ý
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Maryland
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94-6181186
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(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
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410 Park Avenue,
14th Floor, New York,
NY
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10022
|
(Address
of principal executive offices)
|
(Zip
Code)
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(212)
655-0220
(Registrant's
telephone number, including area
code)
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Large
accelerated filer o
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Accelerated
filer o
|
|
Non-accelerated
filer ý (Do not check if
a smaller reporting company)
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Smaller
Reporting Company o
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Part
I.
|
Financial
Information
|
||
Item
1:
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1
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||
1
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|||
2
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|||
3
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|||
4
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|||
5
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|||
Item
2:
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44
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Item
3:
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62
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||
Item
4:
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64
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||
Part II.
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Other
Information
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||
Item
1:
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65
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||
Item
1A:
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65
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||
Item
2:
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65
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||
Item
3:
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65
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Item
4:
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65
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Item
5:
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65
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Item
6:
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66
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67
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ITEM
1.
|
Financial
Statements
|
Capital
Trust, Inc. and Subsidiaries
|
||||||||
Consolidated
Balance Sheets
|
||||||||
September
30, 2010 and December 31, 2009
|
||||||||
(in
thousands, except per share data)
|
||||||||
September
30,
|
December
31,
|
|||||||
Assets
|
2010
|
2009
|
||||||
(unaudited)
|
||||||||
Cash
and cash equivalents
|
$ | 24,149 | $ | 27,954 | ||||
Securities
held-to-maturity
|
3,345 | 17,332 | ||||||
Loans
receivable, net
|
610,633 | 766,745 | ||||||
Loans
held-for-sale, net
|
59,953 | — | ||||||
Equity
investments in unconsolidated subsidiaries
|
7,597 | 2,351 | ||||||
Accrued
interest receivable
|
2,600 | 3,274 | ||||||
Deferred
income taxes
|
1,155 | 2,032 | ||||||
Prepaid
expenses and other assets
|
5,976 | 8,391 | ||||||
Subtotal
|
715,408 | 828,079 | ||||||
Assets of Consolidated Variable Interest Entities
("VIEs")
|
||||||||
Securities
held-to-maturity
|
531,349 | 697,864 | ||||||
Loans
receivable, net
|
2,962,597 | 391,499 | ||||||
Loans
held-for-sale, net
|
— | 17,548 | ||||||
Real
estate held-for-sale
|
8,055 | — | ||||||
Accrued
interest receivable and other assets
|
18,442 | 1,645 | ||||||
Subtotal
|
3,520,443 | 1,108,556 | ||||||
Total
assets
|
$ | 4,235,851 | $ | 1,936,635 | ||||
Liabilities
& Shareholders' Deficit
|
||||||||
Liabilities:
|
||||||||
Accounts
payable and accrued expenses
|
$ | 7,325 | $ | 8,228 | ||||
Repurchase
obligations
|
407,921 | 450,137 | ||||||
Senior
credit facility
|
98,393 | 99,188 | ||||||
Junior
subordinated notes
|
131,145 | 128,077 | ||||||
Participations
sold
|
288,127 | 289,144 | ||||||
Interest
rate hedge liabilities
|
5,900 | 4,184 | ||||||
Subtotal
|
938,811 | 978,958 | ||||||
Non-Recourse Liabilities of Consolidated
VIEs
|
||||||||
Accounts
payable and accrued expenses
|
4,588 | 1,798 | ||||||
Securitized
debt obligations
|
3,683,774 | 1,098,280 | ||||||
Interest
rate hedge liabilities
|
35,329 | 26,766 | ||||||
Subtotal
|
3,723,691 | 1,126,844 | ||||||
Total
liabilities
|
4,662,502 | 2,105,802 | ||||||
Shareholders'
deficit:
|
||||||||
Class
A common stock, $0.01 par value, 100,000 shares authorized,
21,912
and
21,796 shares issued and outstanding as of September 30, 2010
and
December
31, 2009, respectively ("class A common stock")
|
219 | 218 | ||||||
Restricted
class A common stock, $0.01 par value, 51 and 79 shares
issued
and
outstanding as of September 30, 2010 and December 31, 2009,
respectively
("restricted class A common stock" and together with class
A
common stock, "common stock")
|
1 | 1 | ||||||
Additional
paid-in capital
|
559,339 | 559,145 | ||||||
Accumulated
other comprehensive loss
|
(55,940 | ) | (39,135 | ) | ||||
Accumulated
deficit
|
(930,270 | ) | (689,396 | ) | ||||
Total
shareholders' deficit
|
(426,651 | ) | (169,167 | ) | ||||
Total
liabilities and shareholders' deficit
|
$ | 4,235,851 | $ | 1,936,635 |
Capital Trust, Inc. and Subsidiaries
|
||||||||||||||||
Consolidated
Statements of Operations
|
||||||||||||||||
Three
and Nine Months Ended September 30, 2010 and 2009
|
||||||||||||||||
(in
thousands, except share and per share data)
|
||||||||||||||||
(unaudited)
|
||||||||||||||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Income
from loans and other investments:
|
||||||||||||||||
Interest
and related income
|
$ | 40,125 | $ | 29,527 | $ | 119,523 | $ | 93,341 | ||||||||
Less:
Interest and related expenses
|
31,557 | 19,604 | 94,462 | 61,116 | ||||||||||||
Income
from loans and other investments, net
|
8,568 | 9,923 | 25,061 | 32,225 | ||||||||||||
Other
revenues:
|
||||||||||||||||
Management
fees from affiliates
|
2,050 | 2,959 | 5,990 | 8,768 | ||||||||||||
Incentive
management fees from affiliates
|
733 | — | 733 | — | ||||||||||||
Servicing
fees
|
84 | 168 | 2,821 | 1,502 | ||||||||||||
Other
interest income
|
155 | 16 | 260 | 153 | ||||||||||||
Total
other revenues
|
3,022 | 3,143 | 9,804 | 10,423 | ||||||||||||
Other
expenses:
|
||||||||||||||||
General
and administrative
|
5,143 | 5,492 | 14,383 | 18,450 | ||||||||||||
Depreciation
and amortization
|
5 | 51 | 15 | 65 | ||||||||||||
Total
other expenses
|
5,148 | 5,543 | 14,398 | 18,515 | ||||||||||||
Total
other-than-temporary impairments of securities
|
(29,963 | ) | (77,883 | ) | (69,798 | ) | (96,529 | ) | ||||||||
Portion
of other-than-temporary impairments of securities
recognized
in other comprehensive income
|
(5,921 | ) | 11,987 | 12,094 | 17,612 | |||||||||||
Impairment
of goodwill
|
— | — | — | (2,235 | ) | |||||||||||
Impairment
of real estate held-for-sale
|
(4,000 | ) | — | (4,000 | ) | (2,233 | ) | |||||||||
Net
impairments recognized in earnings
|
(39,884 | ) | (65,896 | ) | (61,704 | ) | (83,385 | ) | ||||||||
Provision
for loan losses
|
(95,916 | ) | (47,222 | ) | (150,143 | ) | (113,716 | ) | ||||||||
Valuation
allowance on loans held-for-sale
|
(6,036 | ) | — | (6,036 | ) | (10,363 | ) | |||||||||
Gain
on extinguishment of debt
|
185 | — | 648 | — | ||||||||||||
Income
(loss) from equity investments
|
1,056 | (862 | ) | 2,358 | (3,074 | ) | ||||||||||
Loss
before income taxes
|
(134,153 | ) | (106,457 | ) | (194,410 | ) | (186,405 | ) | ||||||||
Income
tax provision (benefit)
|
556 | — | 849 | (408 | ) | |||||||||||
Net
loss
|
$ | (134,709 | ) | $ | (106,457 | ) | $ | (195,259 | ) | $ | (185,997 | ) | ||||
Per
share information:
|
||||||||||||||||
Net
loss per share of common stock:
|
||||||||||||||||
Basic
|
$ | (6.02 | ) | $ | (4.75 | ) | $ | (8.73 | ) | $ | (8.32 | ) | ||||
Diluted
|
$ | (6.02 | ) | $ | (4.75 | ) | $ | (8.73 | ) | $ | (8.32 | ) | ||||
Weighted
average shares of common stock outstanding:
|
||||||||||||||||
Basic
|
22,389,901 | 22,426,623 | 22,356,857 | 22,361,541 | ||||||||||||
Diluted
|
22,389,901 | 22,426,623 | 22,356,857 | 22,361,541 |
Capital
Trust, Inc. and Subsidiaries
|
|||||||||||||||||||||||||||||
Consolidated
Statements of Changes in Shareholders' Equity (Deficit)
|
|||||||||||||||||||||||||||||
For
the Nine Months Ended September 30, 2010 and 2009
|
|||||||||||||||||||||||||||||
(in
thousands)
|
|||||||||||||||||||||||||||||
(unaudited)
|
|||||||||||||||||||||||||||||
Comprehensive
Loss
|
Class
A Common Stock
|
Restricted
Class A Common Stock
|
Additional
Paid-In Capital
|
Accumulated
Other Comprehensive Loss
|
Accumulated
Deficit
|
Total
|
|||||||||||||||||||||||
Balance
at January 1, 2009
|
$ | 217 | $ | 3 | $ | 557,435 | $ | (41,009 | ) | $ | (115,202 | ) | $ | 401,444 | |||||||||||||||
Net
loss
|
$ | (185,997 | ) | — | — | — | — | (185,997 | ) | (185,997 | ) | ||||||||||||||||||
Cumulative
effect of change in accounting principle
|
— | — | — | — | (2,243 | ) | 2,243 | — | |||||||||||||||||||||
Unrealized
gain (loss) on derivative financial instruments
|
13,465 | — | — | — | 13,465 | — | 13,465 | ||||||||||||||||||||||
Amortization
of net unrealized gains and losses on securities
|
(675 | ) | — | — | — | (675 | ) | — | (675 | ) | |||||||||||||||||||
Amortization
of net deferred gains and losses on settlement of swaps
|
(70 | ) | — | — | — | (70 | ) | — | (70 | ) | |||||||||||||||||||
Other-than-temporary
impairments of securities related to fair value
adjustments in excess of expected credit losses, net of
amortization
|
(17,346 | ) | — | — | — | (17,346 | ) | — | (17,346 | ) | |||||||||||||||||||
Issuance
of warrants in conjunction with debt restructuring
|
— | — | — | 940 | — | — | 940 | ||||||||||||||||||||||
Restricted
class A common stock earned
|
— | 1 | — | 1,091 | — | — | 1,092 | ||||||||||||||||||||||
Deferred
directors' compensation
|
— | — | — | 393 | — | — | 393 | ||||||||||||||||||||||
Balance
at September 30, 2009
|
$ | (190,623 | ) | $ | 218 | $ | 3 | $ | 559,859 | $ | (47,878 | ) | $ | (298,956 | ) | $ | 213,246 | ||||||||||||
Balance
at January 1, 2010
|
$ | 218 | $ | 1 | $ | 559,145 | $ | (39,135 | ) | $ | (689,396 | ) | $ | (169,167 | ) | ||||||||||||||
Net
loss
|
$ | (195,259 | ) | — | — | — | — | (195,259 | ) | (195,259 | ) | ||||||||||||||||||
Cumulative
effect of change in accounting principle
|
— | — | — | — | 3,800 | (45,615 | ) | (41,815 | ) | ||||||||||||||||||||
Unrealized
gain (loss) on derivative financial instruments
|
(10,281 | ) | — | — | — | (10,281 | ) | — | (10,281 | ) | |||||||||||||||||||
Amortization
of net unrealized gains and losses on securities
|
(754 | ) | — | — | — | (754 | ) | — | (754 | ) | |||||||||||||||||||
Amortization
of net deferred gains and losses on settlement of swaps
|
(74 | ) | — | — | — | (74 | ) | — | (74 | ) | |||||||||||||||||||
Other-than-temporary
impairments of securities related to fair value adjustments
in excess of expected credit losses, net of amortization
|
(9,496 | ) | — | — | — | (9,496 | ) | — | (9,496 | ) | |||||||||||||||||||
Restricted
class A common stock earned
|
— | 1 | — | 44 | — | — | 45 | ||||||||||||||||||||||
Deferred
directors' compensation
|
— | — | — | 150 | — | — | 150 | ||||||||||||||||||||||
Balance
at September 30, 2010
|
$ | (215,864 | ) | $ | 219 | $ | 1 | $ | 559,339 | $ | (55,940 | ) | $ | (930,270 | ) | $ | (426,651 | ) |
Capital Trust, Inc. and Subsidiaries
|
||||||||
Consolidated
Statements of Cash Flows
|
||||||||
For
the Nine Months Ended September 30, 2010 and 2009
|
||||||||
(in
thousands)
|
||||||||
(unaudited)
|
||||||||
2010
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$ | (195,259 | ) | $ | (185,997 | ) | ||
Adjustments
to reconcile net loss to net cash provided by
|
||||||||
operating
activities:
|
||||||||
Net
impairments recognized in earnings
|
61,704 | 83,385 | ||||||
Provision
for loan losses
|
150,143 | 113,716 | ||||||
Valuation
allowance on loans held-for-sale
|
6,036 | 10,363 | ||||||
Gain
on extinguishment of debt
|
(648 | ) | — | |||||
(Income)
loss from equity investments
|
(2,358 | ) | 3,074 | |||||
Employee
stock-based compensation
|
107 | 1,102 | ||||||
Depreciation
and amortization
|
15 | 65 | ||||||
Amortization
of premiums/discounts on loans and securities and deferred
interest
on loans
|
(2,581 | ) | (4,966 | ) | ||||
Amortization
of deferred gains and losses on settlement of swaps
|
(74 | ) | (70 | ) | ||||
Amortization
of deferred financing costs and premiums/discounts on
|
||||||||
debt
obligations
|
5,596 | 5,166 | ||||||
Deferred
interest on senior credit facility
|
2,954 | 1,943 | ||||||
Deferred
directors' compensation
|
150 | 393 | ||||||
Changes
in assets and liabilities, net:
|
||||||||
Accrued
interest receivable
|
351 | 1,439 | ||||||
Deferred
income taxes
|
877 | — | ||||||
Prepaid
expenses and other assets
|
1,163 | 2,220 | ||||||
Accounts
payable and accrued expenses
|
56 | (1,747 | ) | |||||
Net
cash provided by operating activities
|
28,232 | 30,086 | ||||||
Cash
flows from investing activities:
|
||||||||
Principal
collections of securities
|
35,806 | 11,342 | ||||||
Add-on
fundings under existing loan commitments
|
(1,562 | ) | (7,698 | ) | ||||
Principal
collections of loans receivable
|
183,761 | 56,188 | ||||||
Proceeds
from operation/disposition of real estate held-for-sale
|
— | 7,665 | ||||||
Proceeds
from disposition of loans
|
23,548 | — | ||||||
Contributions
to unconsolidated subsidiaries
|
(2,917 | ) | (2,315 | ) | ||||
Distributions
from unconsolidated subsidiaries
|
29 | — | ||||||
Net
cash provided by investing activities
|
238,665 | 65,182 | ||||||
Cash
flows from financing activities:
|
||||||||
Decrease
in restricted cash
|
— | 18,666 | ||||||
Repayments
under repurchase obligations
|
(42,568 | ) | (93,709 | ) | ||||
Repayments
under senior credit facility
|
(3,750 | ) | (2,500 | ) | ||||
Repayment
of securitized debt obligations
|
(224,384 | ) | (31,636 | ) | ||||
Repayment
of participations sold
|
— | (2,889 | ) | |||||
Payment
of deferred financing costs
|
— | (7 | ) | |||||
Net
cash used in financing activities
|
(270,702 | ) | (112,075 | ) | ||||
Net
decrease in cash and cash equivalents
|
(3,805 | ) | (16,807 | ) | ||||
Cash
and cash equivalents at beginning of period
|
27,954 | 45,382 | ||||||
Cash
and cash equivalents at end of period
|
$ | 24,149 | $ | 28,575 |
CMBS
|
CDOs
& Other
|
Total
Book Value
(1)
|
|||||||||||
December
31, 2009
|
$2,081 | $15,251 | $17,332 | ||||||||||
Principal
paydowns
|
(127 | ) | — | (127 | ) | ||||||||
Discount/premium
amortization & other (2)
|
193 | 590 | 783 | ||||||||||
Other-than-temporary
impairments:
|
|||||||||||||
Recognized
in earnings
|
(586 | ) | (17,211 | ) | (17,797 | ) | |||||||
Recognized
in accumulated other comprehensive income
|
586 | 2,568 | 3,154 | ||||||||||
September
30, 2010
|
$2,147 | $1,198 | $3,345 |
(1)
|
Includes securities with a total face value of $36.1 million and
$105.2 million as of September 30, 2010 and December 31, 2009,
respectively. Securities with an aggregate face value of $69.0 million,
which had a net carrying value of zero as of December 31, 2009, have been
eliminated in consolidation beginning January 1, 2010 as discussed in Note
2.
