections
entitled “Risk Factors” and “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” in the Company’s
most recent Annual Report on Form 10-K and Quarterly Report on Form
10-Q. Furthermore, new risks and uncertainties emerge from time to
time, and it is not possible for the Company to predict or assess
the impact of every factor that may cause its actual results to
differ from those contained in any forward-looking statements. Such
forward-looking statements speak only as of the date of this press
release. The Company expressly disclaims any obligation to release
publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in the Company's
expectations with regard thereto or change in events, conditions or
circumstances on which any statement is based.
Newcastle Investment Corp.Investor Relations, 212-479-3195
New Senior Investment (NYSE:SNR)
Historical Stock Chart
From Mar 2024 to Apr 2024
New Senior Investment (NYSE:SNR)
Historical Stock Chart
From Apr 2023 to Apr 2024