|
|
(2) |
Includes mark-to-market adjustments on securities previously
classified as available-for-sale, amortization of other-than-temporary
impairments, and losses, if
any.
|
CMBS
|
CDOs
&
Other
|
Total
Securities
|
|||||||||||
Amortized
cost basis
|
$5,541 | $1,198 | $6,739 | ||||||||||
Mark-to-market
adjustments on securities previously classified
as
available-for-sale
|
(549 | ) | — | (549 | ) | ||||||||
Other-than-temporary
impairments recognized in accumulated
other
comprehensive income
|
(2,845 | ) | — | (2,845 | ) | ||||||||
Total
book value
|
$2,147 | $1,198 | $3,345 |
September
30, 2010
|
December
31, 2009
|
|||
Number
of securities
|
7
|
9
|
||
Number
of issues
|
5
|
6
|
||
Rating
(1)
(2)
|
CCC
|
B-
|
||
Fixed
/ Floating (in millions) (3)
|
$2
/ $1
|
$16
/ $1
|
||
Coupon
(1)
(4)
|
6.81%
|
9.82%
|
||
Yield (1)
(4)
|
8.58%
|
7.89%
|
||
Life
(years) (1)
(5)
|
2.0
|
2.8
|
(1)
|
Represents a weighted average as of September 30, 2010 and December
31, 2009, respectively.
|
|
(2) |
Weighted average ratings are based on the lowest rating published
by Fitch Ratings, Standard & Poor’s or Moody’s Investors Service for
each security and exclude unrated equity investments in CDOs with a net
book value of $1.2 million as of both September 30, 2010 and December 31,
2009.
|
|
(3) |
Represents the aggregate net book value of our portfolio allocated
between fixed rate and floating rate securities.
|
|
(4) |
Coupon is based on the securities’ contractual interest rates,
while yield is based on expected cash flows for each security, and
considers discounts/premiums and asset non-performance. Calculations for
floating rate securities are based on LIBOR of 0.26% and 0.23% as of
September 30, 2010 and December 31, 2009,
respectively.
|
|
(5) | Weighted average life is based on the timing and amount of future expected principal payments through the expected repayment date of each respective investment. |
Rating
as of September 30, 2010
|
Rating
as of December 31, 2009
|
||||||||||||||
Vintage
|
B
|
CCC
and
Below
|
Total
|
B
|
CCC
and
Below
|
Total
|
|||||||||
2003
|
$—
|
$1,197
|
$1,197
|
$13,488
|
$1,162
|
$14,650
|
|||||||||
2002
|
—
|
—
|
—
|
—
|
602
|
602
|
|||||||||
2000
|
—
|
866
|
866
|
—
|
879
|
879
|
|||||||||
1997
|
226
|
—
|
226
|
246
|
—
|
246
|
|||||||||
1996
|
—
|
1,056
|
1,056
|
—
|
955
|
955
|
|||||||||
Total
|
$226
|
$3,119
|
$3,345
|
$13,734
|
$3,598
|
$17,332
|
Gross
Other-Than-Temporary Impairments
|
Credit
Related Other-Than-Temporary Impairments
|
Non-Credit
Related Other-Than-Temporary Impairments
|
|||||||||||
December
31, 2009
|
$85,838 | $79,210 | $6,628 | ||||||||||
Impact
of change in accounting principle (1)
|
(68,989 | ) | (68,989 | ) | — | ||||||||
Additions
due to change in expected cash
flows
|
14,643 | 17,797 | (3,154 | ) | |||||||||
Amortization
of other-than-temporary impairments
|
(831 | ) | (202 | ) | (629 | ) | |||||||
September
30, 2010
|
$30,661 | $27,816 | $2,845 |
(1)
|
Due to the consolidation of additional VIEs, as discussed in Note
2, other-than-temporary impairments which were previously recorded on our
investment in these entities have been eliminated in consolidation
beginning January 1,
2010.
|
Less
Than 12 Months
|
Greater
Than 12 Months
|
Total
|
||||||||||||||
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Book
Value (1)
|
||||||||||
Floating
Rate
|
$—
|
$—
|
$0.2
|
($1.0)
|
$0.2
|
($1.0)
|
$1.2
|
|||||||||
Fixed
Rate
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||
Total
|
$—
|
$—
|
$0.2
|
($1.0)
|
$0.2
|
($1.0)
|
$1.2
|
(1)
|
Excludes, as of September 30, 2010, $2.1 million of securities
which were carried at or below fair value and securities against which an
other-than-temporary impairment equal to the entire book value was
recognized in
earnings.
|
Less
Than 12 Months
|
Greater
Than 12 Months
|
Total
|
||||||||||||||
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Book
Value (1)
|
||||||||||
Floating
Rate
|
$—
|
$—
|
$0.2
|
($0.9)
|
$0.2
|
($0.9)
|
$1.1
|
|||||||||
Fixed
Rate
|
—
|
—
|
3.8
|
(9.7)
|
3.8
|
(9.7)
|
13.5
|
|||||||||
Total
|
$—
|
$—
|
$4.0
|
($10.6)
|
$4.0
|
($10.6)
|
$14.6
|
(1)
|
Excludes, as of December 31, 2009, $2.7 million of securities which
were carried at or below fair value and securities against which an
other-than-temporary impairment equal to the entire book value was
recognized in
earnings.
|
Gross
Book
Value |
Provision
for
Loan Losses |
Net
Book
Value (1)
|
|||||
December
31, 2009
|
$1,126,697
|
($359,952)
|
$766,745
|
||||
Additional
fundings
(2)
|
1,842
|
—
|
1,842
|
||||
Satisfactions
(3)
|
(21,000)
|
—
|
(21,000)
|
||||
Principal
paydowns
|
(10,215)
|
—
|
(10,215)
|
||||
Discount/premium
amortization & other
|
580
|
—
|
580
|
||||
Provision
for loan losses (4)
|
—
|
(61,330)
|
(61,330)
|
||||
Realized
loan losses
|
(17,511)
|
17,511
|
—
|
||||
Reclassification
to loans held-for-sale
|
(76,632)
|
10,643
|
(65,989)
|
||||
September
30, 2010
|
$1,003,761
|
($393,128)
|
$610,633
|
(1)
|
Includes loans with a total principal balance of $1.00 billion and
$1.13 billion as of September 30, 2010 and December 31, 2009,
respectively.
|
|
(2) |
Additional fundings includes capitalized interest of
$281,000.
|
|
(3) |
Includes final maturities, full repayments, and
sales.
|
|
(4) |
Provision for loan losses is presented net of a $10.0 million
recovery of provisions recorded in prior
periods.
|
September
30, 2010
|
December
31, 2009
|
|||
Number
of investments
|
31
|
35
|
||
Fixed
/ Floating (in millions) (1)
|
$53
/ $558
|
$58
/ $708
|
||
Coupon
(2)
(3)
|
3.71%
|
3.77%
|
||
Yield (2)
(3)
|
3.71%
|
3.59%
|
||
Maturity
(years) (2)
(4)
|
1.7
|
2.2
|
(1)
|
Represents the aggregate net book value of our portfolio allocated
between fixed rate and floating rate
loans.
|
|
(2) |
Represents a weighted average as of September 30, 2010 and December
31, 2009, respectively.
|
|
(3) |
Calculations for floating rate loans are based on LIBOR of 0.26%
and 0.23% as of September 30, 2010 and December 31, 2009,
respectively.
|
|
(4) |
Represents the final maturity of each investment assuming all
extension options are
executed.
|
September
30, 2010
|
December
31, 2009
|
|||||||||||||||
Asset
Type
|
Book
Value
|
Percentage
|
Book
Value
|
Percentage
|
||||||||||||
Senior
mortgages
|
$238,614 | 39 | % | $302,999 | 40 | % | ||||||||||
Mezzanine
loans
|
232,460 | 38 | 209,980 | 27 | ||||||||||||
Subordinate
interests in mortgages
|
116,425 | 18 | 179,525 | 23 | ||||||||||||
Other
|
23,134 | 5 | 74,241 | 10 | ||||||||||||
Total
|
$610,633 | 100 | % | $766,745 | 100 | % | ||||||||||
Property
Type
|
Book
Value
|
Percentage
|
Book
Value
|
Percentage
|
||||||||||||
Office
|
$310,755 | 51 | % | $339,142 | 44 | % | ||||||||||
Hotel
|
146,883 | 24 | 176,557 | 23 | ||||||||||||
Healthcare
|
52,104 | 9 | 113,900 | 15 | ||||||||||||
Multifamily
|
18,102 | 3 | 23,657 | 3 | ||||||||||||
Retail
|
14,230 | 2 | 14,219 | 2 | ||||||||||||
Other
|
68,559 | 11 | 99,270 | 13 | ||||||||||||
Total
|
$610,633 | 100 | % | $766,745 | 100 | % | ||||||||||
Geographic
Location
|
Book
Value
|
Percentage
|
Book
Value
|
Percentage
|
||||||||||||
Northeast
|
$178,342 | 29 | % | $222,303 | 29 | % | ||||||||||
Southeast
|
170,031 | 28 | 196,640 | 26 | ||||||||||||
Southwest
|
96,190 | 16 | 97,384 | 13 | ||||||||||||
West
|
54,714 | 9 | 76,751 | 10 | ||||||||||||
Northwest
|
29,926 | 5 | 64,260 | 8 | ||||||||||||
Midwest
|
6,614 | 1 | 18,827 | 2 | ||||||||||||
International
|
39,558 | 6 | 54,800 | 7 | ||||||||||||
Diversified
|
35,258 | 6 | 35,780 | 5 | ||||||||||||
Total
|
$610,633 | 100 | % | $766,745 | 100 | % |
No.
of
Loans
|
Gross
Book
Value
|
Provision
for
Loan
Loss
|
Net
Book Value
|
||||||
Impaired
loans:
|
|||||||||
Performing
loans
|
6
|
$365,701
|
($316,680)
|
$49,021
|
|||||
Non-performing
loans
|
4
|
101,846
|
(76,448)
|
25,398
|
|||||
Total
impaired loans
|
10
|
$467,547
|
($393,128)
|
$74,419
|
September
30, 2010
|
||||
Provision
for Loan Losses
|
Book
Value
|
Percentage
|
||
Mezzanine
loans
|
$302,288
|
77%
|
||
Subordinate
interests in mortgages
|
73,931
|
19
|
||
Senior
mortgages
|
16,909
|
4
|
||
Total
|
$393,128
|
100%
|
Gross
Book
Value
|
Valuation
Allowance
|
Net
Book Value
|
|||||
December
31, 2009
|
$—
|
$—
|
$—
|
||||
Reclassification
from loans receivable
|
76,632
|
(10,643)
|
65,989
|
||||
Valuation
allowance on loans held-for-sale
|
—
|
(6,036)
|
(6,036)
|
||||
September
30, 2010
|
$76,632
|
($16,679)
|
$59,953
|
September
30, 2010
|
||
Number
of investments
|
2
|
|
Coupon
(1)
(2)
|
4.88%
|
|
Yield (1)
(2)
|
4.81%
|
|
Maturity
(years) (1)
(3)
|
1.5
|
(1)
|
Represents a weighted average as of September 30,
2010.
|
|
(2) |
Calculations for floating rate loans are based on LIBOR of 0.26% as
of September 30, 2010.
|
|
(3) |
Represents the final maturity of each investment assuming all
extension options are
executed.
|
Fund
III
|
CTOPI
|
Other
|
Total
|
||||||
December
31, 2009
|
$158
|
$2,175
|
$18
|
$2,351
|
|||||
Contributions
|
—
|
2,917
|
—
|
2,917
|
|||||
(Loss)
income from equity investments
|
(129)
|
2,492
|
(5)
|
2,358
|
|||||
Distributions
|
(29)
|
—
|
—
|
(29)
|
|||||
September
30, 2010
|
$—
|
$7,584
|
$13
|
$7,597
|
September
30, 2010
|
December
31, 2009
|
September
30, 2010
|
|||||||||||||||||||||
Recourse
Debt Obligations
|
Principal
Balance
|
Book
Balance
|
Book
Balance
|
Coupon(1)
|
All-In Cost(1)
|
Maturity Date(2)
|
|||||||||||||||||
Repurchase
obligations
|
|||||||||||||||||||||||
JPMorgan
|
$229,403 | $229,277 | $258,203 | 1.73 | % | 1.78 | % |
March
15, 2011
|
|||||||||||||||
Morgan
Stanley
|
135,801 | 135,735 | 148,170 | 2.12 | % | 2.12 | % |
March
15, 2011
|
|||||||||||||||
Citigroup
|
42,932 | 42,909 | 43,764 | 1.60 | % | 1.60 | % |
March
15, 2011
|
|||||||||||||||
Total
repurchase obligations
|
408,136 | 407,921 | 450,137 | 1.84 | % | 1.87 | % |
March
15, 2011
|
|||||||||||||||
Senior
credit facility
|
98,393 | 98,393 | 99,188 | 3.26 | % | 7.20 | % |
March
15, 2011
|
|||||||||||||||
Junior subordinated
notes
(3)
|
143,753 | 131,145 | 128,077 | 1.00 | % | 4.28 | % |
April
30, 2036
|
|||||||||||||||
Total/Weighted
Average
|
$650,282 | $637,459 | $677,402 | 1.87 | % | 3.19 | %(4) |
May
15, 2016
|
(1)
|
Represents a weighted average for each respective facility,
assuming LIBOR of 0.26% at September 30, 2010 for floating rate debt
obligations.
|
|
(2) |
Maturity dates for our repurchase obligations with JPMorgan, Morgan
Stanley and Citigroup, and our senior credit facility, do not give effect
to the potential one year extension, to March 15, 2012, which is at our
lenders’ sole discretion.
|
|
(3) |
The coupon for junior subordinated notes will remain at 1.00% per
annum through April 29, 2012, increase to 7.23% per annum for the period
from April 30, 2012 through April 29, 2016 and then convert to a floating
interest rate of three-month LIBOR + 2.44% per annum through
maturity.
|
|
(4) |
Including the impact of interest rate hedges with an aggregate
notional balance of $64.2 million as of September 30, 2010, the effective
all-in cost of our debt obligations would be 3.68% per
annum.
|
|
·
|
Maturity
dates were modified to one year from the March 16, 2009 effective date of
each respective agreement, which maturity dates may be extended further
for two one-year periods. The first one-year extension option was
exercised by us in March 2010, as a result of a successful twenty percent
reduction in the amount owed each repurchase lender from the amount
outstanding as of the March 16, 2009 amendment. The second one-year
extension option is exercisable by each repurchase lender in its sole
discretion. Currently, maturity dates for our repurchase agreements have
been extended to March 15, 2011.
|
|
·
|
We
agreed to pay each repurchase lender periodic amortization as follows: (i)
mandatory payments, payable monthly in arrears, in an amount equal to
sixty-five (65%) of the net interest income generated by each such
lender’s collateral pool (this amount did not change during the first
one-year extension period), and (ii) one hundred percent (100%) of the
principal proceeds received from the repayment of assets in each such
lender’s collateral pool. In addition, under the terms of the amendment
with Citigroup, we agreed to pay Citigroup an additional quarterly
amortization payment generally equal to the product of (i) the total cash
paid (including both principal and interest) during the period to our
senior credit facility in excess of an amount equivalent to LIBOR plus
1.75% based upon a $100.0 million facility amount, and (ii) a fraction,
the numerator of which is Citigroup’s then outstanding repurchase facility
balance and the denominator is the total outstanding indebtedness of our
repurchase lenders.
|
|
·
|
We
further agreed to amortize each repurchase lender’s secured debt at the
end of each calendar quarter on a pro rata basis until we have repaid our
repurchase facilities and thereafter our senior credit facility in an
amount equal to any unrestricted cash in excess of the sum of (i) $25.0
million, and (ii) any unfunded loan and co-investment
commitments.
|
|
·
|
Each
repurchase lender was relieved of its obligation to make future advances
with respect to unfunded commitments arising under investments in its
collateral pool.
|
|
·
|
We
received the right to sell or refinance collateral assets provided we
apply one hundred percent (100%) of the proceeds to pay down the related
repurchase facility balance subject to minimum release price
mechanics.
|
|
·
|
We
eliminated the cash margin call provisions and amended the mark-to-market
provisions that were in effect under the original terms of
the repurchase facilities. Under the revised facilities, going
forward, collateral value is expected to be determined by our lenders
based upon changes in the performance of the underlying real estate
collateral as opposed to changes in market spreads under
the original terms. Beginning September 2009, each collateral pool
may be valued monthly. If a repurchase lender determines that the ratio of
their total outstanding facility balance to total collateral value exceeds
1.15x the ratio calculated as of the effective date of the amended
agreements, we may be required to liquidate collateral and reduce the
borrowings or post other collateral in an effort to bring the ratio
back into compliance with the prescribed ratio, which may or may not be
successful.
|
|
·
|
prohibit
new balance sheet investments except, subject to certain limitations,
co-investments in our investment management vehicles or protective
investments to defend existing collateral assets on our balance
sheet;
|
|
·
|
prohibit
the incurrence of any additional indebtedness except in limited
circumstances;
|
|
·
|
limit
the total cash compensation to all employees and, specifically with
respect to our chief executive officer and chief financial officer, freeze
their base salaries at 2008 levels, and require cash bonuses to any of
them to be approved by a committee comprised of one representative
designated by the repurchase lenders, the administrative agent under the
senior credit facility and a representative of our board of
directors;
|
|
·
|
prohibit
the payment of cash dividends to our common shareholders except to the
minimum extent necessary to maintain our REIT
status;
|
|
·
|
require
us to maintain a minimum amount of liquidity, as defined, of $5.0
million;
|
|
·
|
trigger
an event of default if our current chief executive officer ceases his
employment with us during the term of the agreement and we fail to hire a
replacement acceptable to the lenders;
and
|
|
·
|
trigger
an event of default, if any event or condition occurs which causes any
obligation or liability of more than $1.0 million to become due prior to
its scheduled maturity or any monetary default under our restructured debt
obligations if the amount of such obligation is at least $1.0
million.
|
Loans
and Securities Collateral Balances, as of September 30,
2010
|
||||||||||
Repurchase
Lender
|
Facility
Balance
|
Principal
Balance
|
Carrying
Value
|
Fair Value (1)
|
Amount at Risk (2)
|
|||||
JPMorgan (3)
|
$229,403
|
$476,921
|
$308,217
|
$261,203
|
$86,336
|
|||||
Morgan Stanley (4)
|
135,801
|
367,636
|
238,749
|
144,320
|
102,948
|
|||||
Citigroup
|
42,932
|
77,648
|
76,340
|
61,327
|
33,407
|
|||||
$408,136
|
$922,205
|
$623,306
|
$466,850
|
$222,691
|
(1)
|
Fair values represent the amount at which assets could be sold in
an orderly transaction between a willing buyer and willing seller. The
immediate liquidation value of these assets would likely be substantially
lower.
|
|
(2) |
Amount at risk is calculated on an asset-by-asset basis for each
facility and considers the greater of (a) the carrying value of an asset
and (b) the fair value of an asset, in determining the total
risk.
|
|
(3) |
In addition to serving as collateral for our JPMorgan repurchase
facility, these assets also secure our interest rate swap agreements.
These agreements with JPMorgan are in a net liability position of $11.0
million (their termination value), as described in Note
10.
|
|
(4) |
Amounts other than principal exclude certain subordinate interests
in our CT CDOs which have been pledged as collateral to Morgan Stanley.
These interests have been eliminated in consolidation and therefore have a
carrying value of zero on our balance
sheet.
|
|
·
|
extend
the maturity date of the senior credit agreement to be co-terminus with
the maturity date of our repurchase facilities (as they may be further
extended until March 16, 2012, as described
above);
|
|
·
|
increase
the cash interest rate under the senior credit agreement to LIBOR plus
3.00% per annum (from LIBOR plus 1.75%), plus an accrual rate of 7.20% per
annum less the cash interest rate;
|
|
·
|
initiate
quarterly amortization equal to the greater of: (i) $5.0 million per
annum, and (ii) 25% of the annual cash flow received from our then
unencumbered collateralized debt obligation
interests;
|
|
·
|
pledge
our unencumbered CT CDO interests and provide a negative pledge with
respect to certain other assets;
and
|
|
·
|
replace
all existing financial covenants with substantially similar covenants and
default provisions to those described above with respect to our repurchase
facilities.
|
September
30,
|
December
31,
|
|||||||
2010
|
2009
|
|||||||
Participations
sold assets
|
||||||||
Gross
carrying value
|
$288,127 | $289,144 | ||||||
Less:
Provision for loan losses
|
(173,668 | ) | (172,465 | ) | ||||
Net
book value of assets
|
$114,459 | $116,679 | ||||||
Participations
sold liabilities
|
||||||||
Net
book value of liabilities
|
$288,127 | $289,144 | ||||||
Net
impact to shareholders' equity
|
($173,668 | ) | ($172,465 | ) |
Type
|
Counterparty
|
September
30, 2010
Notional
Amount
|
Interest Rate (1)
|
Maturity
|
September
30, 2010
Fair
Value
|
December
31, 2009
Fair
Value
|
||||||
Cash
Flow Hedge
|
JPMorgan
Chase
|
$17,806
|
5.14%
|
2014
|
($1,537)
|
($1,182)
|
||||||
Cash
Flow Hedge
|
JPMorgan
Chase
|
16,894
|
4.83%
|
2014
|
(1,402)
|
(966)
|
||||||
Cash
Flow Hedge
|
JPMorgan
Chase
|
16,377
|
5.52%
|
2018
|
(1,865)
|
(1,239)
|
||||||
Cash
Flow Hedge
|
JPMorgan
Chase
|
7,062
|
5.11%
|
2016
|
(702)
|
(440)
|
||||||
Cash
Flow Hedge
|
JPMorgan
Chase
|
3,221
|
5.45%
|
2015
|
(335)
|
(237)
|
||||||
Cash
Flow Hedge
|
JPMorgan
Chase
|
2,812
|
5.08%
|
2011
|
(59)
|
(120)
|
||||||
Total/Weighted
Average
|
$64,172
|
5.16%
|
2015
|
($5,900)
|
($4,184)
|
(1)
|
Represents the gross fixed interest rate we pay to our
counterparties under these derivative instruments. We receive an amount of
interest indexed to one-month LIBOR on all of our interest rate
swaps.
|
Amount
of gain (loss) recognized
|
Amount
of loss reclassified from OCI
|
|||||||
in
OCI for the nine months ended
|
to income for the
nine months ended (1)
|
|||||||
Hedge
|
September
30, 2010
|
September
30, 2009
|
September
30, 2010
|
September
30, 2009
|
||||
Interest
rate swaps
|
($1,716)
|
$6,768
|
($2,237)
|
($2,581)
|
(1)
|
Represents net amounts paid to swap counterparties during the
period, which are included in interest expense, offset by an immaterial
amount of non-cash swap
amortization.
|
CMBS
|
CDOs
& Other
|
Total
Book
Value
(1)
|
|||||||||||
December
31, 2009
|
$624,791 | $73,073 | $697,864 | ||||||||||
Impact
of consolidation due to change in accounting principal
|
(78,087 | ) | — | (78,087 | ) | ||||||||
Principal
paydowns
|
(7,993 | ) | (17,906 | ) | (25,899 | ) | |||||||
Maturities
|
(9,781 | ) | — | (9,781 | ) | ||||||||
Discount/premium
amortization & other (2)
|
3,068 | (661 | ) | 2,407 | |||||||||
Other-than-temporary
impairments:
|
|||||||||||||
Recognized
in earnings
|
(39,907 | ) | — | (39,907 | ) | ||||||||
Recognized
in accumulated other comprehensive income
|
(15,248 | ) | — | (15,248 | ) | ||||||||
September
30, 2010
|
$476,843 | $54,506 | $531,349 |
(1)
|
Includes securities with a total face value of $614.4 million and
$751.2 million as of September 30, 2010 and December 31, 2009,
respectively. Securities with an aggregate face value of $92.4 million,
which had a net carrying value of $78.1 million as of December 31, 2009,
have been eliminated in consolidation beginning January 1, 2010 as
discussed in Note 2.
|
|
(2) |
Includes mark-to-market adjustments on securities previously
classified as available-for-sale, amortization of other-than-temporary
impairments, and losses, if
any.
|
CMBS
|
CDOs
&
Other
|
Total
Securities
|
|||||||||||
Amortized
cost basis
|
$ | 488,348 | $ | 54,506 | $ | 542,854 | |||||||
Mark-to-market
adjustments on securities previously classified as
available-for-sale
|
5,371 | — | 5,371 | ||||||||||
Other-than-temporary
impairments recognized in accumulated other
comprehensive income
|
(16,876 | ) | — | (16,876 | ) | ||||||||
Total
book value
|
$ | 476,843 | $ | 54,506 | $ | 531,349 |
September
30, 2010
|
December
31, 2009
|
|||
Number
of securities
|
57
|
64
|
||
Number
of issues
|
41
|
47
|
||
Rating
(1) (2)
(3)
|
BBB-
|
BB-
|
||
Fixed
/ Floating (in millions) (4)
|
$530
/ $1
|
$618
/ $80
|
||
Coupon
(1)
(5)
|
6.67%
|
6.11%
|
||
Yield (1)
(5)
|
7.11%
|
6.58%
|
||
Life
(years) (1)
(6)
|
2.9
|
3.6
|
(1)
|
Represents a weighted average as of September 30, 2010 and December
31, 2009, respectively.
|
|
(2) |
Weighted average ratings are based on the lowest rating published
by Fitch Ratings, Standard & Poor’s or Moody’s Investors Service for
each security.
|
|
(3) |
Increase in weighted average rating as of September 30, 2010 is
primarily due to the consolidation of additional VIEs as described in Note
2.
|
|
(4) |
Represents the aggregate net book value of our portfolio allocated
between fixed rate and floating rate securities.
|
|
(5) | Coupon is based on the securities’ contractual interest rates, while yield is based on expected cash flows for each security, and considers discounts/premiums and asset non-performance. Calculations for floating rate securities are based on LIBOR of 0.26% and 0.23% as of September 30, 2010 and December 31, 2009, respectively. | |
(6) | Weighted average life is based on the timing and amount of future expected principal payments through the expected repayment date of each respective investment. |
Rating
as of September 30, 2010
|
|||||||||||||||||
Vintage
|
AAA
|
AA
|
A
|
BBB
|
BB
|
B
|
CCC
and
Below
|
Total
|
|||||||||
2007
|
$—
|
$—
|
$—
|
$—
|
$—
|
$—
|
$—
|
$—
|
|||||||||
2006
|
—
|
—
|
—
|
—
|
—
|
—
|
15,445
|
15,445
|
|||||||||
2005
|
—
|
—
|
—
|
—
|
—
|
3,761
|
19,650
|
23,411
|
|||||||||
2004
|
—
|
24,823
|
10,195
|
—
|
—
|
—
|
2,335
|
37,353
|
|||||||||
2003
|
9,906
|
—
|
—
|
4,978
|
—
|
—
|
—
|
14,884
|
|||||||||
2002
|
—
|
—
|
—
|
6,651
|
—
|
2,639
|
—
|
9,290
|
|||||||||
2001
|
—
|
—
|
—
|
4,821
|
4,131
|
—
|
5,000
|
13,952
|
|||||||||
2000
|
7,434
|
—
|
—
|
—
|
3,966
|
—
|
22,300
|
33,700
|
|||||||||
1999
|
—
|
—
|
11,362
|
1,425
|
17,363
|
—
|
—
|
30,150
|
|||||||||
1998
|
103,287
|
45,426
|
37,780
|
43,377
|
43,056
|
—
|
9,041
|
281,967
|
|||||||||
1997
|
—
|
—
|
34,601
|
—
|
5,173
|
3,416
|
3,500
|
46,690
|
|||||||||
1996
|
24,507
|
—
|
—
|
—
|
—
|
—
|
—
|
24,507
|
|||||||||
Total
|
$145,134
|
$70,249
|
$93,938
|
$61,252
|
$73,689
|
$9,816
|
$77,271
|
$531,349
|
Rating
as of December 31, 2009
|
|||||||||||||||||
Vintage
|
AAA
|
AA
|
A
|
BBB
|
BB
|
B
|
CCC
and
Below
|
Total
|
|||||||||
2007
|
$—
|
$—
|
$—
|
$—
|
$2,812
|
$—
|
$28,921
|
$31,733
|
|||||||||
2006
|
—
|
—
|
—
|
—
|
—
|
8,933
|
28,325
|
37,258
|
|||||||||
2005
|
—
|
—
|
—
|
11,866
|
1,250
|
14,630
|
22,104
|
49,850
|
|||||||||
2004
|
—
|
24,848
|
19,225
|
—
|
25,540
|
9,782
|
—
|
79,395
|
|||||||||
2003
|
9,905
|
—
|
—
|
4,976
|
—
|
—
|
—
|
14,881
|
|||||||||
2002
|
—
|
—
|
—
|
6,616
|
—
|
2,599
|
—
|
9,215
|
|||||||||
2001
|
—
|
—
|
—
|
4,843
|
14,204
|
—
|
—
|
19,047
|
|||||||||
2000
|
7,506
|
—
|
—
|
—
|
4,982
|
—
|
22,069
|
34,557
|
|||||||||
1999
|
—
|
—
|
11,436
|
1,432
|
17,359
|
—
|
—
|
30,227
|
|||||||||
1998
|
117,349
|
—
|
82,791
|
75,314
|
11,807
|
—
|
12,900
|
300,161
|
|||||||||
1997
|
—
|
—
|
35,101
|
4,876
|
8,580
|
—
|
18,778
|
67,335
|
|||||||||
1996
|
24,205
|
—
|
—
|
—
|
—
|
—
|
—
|
24,205
|
|||||||||
Total
|
$158,965
|
$24,848
|
$148,553
|
$109,923
|
$86,534
|
$35,944
|
$133,097
|
$697,864
|
Gross
Other-Than-Temporary Impairments
|
Credit
Related Other-Than-Temporary Impairments
|
Non-Credit
Related Other-Than-Temporary Impairments
|
|||||||||||
December
31, 2009
|
$32,508 | $25,112 | $7,396 | ||||||||||
Impact
of change in accounting principle (1)
|
(5,376 | ) | (1,576 | ) | (3,800 | ) | |||||||
Additions
due to change in expected cash
flows
|
55,155 | 39,907 | 15,248 | ||||||||||
Amortization
of other-than-temporary impairments
|
(1,702 | ) | 267 | (1,969 | ) | ||||||||
September
30, 2010
|
$80,585 | $63,710 | $16,875 |
(1)
|
Due to the consolidation of additional VIEs, as discussed in Note
2, other-than-temporary impairments which were previously recorded on our
investment in these entities have been eliminated in consolidation
beginning January 1,
2010.
|
Less
Than 12 Months
|
Greater
Than 12 Months
|
Total
|
||||||||||||||
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Book
Value (1)
|
||||||||||
Floating
Rate
|
$—
|
$—
|
$—
|
$—
|
$—
|
$—
|
$—
|
|||||||||
Fixed
Rate
|
26.1
|
(0.3)
|
285.8
|
(51.1)
|
311.9
|
(51.4)
|
363.3
|
|||||||||
Total
|
$26.1
|
($0.3)
|
$285.8
|
($51.1)
|
$311.9
|
($51.4)
|
$363.3
|
(1)
|
Excludes, as of September 30, 2010, $168.0 million of securities
which were carried at or below fair value and securities against which an
other-than-temporary impairment equal to the entire book value was
recognized in
earnings.
|
Less
Than 12 Months
|
Greater
Than 12 Months
|
Total
|
||||||||||||||
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Estimated
Fair
Value
|
Gross
Unrealized
Loss
|
Book
Value (1)
|
||||||||||
Floating
Rate
|
$—
|
$—
|
$24.5
|
($55.1)
|
$24.5
|
($55.1)
|
$79.6
|
|||||||||
Fixed
Rate
|
27.6
|
(3.9)
|
333.6
|
(125.9)
|
361.2
|
(129.8)
|
491.0
|
|||||||||
Total
|
$27.6
|
($3.9)
|
$358.1
|
($181.0)
|
$385.7
|
($184.9)
|
$570.6
|
(1)
|
Excludes, as of December 31, 2009, $127.2 million of securities
which were carried at or below fair value and securities against which an
other-than-temporary impairment equal to the entire book value was
recognized in
earnings.
|
Gross
Book
Value
|
Provision
for
Loan
Losses
|
Net
Book
Value
(1)
|
|||||
December
31, 2009
|
$508,971
|
($117,472)
|
$391,499
|
||||
Impact
of consolidation due to change in accounting
principal
|
2,980,075
|
(134,834)
|
2,845,241
|
||||
Satisfactions
(2)
|
(103,816)
|
—
|
(103,816)
|
||||
Principal
paydowns
|
(63,218)
|
—
|
(63,218)
|
||||
Discount/premium
amortization & other (3)
|
(6,242)
|
—
|
(6,242)
|
||||
Provision
for loan losses (4)
|
—
|
(88,813)
|
(88,813)
|
||||
Realized
loan losses
|
(45,020)
|
45,020
|
—
|
||||
Reclassification
to real estate held-for-sale
|
(15,068)
|
3,014
|
(12,054)
|
||||
September
30, 2010
|
$3,255,682
|
($293,085)
|
$2,962,597
|
(1)
|
Includes loans with a total principal balance of $3.26 billion and
$511.4 million as of September 30, 2010 and December 31, 2009,
respectively. Loans with an aggregate principal balance of $2.98 billion
as of December 31, 2009 have been consolidated onto our balance sheet
beginning January 1, 2010, as discussed in Note
2.
|
|
(2) |
Includes final maturities and full
repayments.
|
|
(3) |
Includes one loan which was restructured in June 2010 and converted
to a $6.6 million equity participation in the borrower entity. This equity
investment has been reclassified to Accrued Interest Receivable and Other
Assets on our consolidated balance sheet as of September 30,
2010.
|
|
(4) |
Provision for loan losses is presented net of a $2.5 million
recovery of provisions recorded in prior
periods.
|
September
30, 2010
|
December
31, 2009
|
|||
Number
of investments
|
96
|
26
|
||
Fixed
/ Floating (in millions) (1)
|
$222
/ $2,741
|
$72
/ $319
|
||
Coupon
(2)
(3)
|
2.28%
|
3.65%
|
||
Yield (2)
(3)
|
2.30%
|
3.58%
|
||
Maturity
(years) (2)
(4)
|
1.3
|
3.4
|
(1)
|
Represents the aggregate net book value of our portfolio allocated
between fixed rate and floating rate
loans.
|
|
(2) |
Represents a weighted average as of September 30, 2010 and December
31, 2009, respectively.
|
|
(3) |
Calculations for floating rate loans are based on LIBOR of 0.26%
and 0.23% as of September 30, 2010 and December 31, 2009,
respectively.
|
|
(4) |
For loans in CT CDOs, assumes all extension options are executed.
For loans in other consolidated VIEs, maturity is based on information
provided by the trustees of each respective
VIE.
|
September
30, 2010
|
December
31, 2009
|
|||||||||||||||
Asset
Type
|
Book
Value
|
Percentage
|
Book
Value
|
Percentage
|
||||||||||||
Senior
mortgages
|
$2,250,318 | 75 | % | $35,829 | 9 | % | ||||||||||
Mezzanine
loans
|
356,485 | 12 | 103,726 | 26 | ||||||||||||
Subordinate
interests in mortgages
|
343,496 | 11 | 228,662 | 59 | ||||||||||||
Other
|
22,963 | 2 | 23,282 | 6 | ||||||||||||
Total
|
$2,973,262 | 100 | % | $391,499 | 100 | % | ||||||||||
Property
Type
|
Book
Value
|
Percentage
|
Book
Value
|
Percentage
|
||||||||||||
Healthcare
|
$1,162,495 | 39 | % | $27,976 | 7 | % | ||||||||||
Office
|
827,261 | 28 | 174,695 | 45 | ||||||||||||
Hotel
|
655,266 | 22 | 128,150 | 33 | ||||||||||||
Retail
|
196,250 | 7 | 8,660 | 2 | ||||||||||||
Other
|
131,990 | 4 | 52,018 | 13 | ||||||||||||
Total
|
$2,973,262 | 100 | % | $391,499 | 100 | % | ||||||||||
Geographic
Location
|
Book
Value
|
Percentage
|
Book
Value
|
Percentage
|
||||||||||||
Northeast
|
$463,725 | 16 | % | $225,117 | 57 | % | ||||||||||
Southeast
|
322,352 | 10 | 72,976 | 19 | ||||||||||||
Southwest
|
177,959 | 6 | 29,550 | 8 | ||||||||||||
West
|
165,123 | 6 | 36,041 | 9 | ||||||||||||
Midwest
|
26,305 | 1 | 8,884 | 2 | ||||||||||||
Diversified
|
1,817,798 | 61 | 18,931 | 5 | ||||||||||||
Total
|
$2,973,262 | 100 | % | $391,499 | 100 | % | ||||||||||
Unallocated
loan loss provision:
|
(10,665 | ) | — | |||||||||||||
Net
book value
|
$2,962,597 | $391,499 |
No.
of
Loans
|
Gross
Book
Value
|
Provision
for
Loan
Loss
|
Net
Book Value
|
||||||
Impaired
loans:
|
|||||||||
Performing
loans
|
7
|
$421,974
|
($184,937)
|
$237,037
|
|||||
Non-performing
loans
|
7
|
167,661
|
(97,483)
|
70,178
|
|||||
Total
impaired loans
|
14
|
$589,635
|
($282,420)
|
$307,215
|
September
30, 2010
|
||||||||
Provision
for Loan Losses
|
Book
Value
|
Percentage
|
||||||
Subordinate
interests in mortgages
|
$108,337 | 36 | % | |||||
Senior
mortgages
|
90,334 | 31 | ||||||
Mezzanine
loans
|
83,749 | 29 | ||||||
Unallocated
|
10,665 | 4 | ||||||
Total
|
$293,085 | 100 | % |
September
30, 2010
|
December
31, 2009
|
September
30, 2010
|
|||||||||||||||||||||
Non-Recourse
Securitized Debt Obligations
|
Principal
Balance
|
Book
Balance
|
Book
Balance
|
Coupon(1)
|
All-In Cost(1)
|
Maturity Date(2)
|
|||||||||||||||||
CT
collateralized debt obligations (CDOs)
|
|||||||||||||||||||||||
CT
CDO I
|
$201,136 | $201,136 | $233,168 | 0.95 | % | 0.95 | % |
July
2039
|
|||||||||||||||
CT
CDO II
|
264,533 | 264,533 | 283,671 | 0.78 | % | 1.05 | % |
March
2050
|
|||||||||||||||
CT
CDO III
|
247,828 | 248,709 | 254,156 | 5.23 | % | 5.15 | % |
June
2035
|
|||||||||||||||
CT CDO IV (3)
|
292,289 | 292,289 | 327,285 | 0.90 | % | 1.02 | % |
October
2043
|
|||||||||||||||
Total
CT CDOs
|
1,005,786 | 1,006,667 | 1,098,280 | 1.95 | % | 2.04 | % |
July
2042
|
|||||||||||||||
Other
consolidated VIEs
|
|||||||||||||||||||||||
GMACC
1997-C1
|
102,579 | 102,579 | N/A | 7.11 | % | 7.11 | % |
July
2029
|
|||||||||||||||
GSMS
2006-FL8A
|
136,598 | 136,598 | N/A | 0.81 | % | 0.81 | % |
June
2020
|
|||||||||||||||
JPMCC
2005-FL1A
|
97,796 | 97,796 | N/A | 0.84 | % | 0.84 | % |
February
2019
|
|||||||||||||||
MSC
2007-XLFA
|
753,888 | 753,888 | N/A | 0.52 | % | 0.52 | % |
October
2020
|
|||||||||||||||
MSC
2007-XLCA
|
535,229 | 535,229 | N/A | 1.53 | % | 1.53 | % |
July
2017
|
|||||||||||||||
CSFB
2006-HC1
|
1,051,017 | 1,051,017 | N/A | 0.80 | % | 0.80 | % |
May
2023
|
|||||||||||||||
Total
other consolidated VIEs
|
2,677,107 | 2,677,107 | N/A | 1.11 | % | 1.11 | % |
May
2021
|
|||||||||||||||
Total/Weighted
Average
|
$3,682,893 | $3,683,774 | $1,098,280 | 1.34 | % | 1.36 | %(4) |
February
2027
|
(1)
|
Represents a weighted average for each respective facility,
assuming LIBOR of 0.26% at September 30, 2010 for floating rate debt
obligations.
|
|
(2) |
Maturity dates represent the contractual maturity of each
securitization trust. Repayment of securitized debt is a function of
collateral cash flows which are disbursed in accordance with the
contractual provisions of each trust, and is therefore expected to occur
prior to contractual maturity.
|
|
(3) |
Comprised, at September 30, 2010 of $279.8 million of floating rate
notes sold and $12.5 million of fixed rate notes
sold.
|
|
(4) |
Including the impact of interest rate hedges with an aggregate
notional balance of $344.4 million as of September 30, 2010, the effective
all-in cost of our consolidated VIEs’ debt obligations would be 1.80% per
annum.
|
Type
|
Counterparty
|
September
30, 2010
Notional
Amount
|
Interest Rate (1)
|
Maturity
|
September
30, 2010
Fair
Value
|
December
31, 2009
Fair
Value
|
||||||
Cash
Flow Hedge
|
Swiss
RE Financial
|
$264,863
|
5.10%
|
2015
|
($28,684)
|
($21,785)
|
||||||
Cash
Flow Hedge
|
Bank
of America
|
44,891
|
4.58%
|
2014
|
(3,946)
|
(3,005)
|
||||||
Cash
Flow Hedge
|
Morgan
Stanley
|
17,878
|
3.95%
|
2011
|
(550)
|
(794)
|
||||||
Cash
Flow Hedge
|
Bank
of America
|
10,916
|
5.05%
|
2016
|
(1,565)
|
(930)
|
||||||
Cash
Flow Hedge
|
Bank
of America
|
5,104
|
4.12%
|
2016
|
(568)
|
(212)
|
||||||
Cash
Flow Hedge
|
Morgan
Stanley
|
780
|
5.31%
|
2011
|
(16)
|
(40)
|
||||||
Total/Weighted
Average
|
$344,432
|
4.95%
|
2015
|
($35,329)
|
($26,766)
|
(1)
|
Represents the gross fixed interest rate we pay to our
counterparties under these derivative instruments. We receive an amount of
interest indexed to one-month LIBOR on all of our interest rate
swaps.
|
Amount
of (loss) gain recognized
|
Amount
of loss reclassified from OCI
|
|||||||
in
OCI for the nine months ended
|
to income for the
nine months ended (1)
|
|||||||
Hedge
|
September
30, 2010
|
September
30, 2009
|
September
30, 2010
|
September
30, 2009
|
||||
Interest
rate swaps
|
($8,563)
|
$6,075
|
($12,305)
|
($12,852)
|
(1)
|
Represents net amounts paid to swap counterparties during the
period, which are included in interest expense, offset by an immaterial
amount of non-cash swap
amortization.
|
Mark-to-Market
on Interest Rate Hedges
|
Deferred
Gains on Settled Hedges
|
Other-than-Temporary
Impairments
|
Unrealized
Gains on Securities
|
Total
|
|||||||
December
31, 2009
|
($30,950)
|
$263
|
($14,024)
|
$5,576
|
($39,135)
|
||||||
Cumulative
effect of change in accounting principle
|
—
|
—
|
3,800
|
—
|
3,800
|
||||||
Unrealized
loss on derivative financial instruments
|
(10,281)
|
—
|
—
|
—
|
(10,281)
|
||||||
Amortization
of net unrealized gains on securities
|
—
|
—
|
—
|
(754)
|
(754)
|
||||||
Amortization
of net deferred gains on settlement of swaps
|
—
|
(74)
|
—
|
(74)
|
|||||||
Other-than-temporary
impairments of securities (1)
|
—
|
—
|
(9,496)
|
—
|
(9,496)
|
||||||
September
30, 2010
|
($41,231)
|
$189
|
($19,720)
|
$4,822
|
($55,940)
|
(1)
|
Represents other-than-temporary impairments of securities related
to fair value adjustments in excess of expected credit losses, net of
amortization of $2.6
million.
|
Nine
Months Ended September 30, 2010
|
Nine
Months Ended September 30, 2009
|
|||||||||||||||||||||||
Net
|
Wtd.
Avg.
|
Per
Share
|
Net
|
Wtd.
Avg.
|
Per
Share
|
|||||||||||||||||||
Loss
|
Shares
|
Amount
|
Loss
|
Shares
|
Amount
|
|||||||||||||||||||
Basic
EPS:
|
||||||||||||||||||||||||
Net
loss allocable to
|
|
|||||||||||||||||||||||
common
stock
|
($195,259 | ) | 22,356,857 | ($8.73 | ) | ($185,997 | ) | 22,361,541 | ($8.32 | ) | ||||||||||||||
Effect
of Dilutive Securities:
|
||||||||||||||||||||||||
Warrants
& Options outstanding
|
||||||||||||||||||||||||
for
the purchase of common stock
|
— | — | — | — | ||||||||||||||||||||
Diluted
EPS:
|
||||||||||||||||||||||||
Net
loss per share of
|
||||||||||||||||||||||||
common
stock and assumed
|
||||||||||||||||||||||||
conversions
|
($195,259 | ) | 22,356,857 | ($8.73 | ) | ($185,997 | ) | 22,361,541 | ($8.32 | ) |
Three
Months Ended September 30, 2010
|
Three
Months Ended September 30, 2009
|
|||||||||||||||||||||||
Net
|
Wtd.
Avg.
|
Per
Share
|
Net
|
Wtd.
Avg.
|
Per
Share
|
|||||||||||||||||||
Loss
|
Shares
|
Amount
|
Loss
|
Shares
|
Amount
|
|||||||||||||||||||
Basic
EPS:
|
||||||||||||||||||||||||
Net
loss allocable to
|
||||||||||||||||||||||||
common
stock
|
($134,709 | ) | 22,389,901 | ($6.02 | ) | ($106,457 | ) | 22,426,623 | ($4.75 | ) | ||||||||||||||
Effect
of Dilutive Securities:
|
||||||||||||||||||||||||
Warrants
& Options outstanding
|
||||||||||||||||||||||||
for
the purchase of common stock
|
— | — | — | — | ||||||||||||||||||||
Diluted
EPS:
|
||||||||||||||||||||||||
Net
loss per share of
|
||||||||||||||||||||||||
common
stock and assumed
|
||||||||||||||||||||||||
conversions
|
($134,709 | ) | 22,389,901 | ($6.02 | ) | ($106,457 | ) | 22,426,623 | ($4.75 | ) |
Nine
Months Ended September 30,
|
|||
2010
|
2009
|
||
Personnel
costs
|
$7,103
|
$7,950
|
|
Employee
stock-based compensation
|
107
|
1,102
|
|
Professional
services
|
3,019
|
4,342
|
|
Restructuring
costs
|
1,110
|
3,042
|
|
Operating
and other costs
|
1,746
|
2,014
|
|
Subtotal
|
$13,085
|
$18,450
|
|
Expenses
from other consolidated VIEs
|
1,298
|
—
|
|
Total
|
$14,383
|
$18,450
|
Benefit
Type
|
1997 Employee
Plan
|
1997 Director
Plan
|
2004
Plan
|
2007
Plan
|
Total
|
|||||
Options(1)
|
||||||||||
Beginning
balance
|
170,477
|
—
|
—
|
—
|
170,477
|
|||||
Expired
|
(41,585)
|
—
|
—
|
—
|
(41,585)
|
|||||
Ending
balance
|
128,892
|
—
|
—
|
—
|
128,892
|
|||||
Restricted Common
Stock(2)
|
||||||||||
Beginning
balance
|
—
|
—
|
3,480
|
75,543
|
79,023
|
|||||
Granted
|
—
|
—
|
—
|
16,875
|
16,875
|
|||||
Vested
|
—
|
—
|
(3,480)
|
(41,807)
|
(45,287)
|
|||||
Ending
balance
|
—
|
—
|
—
|
50,611
|
50,611
|
|||||
Stock
Units(3)
|
||||||||||
Beginning
balance
|
—
|
80,017
|
—
|
384,029
|
464,046
|
|||||
Granted,
deferred and (vested), net
|
—
|
(11,473)
|
—
|
721
|
(10,752)
|
|||||
Ending
balance
|
—
|
68,544
|
—
|
384,750
|
453,294
|
|||||
Total
outstanding
|
128,892
|
68,544
|
—
|
435,361
|
632,797
|
(1)
|
All options are fully vested as of September 30,
2010.
|
|
(2) |
Comprised of both performance based awards that vest upon the
attainment of certain common equity return thresholds and time based
awards that vest based upon an employee’s continued employment on vesting
dates.
|
|
(3) |
Stock units are granted to certain members of our board of
directors in lieu of cash compensation for services and in lieu of
dividends earned on previously granted stock
units.
|
Weighted
Average
|
Weighted
Average
|
|||||||||||
Exercise Price
per Share
|
Options
Outstanding
|
Exercise
Price per Share
|
Remaining
Life (in Years)
|
|||||||||
$10.00
- $15.00
|
35,557
|
$13.50
|
0.18
|
|||||||||
$15.00
- $20.00
|
93,335
|
15.80
|
0.22
|
|||||||||
Total/Weighted
Average
|
128,892
|
$15.17
|
0.21
|
Restricted
Common Stock
|
|||
Shares
|
Grant
Date Fair Value
|
||
Unvested
at January 1, 2010
|
79,023
|
$7.99
|
|
Granted
|
16,875
|
1.27
|
|
Vested
|
(45,287)
|
8.16
|
|
Unvested
at September 30, 2010
|
50,611
|
$6.43
|
Restricted
Common Stock
|
|||
Shares
|
Grant
Date Fair Value
|
||
Unvested
at January 1, 2009
|
331,197
|
$30.61
|
|
Granted
|
216,269
|
3.32
|
|
Vested
|
(58,348)
|
27.44
|
|
Forfeited
|
(201,696)
|
28.99
|
|
Unvested
at September 30, 2009
|
287,422
|
$12.27
|
|
·
|
Level
1 generally includes only unadjusted quoted prices in active markets for
identical assets or liabilities as of the reporting
date.
|
|
·
|
Level
2 inputs are those which, other than Level 1 inputs, are observable for
identical or similar assets or
liabilities.
|
|
·
|
Level
3 inputs generally include anything which does not meet the criteria of
Levels 1 and 2, particularly any unobservable
inputs.
|
Fair
Value Measurements at Reporting Date Using
|
||||||||||||||||
Total
|
Quoted
Prices in
|
Significant
Other
|
Significant
|
|||||||||||||
Fair
Value at
|
Active
Markets
|
Observable
Inputs
|
Unobservable
Inputs
|
|||||||||||||
September
30, 2010
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
|||||||||||||
Measured
on a recurring basis:
|
||||||||||||||||
Non-VIE
loans held-for-sale
|
$59,953 | $— | $— | $59,953 | ||||||||||||
VIE
real estate held-for-sale
|
$8,055 | $— | $— | $8,055 | ||||||||||||
Non-VIE
interest rate hedge liabilities
|
($5,900 | ) | $— | ($5,900 | ) | $— | ||||||||||
VIE
interest rate hedge liabilities
|
($35,329 | ) | $— | ($35,329 | ) | $— | ||||||||||
Measured
on a nonrecurring basis:
|
||||||||||||||||
Non-VIE impaired
loans (1)
|
||||||||||||||||
Senior
mortgage
|
$34,538 | $— | $— | $34,538 | ||||||||||||
Subordinate
interests in mortgages
|
39,880 | — | — | 39,880 | ||||||||||||
Mezzanine
loans
|
— | — | — | — | ||||||||||||
$74,418 | $— | $— | $74,418 | |||||||||||||
VIE impaired loans
(1)
|
||||||||||||||||
Senior
mortgage
|
$152,286 | $— | $— | $152,286 | ||||||||||||
Subordinate
interests in mortgages
|
29,100 | — | — | 29,100 | ||||||||||||
Mezzanine
loans
|
125,828 | — | — | 125,828 | ||||||||||||
$307,214 | $— | $— | $307,214 | |||||||||||||
Non-VIE impaired
securities (2)
|
$— | $— | $— | $— | ||||||||||||
VIE impaired
securities (2)
|
||||||||||||||||
Commercial
mortgage-backed securities
|
$9,001 | $— | $7,699 | $1,302 |
(1)
|
Loans receivable against which we have recorded a provision for
loan losses as of September 30, 2010.
|
|
(2) |
Securities which were other-than-temporarily impaired during the
three months ended September 30,
2010.
|
Loans
|
Real
Estate
|
|||||||
Held-for-Sale
|
Held-for-Sale
|
|||||||
December
31, 2009
|
$— | $— | ||||||
Transfer
from loans receivable (non-VIEs)
|
65,989 | — | ||||||
Transfer
from loans receivable (VIEs)
|
— | 12,055 | ||||||
Adjustments
to fair value included in earnings:
|
||||||||
Valuation
allowance on loans held-for-sale
|
(6,036 | ) | — | |||||
Impairment
of real estate held-for-sale
|
— | (4,000 | ) | |||||
September
30, 2010
|
$59,953 | $8,055 |
Fair
Value of Financial Instruments
|
||||||||||||
(in
thousands)
|
September
30, 2010
|
December
31, 2009
|
||||||||||
Carrying
Amount
|
Face
Amount
|
Fair
Value
|
Carrying
Amount
|
Face
Amount
|
Fair
Value
|
|||||||
Financial
assets:
|
||||||||||||
Cash
and cash equivalents
|
$24,149
|
$24,149
|
$24,149
|
$27,954
|
$27,954
|
$27,954
|
||||||
Securities
held-to-maturity
|
3,345
|
36,059
|
4,570
|
17,332
|
105,174
|
8,544
|
||||||
Loans
receivable, net
|
610,633
|
1,005,036
|
514,242
|
766,745
|
1,128,738
|
588,466
|
||||||
Consolidated VIE assets
|
||||||||||||
Securities
held-to-maturity
|
531,349
|
614,448
|
488,768
|
697,864
|
751,214
|
519,118
|
||||||
Loans
receivable, net
|
2,962,597
|
3,257,620
|
2,559,740
|
391,499
|
511,412
|
316,230
|
||||||
Financial
liabilities:
|
||||||||||||
Repurchase
obligations
|
407,921
|
408,136
|
408,136
|
450,137
|
450,704
|
450,704
|
||||||
Senior
credit facility
|
98,393
|
98,393
|
14,759
|
99,188
|
99,188
|
24,797
|
||||||
Junior
subordinated notes
|
131,145
|
143,753
|
2,875
|
128,077
|
143,753
|
14,375
|
||||||
Participations
sold
|
288,127
|
259,568
|
109,209
|
289,144
|
289,209
|
102,220
|
||||||
Consolidated VIE
liabilities
|
||||||||||||
Securitized
debt obligations
|
3,683,774
|
3,682,893
|
2,526,524
|
1,098,280
|
1,097,106
|
494,704
|
Balance
Sheet
|
Investment
|
Inter-Segment
|
||||||||||||||
Investment
|
Management
|
Activities
|
Total
|
|||||||||||||
Income
from loans and other investments:
|
||||||||||||||||
Interest
and related income
|
$119,523 | $— | $— | $119,523 | ||||||||||||
Less:
Interest and related expenses
|
94,462 | — | — | 94,462 | ||||||||||||
Income
from loans and other investments, net
|
25,061 | — | — | 25,061 | ||||||||||||
Other
revenues:
|
||||||||||||||||
Management
fees from affiliates
|
— | 6,244 | (254 | ) | 5,990 | |||||||||||
Incentive
management fees from affiliates
|
— | 733 | — | 733 | ||||||||||||
Servicing
fees
|
— | 4,351 | (1,530 | ) | 2,821 | |||||||||||
Other
interest income
|
259 | 1 | — | 260 | ||||||||||||
Total
other revenues
|
259 | 11,329 | (1,784 | ) | 9,804 | |||||||||||
Other
expenses
|
||||||||||||||||
General
and administrative
|
4,659 | 9,978 | (254 | ) | 14,383 | |||||||||||
Servicing
fee expense
|
1,530 | — | (1,530 | ) | — | |||||||||||
Depreciation
and amortization
|
— | 15 | — | 15 | ||||||||||||
Total
other expenses
|
6,189 | 9,993 | (1,784 | ) | 14,398 | |||||||||||
Total
other-than-temporary impairments of securities
|
(69,798 | ) | — | — | (69,798 | ) | ||||||||||
Portion
of other-than-temporary impairments of securities
recognized in other comprehensive income
|
12,094 | — | — | 12,094 | ||||||||||||
Impairment
of real estate held-for-sale
|
(4,000 | ) | (4,000 | ) | ||||||||||||
Net
impairments recognized in earnings
|
(61,704 | ) | — | — | (61,704 | ) | ||||||||||
Provision
for loan losses
|
(150,143 | ) | — | — | (150,143 | ) | ||||||||||
Valuation
allowance on loans held-for-sale
|
(6,036 | ) | — | — | (6,036 | ) | ||||||||||
Gain
on extinguishment of debt
|
648 | — | — | 648 | ||||||||||||
Income
from equity investments
|
— | 2,358 | — | 2,358 | ||||||||||||
(Loss)
income before income taxes
|
(198,104 | ) | 3,694 | — | (194,410 | ) | ||||||||||
Income
tax provision
|
14 | 835 | — | 849 | ||||||||||||
Net
(loss) income
|
($198,118 | ) | $2,859 | $— | ($195,259 | ) | ||||||||||
Total
assets
|
$4,225,572 | $13,111 | ($2,832 | ) | $4,235,851 |
Balance
Sheet
|
Investment
|
Inter-Segment
|
||||||||||||||
Investment
|
Management
|
Activities
|
Total
|
|||||||||||||
Income
from loans and other investments:
|
||||||||||||||||
Interest
and related income
|
$93,341 | $— | $— | $93,341 | ||||||||||||
Less:
Interest and related expenses
|
61,116 | — | — | 61,116 | ||||||||||||
Income
from loans and other investments, net
|
32,225 | — | — | 32,225 | ||||||||||||
Other
revenues:
|
||||||||||||||||
Management
fees from affiliates
|
— | 12,746 | (3,978 | ) | 8,768 | |||||||||||
Servicing
fees
|
— | 2,012 | (510 | ) | 1,502 | |||||||||||
Other
interest income
|
150 | 16 | (13 | ) | 153 | |||||||||||
Total
other revenues
|
150 | 14,774 | (4,501 | ) | 10,423 | |||||||||||
Other
expenses
|
||||||||||||||||
General
and administrative
|
10,066 | 12,362 | (3,978 | ) | 18,450 | |||||||||||
Servicing
fee expense
|
510 | — | (510 | ) | — | |||||||||||
Other
interest expense
|
— | 13 | (13 | ) | — | |||||||||||
Depreciation
and amortization
|
— | 65 | — | 65 | ||||||||||||
Total
other expenses
|
10,576 | 12,440 | (4,501 | ) | 18,515 | |||||||||||
Total
other-than-temporary impairments of securities
|
(96,529 | ) | — | — | (96,529 | ) | ||||||||||
Portion
of other-than-temporary impairments of securities
recognized in other comprehensive income
|
17,612 | — | — | 17,612 | ||||||||||||
Impairment
of goodwill
|
— | (2,235 | ) | — | (2,235 | ) | ||||||||||
Impairment
of real estate held-for-sale
|
(2,233 | ) | — | — | (2,233 | ) | ||||||||||
Net
impairments recognized in earnings
|
(81,150 | ) | (2,235 | ) | — | (83,385 | ) | |||||||||
Provision
for loan losses
|
(113,716 | ) | — | — | (113,716 | ) | ||||||||||
Valuation
allowance on loans held-for-sale
|
(10,363 | ) | — | — | (10,363 | ) | ||||||||||
Loss
from equity investments
|
— | (3,074 | ) | — | (3,074 | ) | ||||||||||
Loss
before income taxes
|
(183,430 | ) | (2,975 | ) | — | (186,405 | ) | |||||||||
Income
tax benefit
|
(408 | ) | — | — | (408 | ) | ||||||||||
Net
loss
|
($183,022 | ) | ($2,975 | ) | $— | ($185,997 | ) | |||||||||
Total
assets
|
$2,382,157 | $10,424 | ($1,957 | ) | $2,390,624 |
Balance
Sheet
|
Investment
|
Inter-Segment
|
||||||||||||||
Investment
|
Management
|
Activities
|
Total
|
|||||||||||||
Income
from loans and other investments:
|
||||||||||||||||
Interest
and related income
|
$40,125 | $— | $— | $40,125 | ||||||||||||
Less:
Interest and related expenses
|
31,557 | — | — | 31,557 | ||||||||||||
Income
from loans and other investments, net
|
8,568 | — | — | 8,568 | ||||||||||||
Other
revenues:
|
||||||||||||||||
Management
fees from affiliates
|
— | 1,859 | 191 | 2,050 | ||||||||||||
Incentive
management fees from affiliates
|
— | 733 | — | 733 | ||||||||||||
Servicing
fees
|
— | 1,066 | (982 | ) | 84 | |||||||||||
Other
interest income
|
155 | — | — | 155 | ||||||||||||
Total
other revenues
|
155 | 3,658 | (791 | ) | 3,022 | |||||||||||
Other
expenses
|
||||||||||||||||
General
and administrative
|
1,295 | 3,657 | 191 | 5,143 | ||||||||||||
Servicing
fee expense
|
982 | — | (982 | ) | — | |||||||||||
Depreciation
and amortization
|
— | 5 | — | 5 | ||||||||||||
Total
other expenses
|
2,277 | 3,662 | (791 | ) | 5,148 | |||||||||||
Total
other-than-temporary impairments of securities
|
(29,963 | ) | — | — | (29,963 | ) | ||||||||||
Portion
of other-than-temporary impairments of securities
recognized in other comprehensive income
|
(5,921 | ) | — | — | (5,921 | ) | ||||||||||
Impairment
of real estate held-for-sale
|
(4,000 | ) | (4,000 | ) | ||||||||||||
Net
impairments recognized in earnings
|
(39,884 | ) | — | — | (39,884 | ) | ||||||||||
Provision
for loan losses
|
(95,916 | ) | — | — | (95,916 | ) | ||||||||||
Valuation
allowance on loans held-for-sale
|
(6,036 | ) | (6,036 | ) | ||||||||||||
Gain
on extinguishment of debt
|
185 | — | — | 185 | ||||||||||||
Income
from equity investments
|
— | 1,056 | — | 1,056 | ||||||||||||
(Loss)
income before income taxes
|
(135,205 | ) | 1,052 | — | (134,153 | ) | ||||||||||
Income
tax provision
|
— | 556 | — | 556 | ||||||||||||
Net
(loss) income
|
($135,205 | ) | $496 | $— | ($134,709 | ) | ||||||||||
Total
assets
|
$4,225,572 | $13,111 | ($2,832 | ) | $4,235,851 |
Balance
Sheet
|
Investment
|
Inter-Segment
|
||||||||||||||
Investment
|
Management
|
Activities
|
Total
|
|||||||||||||
Income
from loans and other investments:
|
||||||||||||||||
Interest
and related income
|
$29,527 | $— | $— | $29,527 | ||||||||||||
Less:
Interest and related expenses
|
19,604 | — | — | 19,604 | ||||||||||||
Income
from loans and other investments, net
|
9,923 | — | — | 9,923 | ||||||||||||
Other
revenues:
|
||||||||||||||||
Management
fees from affiliates
|
— | 4,459 | (1,500 | ) | 2,959 | |||||||||||
Servicing
fees
|
— | 423 | (255 | ) | 168 | |||||||||||
Other
interest income
|
15 | 1 | — | 16 | ||||||||||||
Total
other revenues
|
15 | 4,883 | (1,755 | ) | 3,143 | |||||||||||
Other
expenses
|
||||||||||||||||
General
and administrative
|
2,600 | 4,392 | (1,500 | ) | 5,492 | |||||||||||
Servicing
fee expense
|
255 | — | (255 | ) | — | |||||||||||
Depreciation
and amortization
|
— | 51 | — | 51 | ||||||||||||
Total
other expenses
|
2,855 | 4,443 | (1,755 | ) | 5,543 | |||||||||||
Total
other-than-temporary impairments of securities
|
(77,883 | ) | — | — | (77,883 | ) | ||||||||||
Portion
of other-than-temporary impairments of securities
recognized in other comprehensive income
|
11,987 | — | — | 11,987 | ||||||||||||
Net
impairments recognized in earnings
|
(65,896 | ) | — | — | (65,896 | ) | ||||||||||
Provision
for loan losses
|
(47,222 | ) | — | — | (47,222 | ) | ||||||||||
Loss
from equity investments
|
— | (862 | ) | — | (862 | ) | ||||||||||
Loss
before income taxes
|
(106,035 | ) | (422 | ) | — | (106,457 | ) | |||||||||
Income
tax provision
|
— | — | — | — | ||||||||||||
Net
loss
|
($106,035 | ) | ($422 | ) | $— | ($106,457 | ) | |||||||||
Total
assets
|
$2,382,157 | $10,424 | ($1,957 | ) | $2,390,624 |
Originations(1)
|
||||
(in
millions)
|
Nine
months ended
September
30, 2010
|
Year
ended
December
31, 2009
|
||
Balance
sheet
|
$―
|
$―
|
||
Investment
management
|
212
|
138
|
||
Total
originations
|
$212
|
$138
|
(1)
|
Includes total commitments, both funded and unfunded, net of any
related purchase
discounts.
|
Interest
Earning Assets
|
||||||||||||||||
(in
millions)
|
September
30, 2010
|
December
31, 2009
|
||||||||||||||
Book
Value
|
Yield(1)
|
Book
Value
|
Yield(1)
|
|||||||||||||
Securities
held-to-maturity
|
$3 | 8.58 | % | $17 | 7.89 | % | ||||||||||
Loans
receivable, net (2)
|
524 | 3.97 | 650 | 3.73 | ||||||||||||
Loans
held-for-sale, net (2)
|
33 | 4.98 | — | — | ||||||||||||
Subtotal
/ Weighted Average
|
$560 | 4.06 | % | $667 | 3.84 | % | ||||||||||
Consolidated VIE Assets
|
||||||||||||||||
Securities
held-to-maturity
|
$531 | 7.11 | % | $698 | 6.58 | % | ||||||||||
Loans
receivable, net
|
2,963 | 2.30 | 391 | 3.58 | ||||||||||||
Loans
held-for-sale, net
|
— | — | 18 | — | ||||||||||||
Subtotal
/ Weighted Average
|
$3,494 | 3.03 | % | $1,107 | 5.41 | % | ||||||||||
Total
/ Weighted Average
|
$4,054 | 3.17 | % | $1,774 | 4.82 | % |
(1)
|
Yield on floating rate assets assumes LIBOR of 0.26% and 0.23% at
September 30, 2010 and December 31, 2009,
respectively.
|
|
(2) |
Excludes loan participations sold with a net book value of $114.5
million and $116.7 million as of September 30, 2010 and December 31, 2009,
respectively. These participations are net of $173.7 million and $172.5
million of provisions for loan losses as of September 30, 2010 and
December 31, 2009,
respectively.
|
Equity
Investments
|
||||
(in
thousands)
|
September
30, 2010
|
December
31, 2009
|
||
Fund
III
|
$—
|
$158
|
||
CTOPI
|
7,584
|
2,175
|
||
Capitalized
costs/other
|
13
|
18
|
||
Total
|
$7,597
|
$2,351
|
Portfolio
Performance - Non-VIE Assets(1)
|
|||||
(in
millions, except for number of investments)
|
September
30, 2010
|
December
31, 2009
|
|||
Interest
earning assets, excluding VIEs ($ / #)
|
$560 /
|
40 |
$667
/
|
44 | |
Impaired
Loans (2)
|
|||||
Performing
loans ($ / #)
|
$80 /
|
7 |
$53
/
|
6 | |
Non-performing
loans ($ / #)
|
$27 /
|
5 |
$5
/
|
3 | |
Total
($ / #)
|
$107 /
|
12 |
$58
/
|
9 | |
Percentage
of interest earning assets
|
19.1%
|
8.7%
|
|||
Impaired
Securities (2)
($ / #)
|
$2
/
|
6 |
$3
/
|
6 | |
Percentage
of interest earning assets
|
0.4%
|
0.4%
|
|||
Watch
List Assets (3)
|
|||||
Watch
list loans ($ / #)
|
$156
/
|
8 |
$259
/
|
8 | |
Watch
list securities ($ / #)
|
$1
/
|
1 |
$15
/
|
3 | |
Total
($ / #)
|
$157
/
|
9 |
$274
/
|
11 | |
Percentage
of interest earning assets
|
28.0%
|
41.1%
|
(1)
|
Portfolio statistics include Loans classified as held-for-sale, but
exclude loan participations sold.
|
|
(2) |
Amounts represent net book value after provisions for loan losses,
valuation allowances on loans-held-for-sale and other-than-temporary
impairments of securities.
|
|
(3) |
Watch List Assets exclude Loans against which we have recorded a
provision for loan losses or valuation allowance, and Securities which
have been other-than-temporarily
impaired.
|
Portfolio
Performance - Consolidated VIE Assets(1)
|
|||||
(in
millions, except for number of investments)
|
September
30, 2010
|
December
31, 2009
|
|||
Interest
earning assets of consolidated VIEs ($ / #)
|
$3,494
|
/ 153 |
$1,107
|
/ 91 | |
Real
estate owned ($ / #)
|
$8
|
/ 1 |
$―
|
/ ― | |
Percentage
of interest earning assets
|
0.2% | ―% | |||
Impaired
Loans (2)
|
|||||
Performing
loans ($ / #)
|
$237
|
/ 7 |
$43
|
/ 6 | |
Non-performing
loans ($ / #)
|
$70
|
/ 7 |
$30
|
/ 5 | |
Total
($ / #)
|
$307
|
/ 14 |
$73
|
/ 11 | |
Percentage
of interest earning assets
|
8.8% | 6.6% | |||
Impaired
Securities
(2) ($ / #)
|
$14
|
/ 10 |
$25
|
/ 5 | |
Percentage
of interest earning assets
|
0.4% | 2.3% | |||
Watch
List Assets (3)
|
|||||
Watch
list loans ($ / #)
|
$516
|
/ 15 |
$53
|
/ 2 | |
Watch
list securities ($ / #)
|
$72
|
/ 10 |
$150
|
/ 16 | |
Total
($ / #)
|
$588
|
/ 25 |
$203
|
/ 18 | |
Percentage
of interest earning assets
|
16.8% | 18.3% |
(1)
|
Portfolio statistics include Loans classified as
held-for-sale.
|
|
(2) |
Amounts represent net book value after provisions for loan losses,
valuation allowances on loans-held-for-sale and other-than-temporary
impairments of securities.
|
|
(3) |
Watch List Assets exclude Loans against which we have recorded a
provision for loan losses or valuation allowances, and Securities which
have been other-than-temporarily
impaired.
|
Rating
Activity(1)
|
|||
Nine
months ended
September
30, 2010
|
Year
ended
December
31, 2009
|
||
Securities
Upgraded
|
2
|
1
|
|
Securities
Downgraded
|
23
|
21
|
(1)
|
Represents activity from any of Fitch Ratings, Standard &
Poor’s or Moody’s Investors
Service.
|
|
·
|
Maturity
dates of our repurchase agreements and senior credit facility have been
extended to March 16, 2011 with an additional one-year extension option,
exercisable by each lender in its sole
discretion.
|
|
·
|
We
agreed to pay each of our repurchase lenders periodic amortization as
follows: (i) sixty-five (65%) of the net interest income generated by each
lender’s collateral pool, and (ii) one hundred percent (100%) of the
principal proceeds received from the repayment of assets in each lender’s
collateral pool.
|
|
·
|
We
agreed to initiate quarterly amortization of our senior credit facility,
an amount generally equal to $5.0 million per
annum.
|
|
·
|
We
eliminated the cash margin call provisions and amended the mark-to-market
provisions that were in effect under the original terms of
the repurchase facilities. Generally, if a repurchase lender
determines that the ratio of their total outstanding facility balance to
total collateral value exceeds 1.15x the ratio calculated as of the
effective date of the amended agreements, we may be required to liquidate
collateral and reduce the borrowings or post other collateral in an
effort to bring the ratio back into compliance with the prescribed
ratio.
|
|
·
|
We
are prohibited from making new balance sheet investments except, subject
to certain limitations, co-investments in our investment management
vehicles or protective investments to defend existing collateral assets on
our balance sheet.
|
|
·
|
We
are prohibited from incurring any additional indebtedness except in
limited circumstances.
|
|
·
|
We
are prohibited from paying cash dividends to our common shareholders
except to the minimum extent necessary to maintain our REIT
status.
|
Interest
Bearing Liabilities(1)
|
||||||||
(Principal
balance, in millions)
|
September
30, 2010
|
December
31, 2009
|
||||||
Recourse
debt obligations
|
||||||||
Secured credit facilities
|
||||||||
Repurchase
obligations
|
$408 | $451 | ||||||
Senior
credit facility
|
98 | 99 | ||||||
Subtotal
|
506 | 550 | ||||||
Unsecured credit facilities
|
||||||||
Junior
subordinated notes
|
144 | 144 | ||||||
Total
recourse debt obligations
|
$650 | $694 | ||||||
%
Subject to valuation tests
|
62.8 | % | 65.0 | % | ||||
Weighted
average effective cost of recourse debt (2)
(3)
|
3.19 | % | 3.11 | % | ||||
Non-recourse
securitized debt obligations
|
||||||||
CT
Collateralized debt obligations
|
$1,006 | $1,097 | ||||||
Other
consolidated VIE's
|
2,678 | N/A | ||||||
Total
non-recourse securitized debt obligations
|
$3,684 | $1,097 | ||||||
Weighted
average effective cost of non-recourse debt (2)
(4)
|
1.36 | % | 1.93 | % | ||||
Total
interest bearing liabilities
|
$4,334 | $1,791 | ||||||
Shareholders'
deficit
|
($427 | ) | ($169 | ) |
(1)
|
Excludes participations sold.
|
|
(2) |
Floating rate debt obligations assume LIBOR of 0.26% and 0.23% at
September 30, 2010 and December 31, 2009,
respectively.
|
|
(3) |
Including the impact of interest rate hedges with an aggregate
notional balance of $64.2 million as of September 30, 2010 and $64.4
million as of December 31, 2009, the effective all-in cost of our recourse
debt obligations would be 3.68% and 3.58% per annum,
respectively.
|
|
(4) |
Including the impact of interest rate hedges with an aggregate
notional balance of $344.4 million as of September 30, 2010 and $352.8
million as of December 31, 2009, the effective all-in cost of our
non-recourse debt obligations would be 1.80% and 3.44% per annum,
respectively.
|
Repurchase
Obligations
|
||||
($
in millions)
|
September
30, 2010
|
December
31, 2009
|
||
Counterparties
|
3
|
3
|
||
Outstanding
repurchase obligations
|
$408
|
$451
|
||
All-in
cost
|
L +
1.61%
|
L +
1.66%
|
Non-Recourse
Securitized Debt Obligations
|
||||||||||||||||
(in
millions)
|
September
30, 2010
|
December
31, 2009
|
||||||||||||||
Book
Value
|
All-in
Cost(1)
|
Book
Value
|
All-in
Cost(1)
|
|||||||||||||
CT collateralized debt
obligations
|
||||||||||||||||
CT
CDO I
|
$201 | 0.95 | % | $233 | 0.88 | % | ||||||||||
CT
CDO II
|
265 | 1.05 | 284 | 0.99 | ||||||||||||
CT
CDO III
|
249 | 5.15 | 254 | 5.15 | ||||||||||||
CT
CDO IV
|
292 | 1.02 | 327 | 0.97 | ||||||||||||
Total
CT CDOs
|
$1,007 | 2.04 | % | $1,098 | 1.92 | % | ||||||||||
Other consolidated VIEs
|
||||||||||||||||
GMACC
1997-C1
|
$102 | 7.11 | % | N/A | N/A | |||||||||||
GSMS
2006-FL8A
|
137 | 0.81 | N/A | N/A | ||||||||||||
JPMCC
2005-FL1A
|
98 | 0.84 | N/A | N/A | ||||||||||||
MSC
2007-XLFA
|
754 | 0.52 | N/A | N/A | ||||||||||||
MSC
2007-XLCA
|
535 | 1.53 | N/A | N/A | ||||||||||||
CSFB
2006-HC1
|
1,051 | 0.80 | N/A | N/A | ||||||||||||
Total
other consolidated VIEs
|
$2,677 | 1.11 | % | N/A | N/A | |||||||||||
Total
non-recourse debt obligations
|
$3,684 | 1.36 | % | $1,098 | 1.92 | % |
(1)
|
Includes amortization of premiums and issuance costs of CT CDOs.
Floating rate debt obligations assume LIBOR of 0.26% and 0.23% at
September 30, 2010 and December 31, 2009,
respectively.
|
Shareholders'
Equity
|
||||||||
September
30, 2010
|
December
31, 2009
|
|||||||
Book
value (in millions)
|
($427 | ) | ($169 | ) | ||||
Shares:
|
||||||||
Class
A common stock
|
21,912,052 | 21,796,259 | ||||||
Restricted
common stock
|
50,611 | 79,023 | ||||||
Stock
units
|
453,294 | 464,046 | ||||||
Warrants
& Options(1)
|
— | — | ||||||
Total
|
22,415,957 | 22,339,328 | ||||||
Book
value per share
|
($19.03 | ) | ($7.57 | ) |
(1)
|
Excludes shares issuable upon the exercise of outstanding warrants
and options. These shares would be anti-dilutive as of both September 30,
2010 and December 31, 2009 because an increase in shares would decrease
the book deficit per
share.
|
Interest
Rate Exposure
|
||||||||
(in
millions)
|
September
30, 2010
|
December
31, 2009
|
||||||
Value
exposure to interest rates(1)
|
||||||||
Fixed
rate assets
|
$925 | $833 | ||||||
Fixed
rate debt
|
(507 | ) | (410 | ) | ||||
Interest
rate swaps
|
(409 | ) | (417 | ) | ||||
Net
fixed rate exposure
|
$9 | $6 | ||||||
Weighted
average coupon (fixed rate assets)
|
7.18 | % | 6.91 | % | ||||
Cash
flow exposure to interest rates(1)
|
||||||||
Floating
rate assets
|
$3,776 | $1,678 | ||||||
Floating
rate debt less cash
|
(3,802 | ) | (1,642 | ) | ||||
Interest
rate swaps
|
409 | 417 | ||||||
Net
floating rate exposure
|
$383 | $453 | ||||||
Weighted
average coupon (floating rate assets)
(2)
|
2.16 | % | 3.29 | % | ||||
Net
income impact from 100 bps change in LIBOR
|
$3.8 | $4.5 |
(1)
|
All values are in terms of face or notional amounts, and include
loans classified as held-for-sale.
|
|
(2) |
Weighted average coupon assumes LIBOR of 0.26% and 0.23% at
September 30, 2010 and December 31, 2009,
respectively.
|
Investment
Management Revenues
|
||||||||
(in
thousands)
|
September
30, 2010
|
September
30, 2009
|
||||||
Fees generated as:
|
||||||||
Public
company manager (1)
|
$254 | $3,978 | ||||||
Private
equity manager
|
6,723 | 8,768 | ||||||
CDO
collateral manager
|
715 | 510 | ||||||
Special
servicer
|
3,636 | 1,502 | ||||||
Total
fees
|
$11,328 | $14,758 | ||||||
Eliminations
(2)
|
(1,784 | ) | (4,488 | ) | ||||
Total
fees, net
|
$9,544 | $10,270 |
(1)
|
Beginning in the fourth quarter of 2009, public company management
fees were offset by special servicing and CDO collateral management fees
generated by our balance sheet portfolio. Gross public company management
fees were $2.6 million for the nine months ended September 30, 2010,
offset by $2.3 million of special servicing and CDO collateral management
fees.
|
|
(2) |
Fees received by CTIMCO from Capital Trust, Inc., or other
consolidated subsidiaries, have been eliminated in
consolidation.
|
|
·
|
CT
Opportunity Partners I, LP, or CTOPI, is currently investing capital. The
fund held its final closing in July 2008 with $540 million in total equity
commitments from 28 institutional and individual investors. Currently,
$322 million of committed equity remains undrawn. We have a $25 million
commitment to invest in the fund ($10 million currently funded, $15
million unfunded) and entities controlled by the chairman of our board
have committed to invest $20 million. In May 2010 the fund’s investment
period was extended to December 13, 2011. The fund targets opportunistic
investments in commercial real estate, specifically high yield debt,
equity and hybrid instruments, as well as non-performing and
sub-performing loans and securities. Currently, we earn base management
fees of 0.6% per annum of unfunded equity commitments and 1.3% per annum
of invested capital through December 13, 2010. Subsequent to December 13,
2010, we will earn base management fees of 1.3% per annum of invested
capital. In addition, we earn net incentive management fees of 17.7% of
profits after a 9% preferred return and a 100% return of
capital.
|
|
·
|
CT
High Grade Partners II, LLC, or CT High Grade II, is currently investing
capital. The fund closed in June 2008 with $667 million of commitments
from two institutional investors. Currently, $207 million of committed
equity remains undrawn. In May 2010, the fund’s investment period was
extended to May 30, 2011. The fund targets senior debt opportunities in
the commercial real estate sector and does not employ leverage. We earn a
base management fee of 0.40% per annum on invested
capital.
|
|
·
|
CT
High Grade MezzanineSM,
or CT High Grade, is no longer investing capital (its investment period
expired in July 2008). The fund closed in November 2006, with a single,
related party institutional investor committing $250 million, which was
subsequently increased to $350 million in July 2007. This separate account
targeted lower LTV subordinate debt investments without leverage. We earn
management fees of 0.25% per annum on invested
capital.
|
|
·
|
CT
Large Loan 2006, Inc., or CT Large Loan, is no longer investing capital
(its investment period expired in May 2008). The fund closed in May 2006
with total equity commitments of $325 million from eight institutional
investors. We earn management fees of 0.75% per annum of fund assets
(capped at 1.5% on invested
equity).
|
Investment
Management Mandates, as of September 30, 2010
|
|||||||||||||||
(in
millions)
|
Incentive
Management Fee
|
||||||||||||||
Total
|
Total
Capital
|
Co-
|
Base
|
Company
|
Employee
|
||||||||||
Type
|
Investments(1)
|
Commitments
|
Investment
%
|
Management
Fee
|
%
|
%
|
|||||||||
Investing:
|
|||||||||||||||
CT
High Grade II
|
Fund
|
$460
|
$667
|
—
|
0.40%
(Assets)
|
N/A
|
N/A
|
||||||||
CTOPI
|
Fund
|
276
|
540
|
4.63%
|
(2)
|
(Assets/Equity)(3)
|
100%(4)
|
—%(5)
|
|||||||
Liquidating:
|
|||||||||||||||
CT
High Grade
|
Sep.
Acc.
|
328
|
350
|
—
|
0.25%
(Assets)
|
N/A
|
N/A
|
||||||||
CT
Large Loan
|
Fund
|
201
|
325
|
—
|
(6)
|
0.75% (Assets)(7)
|
N/A
|
N/A
|
(1)
|
Represents total investments, on a cash basis, as of
period-end.
|
|
(2) |
We have committed to invest $25.0 million in
CTOPI.
|
|
(3) |
CTIMCO earns base management fees of 0.6% per annum of unfunded
equity commitments and 1.3% per annum of invested capital through December
13, 2010. Subsequent to December 13, 2010 CTIMCO will earn base management
fees of 1.3% per annum of invested capital.
|
|
(4) |
CTIMCO earns net incentive management fees of 17.7% of profits
after a 9% preferred return on capital and a 100% return of capital,
subject to a catch-up.
|
|
(5) | We have not allocated any of the CTOPI incentive management fee to employees as of September 30, 2010. | |
(6) | We have co-invested on a pari passu, asset by asset basis with CT Large Loan. | |
(7) | Capped at 1.5% of equity. |
Comparison
of Results of Operations: Three Months Ended September 30, 2010 vs.
September 30, 2009
|
||||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
2010
|
2009
|
$
Change
|
%
Change
|
|||||||||||||
Income
from loans and other investments:
|
||||||||||||||||
Interest
and related income
|
$40,125 | $29,527 | $10,598 | 35.9 | % | |||||||||||
Less:
Interest and related expenses
|
31,557 | 19,604 | 11,953 | 61.0 | % | |||||||||||
Income
from loans and other investments, net
|
8,568 | 9,923 | (1,355 | ) | (13.7 | %) | ||||||||||
Other
revenues:
|
||||||||||||||||
Management
fees from affiliates
|
2,050 | 2,959 | (909 | ) | (30.7 | %) | ||||||||||
Incentive
management fees from affiliates
|
733 | — | 733 | N/A | ||||||||||||
Servicing
fees
|
84 | 168 | (84 | ) | (50.0 | %) | ||||||||||
Other
interest income
|
155 | 16 | 139 | N/A | ||||||||||||
Total
other revenues
|
3,022 | 3,143 | (121 | ) | (3.8 | %) | ||||||||||
Other
expenses:
|
||||||||||||||||
General
and administrative
|
5,143 | 5,492 | (349 | ) | (6.4 | %) | ||||||||||
Depreciation
and amortization
|
5 | 51 | (46 | ) | (90.2 | %) | ||||||||||
Total
other expenses
|
5,148 | 5,543 | (395 | ) | (7.1 | %) | ||||||||||
Total
other-than-temporary impairments of securities
|
(29,963 | ) | (77,883 | ) | 47,920 | (61.5 | %) | |||||||||
Portion
of other-than-temporary impairments of securities
recognized
in other comprehensive income
|
(5,921 | ) | 11,987 | (17,908 | ) | (149.4 | %) | |||||||||
Impairment
of real estate held-for-sale
|
(4,000 | ) | — | (4,000 | ) | N/A | ||||||||||
Net
impairments recognized in earnings
|
(39,884 | ) | (65,896 | ) | 26,012 | (39.5 | %) | |||||||||
Provision
for loan losses
|
(95,916 | ) | (47,222 | ) | (48,694 | ) | 103.1 | % | ||||||||
Valuation
allowance on loans held-for-sale
|
(6,036 | ) | — | (6,036 | ) | N/A | ||||||||||
Gain
on extinguishment of debt
|
185 | — | 185 | N/A | ||||||||||||
Income
(loss) from equity investments
|
1,056 | (862 | ) | 1,918 | N/A | |||||||||||
Loss
before income taxes
|
(134,153 | ) | (106,457 | ) | (27,696 | ) | 26.0 | % | ||||||||
Income
tax provision
|
556 | — | 556 | N/A | ||||||||||||
Net
loss
|
($134,709 | ) | ($106,457 | ) | ($28,252 | ) | N/A | |||||||||
Net
loss per share - diluted
|
($6.02 | ) | ($4.75 | ) | ($1.27 | ) | 26.7 | % | ||||||||
Dividend
per share
|
$0.00 | $0.00 | $0.00 | N/A | ||||||||||||
Average
LIBOR
|
0.29 | % | 0.27 | % | 0.02 | % | 7.1 | % |
Comparison
of Results of Operations: Nine Months Ended September 30, 2010 vs.
September 30, 2009
|
||||||||||||||||
(in
thousands, except per share data)
|
||||||||||||||||
2010
|
2009
|
$
Change
|
%
Change
|
|||||||||||||
Income
from loans and other investments:
|
||||||||||||||||
Interest
and related income
|
$119,523 | $93,341 | $26,182 | 28.0 | % | |||||||||||
Less:
Interest and related expenses
|
94,462 | 61,116 | 33,346 | 54.6 | % | |||||||||||
Income
from loans and other investments, net
|
25,061 | 32,225 | (7,164 | ) | (22.2 | %) | ||||||||||
Other
revenues:
|
||||||||||||||||
Management
fees from affiliates
|
5,990 | 8,768 | (2,778 | ) | (31.7 | %) | ||||||||||
Incentive
management fees from affiliates
|
733 | — | 733 | N/A | ||||||||||||
Servicing
fees
|
2,821 | 1,502 | 1,319 | 87.8 | % | |||||||||||
Other
interest income
|
260 | 153 | 107 | 69.9 | % | |||||||||||
Total
other revenues
|
9,804 | 10,423 | (619 | ) | (5.9 | %) | ||||||||||
Other
expenses:
|
||||||||||||||||
General
and administrative
|
14,383 | 18,450 | (4,067 | ) | (22.0 | %) | ||||||||||
Depreciation
and amortization
|
15 | 65 | (50 | ) | (76.9 | %) | ||||||||||
Total
other expenses
|
14,398 | 18,515 | (4,117 | ) | (22.2 | %) | ||||||||||
Total
other-than-temporary impairments of securities
|
(69,798 | ) | (96,529 | ) | 26,731 | (27.7 | %) | |||||||||
Portion
of other-than-temporary impairments of securities
recognized
in other comprehensive income
|
12,094 | 17,612 | (5,518 | ) | (31.3 | %) | ||||||||||
Impairment
of goodwill
|
— | (2,235 | ) | 2,235 | N/A | |||||||||||
Impairment
of real estate held-for-sale
|
(4,000 | ) | (2,233 | ) | (1,767 | ) | 79.1 | % | ||||||||
Net
impairments recognized in earnings
|
(61,704 | ) | (83,385 | ) | 21,681 | (26.0 | %) | |||||||||
Provision
for loan losses
|
(150,143 | ) | (113,716 | ) | (36,427 | ) | 32.0 | % | ||||||||
Valuation
allowance on loans held-for-sale
|
(6,036 | ) | (10,363 | ) | 4,327 | (41.8 | %) | |||||||||
Gain
on extinguishment of debt
|
648 | — | 648 | N/A | ||||||||||||
Income
(loss) from equity investments
|
2,358 | (3,074 | ) | 5,432 | N/A | |||||||||||
Loss
before income taxes
|
(194,410 | ) | (186,405 | ) | (8,005 | ) | 4.3 | % | ||||||||
Income
tax provision (benefit)
|
849 | (408 | ) | 1,257 | N/A | |||||||||||
Net
loss
|
($195,259 | ) | ($185,997 | ) | ($9,262 | ) | 5.0 | % | ||||||||
Net
loss per share - diluted
|
($8.73 | ) | ($8.32 | ) | ($0.41 | ) | 5.0 | % | ||||||||
Dividend
per share
|
$0.00 | $0.00 | $0.00 | N/A | ||||||||||||
Average
LIBOR
|
0.28 | % | 0.37 | % | (0.09 | %) | (0.25 | ) |
Contractual
Obligations(1)
|
||||||||||||||||||||
(in
millions)
|
||||||||||||||||||||
Payments
due by period
|
||||||||||||||||||||
Total
|
Less
than
1
year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
||||||||||||||||
Parent
company obligations
|
||||||||||||||||||||
Recourse debt obligations
|
||||||||||||||||||||
Repurchase
obligations
|
$408 | $408 | $— | $— | $— | |||||||||||||||
Senior
credit facility
|
98 | 98 | — | — | — | |||||||||||||||
Junior
subordinated notes
|
144 | — | — | — | 144 | |||||||||||||||
Total
recourse debt obligations
|
650 | 506 | — | — | 144 | |||||||||||||||
Unfunded commitments
|
||||||||||||||||||||
Loans
|
1 | — | 1 | — | — | |||||||||||||||
Equity
investments(2)
|
16 | — | 16 | — | — | |||||||||||||||
Total
unfunded commitments
|
17 | — | 17 | — | — | |||||||||||||||
Operating
lease obligations
|
9 | 1 | 2 | 2 | 4 | |||||||||||||||
Total
parent company obligations
|
676 | 507 | 19 | 2 | 148 | |||||||||||||||
Consolidated
VIE obligations
|
||||||||||||||||||||
Non-recourse securitized debt
obligations
|
||||||||||||||||||||
CT
collateralized debt obligations
|
1,006 | — | — | — | 1,006 | |||||||||||||||
Other
consolidated VIEs
|
2,757 | — | — | — | 2,757 | |||||||||||||||
Total
non-recourse debt obligations
|
3,763 | — | — | — | 3,763 | |||||||||||||||
Total
consolidated VIE obligations
|
3,763 | — | — | — | 3,763 | |||||||||||||||
Total
contractual obligations
|
$4,439 | $507 | $19 | $2 | $3,911 |
(1)
|
We are also subject to interest rate swaps for which we cannot
estimate future payments due.
|
|
(2) |
CTOPI’s investment period expires in December 2011, at which point
our obligation to fund capital calls will be limited. It is possible that
our unfunded capital commitment will not be entirely called, and the
timing and amount of such required contributions is not estimable. Our
entire unfunded commitment is assumed to be funded by December 2011 for
purposes of the above table.
|
Financial
Assets and Liabilities Sensitive to Changes in Interest Rates as of
September 30, 2010
|
|||||||||
(in
thousands)
|
|||||||||
Non-VIE
Assets:
|
|||||||||
Securities
|
Loans
Receivable
|
Loans
Held-for-Sale
|
Total
|
||||||
Fixed
rate assets
|
$34,475
|
$52,247
|
$16,130
|
$102,852
|
|||||
Interest
rate(1)
|
8.24%
|
8.23%
|
8.55%
|
8.28%
|
|||||
Floating
rate assets
|
$1,584
|
$952,789
|
$60,699
|
$954,373
|
|||||
Interest
rate(1)
|
5.44%
|
3.41%
|
4.76%
|
3.72%
|
|||||
Non-VIE
Debt Obligations:
|
|||||||||
Repurchase
|
Senior
|
Jr.
Subordinated
|
Participations
|
||||||
Obligations
|
Credit
Facility
|
Notes
|
Sold
|
Total
|
|||||
Fixed
rate debt
|
$—
|
$—
|
$143,753
|
$—
|
$143,753
|
||||
Interest
rate(1)
(2)
|
—
|
—
|
1.00%
|
—
|
1.00%
|
||||
Floating
rate debt
|
$408,136
|
$98,393
|
$—
|
$288,220
|
$766,097
|
||||
Interest
rate(1)
(2)
|
1.84%
|
3.26%
|
—
|
3.21%
|
2.43%
|
||||
Non-VIE
Derivative Financial Instruments:
|
|||||||||
Notional
amounts
|
$64,172
|
||||||||
Fixed
pay rate(1)
|
5.16%
|
||||||||
Floating
receive rate(1)
|
0.26%
|
||||||||
Assets
of Consolidated VIEs:
|
|||||||||
Securities
|
Loans
Receivable
|
Total
|
|||||||
Fixed
rate assets
|
$588,697
|
$233,850
|
$822,547
|
||||||
Interest
rate(1)
|
6.58%
|
8.22%
|
7.05%
|
||||||
Floating
rate assets
|
$25,752
|
$3,023,769
|
$3,049,521
|
||||||
Interest
rate(1)
|
1.82%
|
1.82%
|
1.82%
|
||||||
Securitized
Non-Recourse Debt Obligations of Consolidated VIEs:
|
|||||||||
Other
|
|||||||||
CT
CDOs
|
Consolidated
VIEs
|
Total
|
|||||||
Fixed
rate debt
|
$260,275
|
$102,579
|
$362,854
|
||||||
Interest
rate(1)
|
5.31%
|
7.11%
|
5.81%
|
||||||
Floating
rate debt
|
$745,511
|
$2,574,528
|
$3,320,039
|
||||||
Interest
rate(1)
|
0.77%
|
0.87%
|
0.85%
|
||||||
Derivative
Financial Instruments of Consolidated VIEs:
|
|||||||||
Notional
amounts
|
$344,432
|
||||||||
Fixed
pay rate(1)
|
4.95%
|
||||||||
Floating
receive rate(1)
|
0.26%
|
(1)
|
Represents weighted average rates where applicable. Floating rates
are based on LIBOR of 0.26%, which is the rate as of September 30,
2010.
|
|
(2) |
The coupon on our junior subordinated notes will remain at 1.00%
per annum through April 29, 2012, increase to 7.23% per annum for the
period from April 30, 2012 through April 29, 2016 and then convert to a
floating interest rate of three-month LIBOR + 2.44% per annum through
maturity in 2036.
|
ITEM 4.
|
Controls
and Procedures
|
ITEM
1:
|
Legal
Proceedings
|
ITEM 1A:
|
Risk
Factors
|
ITEM 2:
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
ITEM 3:
|
Defaults
Upon Senior Securities
|
ITEM 4:
|
(Removed
and Reserved)
|
ITEM 5:
|
Other
Information
|
ITEM 6:
|
Exhibits
|
3.1a
|
Charter
of the Capital Trust, Inc. (filed as Exhibit 3.1.a to Capital
Trust, Inc.’s Current Report on Form 8-K (File No. 1-14788)
filed on April 2, 2003 and incorporated herein by
reference).
|
|
3.1b
|
Certificate
of Notice (filed as Exhibit 3.1 to Capital Trust, Inc.’s Current
Report on Form 8-K (File No. 1-14788) filed on February 27,
2007 and incorporated herein by reference).
|
|
3.2
|
Second
Amended and Restated By-Laws of Capital Trust, Inc. (filed as
Exhibit 3.2 to Capital Trust, Inc.’s Current Report on
Form 8-K (File No. 1-4788) filed on February 27, 2007 and
incorporated herein by reference).
|
|
·
|
10.1
|
Securities
Purchase Agreement, dated as of May 11, 2004, by and among Capital Trust,
Inc., W.R. Berkley Corporation and certain shareholders of Capital Trust,
Inc.
|
·
|
10.2
|
Junior
Subordinated Indenture, dated as of March 16, 2009, between Capital Trust,
Inc. and The Bank of New York Mellon Trust Company, National Association,
as Trustee.
|
·
|
10.3
|
Junior
Subordinated Indenture, dated as of May 14, 2009, between Capital Trust,
Inc. and The Bank of New York Mellon Trust Company, National Association,
as Trustee.
|
+
·
|
10.4
|
Amendment
No. 10 to Master Repurchase Agreement, dated as of March 16, 2009, by and
among Capital Trust, Inc, CT RE CDO 2004-1 SUB, LLC, CT RE CDO 2005-1 SUB,
LLC, CT XLC Holding, LLC and Morgan Stanley Bank, N.A.
|
+
·
|
10.5
|
Amendment
No. 1 to Master Repurchase Agreement, dated as of March 16, 2009, by and
among CT BSI Funding Corp., Capital Trust, Inc. and JPMorgan Chase Bank,
N.A.
|
+
·
|
10.6
|
Amendment
No. 1 to Master Repurchase Agreement, dated as of March 16, 2009, by and
among Capital Trust, Inc., CT BSI Funding Corp. and JPMorgan Chase Funding
Inc.
|
+
·
|
10.7
|
Amendment
No. 3 to Master Repurchase Agreement, dated as of March 16, 2009, by and
between Capital Trust, Inc., Citigroup Global Markets, Inc. and
Citigroup Financial Products Inc.
|
+
·
|
10.8
|
Pledge
and Security Agreement, dated as of March 16, 2009, by and between Capital
Trust, Inc. and WestLB AG, New York Branch.
|
·
|
31.1
|
Certification
of Stephen D. Plavin, Chief Executive Officer, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
·
|
31.2
|
Certification
of Geoffrey G. Jervis, Chief Financial Officer, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
·
|
32.1
|
Certification
of Stephen D. Plavin, 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 Geoffrey G. Jervis, Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
·
|
99.1
|
Updated
Risk Factors from our Annual Report on Form 10-K for the year ended
December 31, 2009, filed on March 2, 2010 with the Securities and Exchange
Commission.
|
|
|
|
|
·
|
Filed
herewith
|
|
+
|
Confidential
treatment has been requested for certain portions which are omitted in the
copy of the exhibit electronically filed with the SEC. The omitted
information has been filed separately with the SEC pursuant to our
application for confidential
treatment.
|
CAPITAL
TRUST, INC.
|
||
October 26,
2010
|
/s/ Stephen D. Plavin | |
Date
|
Stephen D. Plavin
Chief
Executive Officer
(Principal
executive officer)
|
|
October 26,
2010
|
/s/ Geoffrey G. Jervis | |
Date
|
Geoffrey
G. Jervis
Chief
Financial Officer
(Principal
financial officer and
Principal
accounting officer)
|