McLEAN, Va., Aug. 6 /PRNewswire-FirstCall/ -- JER Investors Trust Inc.
(NYSE: JRT) today reported results for the quarter ended June 30, 2008:
Second Quarter Highlights:
-- Liquidity: At June 30, 2008, we had $43.4 million in unrestricted cash
plus an additional $1.2 million of restricted cash as well as borrowings on
our repurchase agreements of $151.3 million. As of August 4, 2008,
unrestricted cash decreased to $38.4 million and borrowings on our repurchase
agreements decreased to $100.6 million.
-- Credit Performance: As of June 30, 2008, delinquency rates on
collateral for our CMBS portfolio in which we own the first-loss position
remain at low levels with a 60 day delinquency rate of approximately 31 basis
points compared to 32 basis points at March 31, 2008. Overall, CMBS portfolio
cash flow projections generally continue to be in line with original
underwriting. There were no delinquencies, impairment charges or loss
reserves established related to real estate loans as of and during the three
months ended June 30, 2008.
-- Adjusted Funds from Operations: Generated Adjusted Funds from
Operations ("AFFO") of $8.6 million and $19.6 million, or $0.33 and $0.76,
respectively, per diluted common share for the three and six months ended June
30, 2008.
-- GAAP Operating Results: Net income (loss) was $29.0 million and
$(37.9) million, or $1.13 and $(1.47), respectively, per diluted common share
for the three and six months ended June 30, 2008.
-- Stockholders' Equity: Stockholders' equity at June 30, 2008 is $262.8
million, or $10.15 per share, compared to $256.0 million, or $9.88 per share,
at March 31, 2008. In addition, if all assets and liabilities were carried at
fair value at June 30, 2008, we estimate that stockholders' equity would
increase to approximately $293.9 million or $11.35 per share. At the end of
this earnings release is a proforma calculation of the June 30, 2008 Fair
Value Balance Sheet and Stockholders' Equity.
-- Subsequent Events:
-- On July 31, 2008 we paid dividends of $7.8 million, or $0.30 per
share, which we declared in June 2008.
-- In July 2008, we sold a fixed rate real estate loan classified as
held for sale with a face amount of $65.0 million for proceeds of
$54.8 million. Proceeds from the sale of this loan were used to pay
down $40.8 million in related repurchase agreement borrowings and
$4.0 million of swap termination costs. The $50.8 million of
proceeds, net of swap termination costs, compares to a net carrying
value of the loan and swap of $50.8 million on June 30, 2008.
-- Between July 1, 2008 and August 4, 2008, we paid margin calls of
$9.5 million on our repurchase agreements.
Operating Results
Net income was $29.0 million, or $1.13 per diluted common share, for the
three months ended June 30, 2008, compared to net income of $10.1 million, or
$0.39 per diluted common share, for the three months ended June 30, 2007. Net
loss was $37.9 million, or $1.47 per diluted common share, for the six months
ended June 30, 2008, compared to net income of $19.9 million, or $0.77 per
diluted common share, for the six months ended June 30, 2007. AFFO was $8.6
million, or $0.33 per diluted share, for the three months ended June 30, 2008,
compared to $11.3 million, or $0.44 per diluted share, for the three months
ended June 30, 2007. AFFO was $19.6 million, or $0.76 per diluted share, for
the six months ended June 30, 2008, compared to $22.0 million, or $0.86 per
diluted share, for the six months ended June 30, 2007. At the end of this
earnings release is a reconciliation of GAAP net income (loss) to AFFO for the
three and six months ended June 30, 2008 and 2007.
Total revenues were $32.6 million and $64.3 million for the three and six
months ended June 30, 2008 compared to $34.2 million and $64.1 million for the
three and six months ended June 30, 2007, respectively. The decrease in
revenues for the three months ended June 30, 2008 compared to the same period
in 2007 is primarily due to the sale of our investment in real estate assets,
reduced income from real estate loans due to loan repayments and lower LIBOR
rates on our floating rate real estate loans and lower income from cash
balances due to lower cash balances and lower yields on cash, offset in part
by higher CMBS income due to acquisitions during 2007 and higher levels of
non-cash CMBS income. The non-cash CMBS income is principally due to the
other than temporary impairment charge on CMBS recorded during the first
quarter of 2008 which reduced our CMBS cost basis and increased GAAP yields on
CMBS, resulting in non-cash accretion income on these investments.
Interest expense for the three and six months ended June 30, 2008 was
$13.8 million and $29.2 million compared to $19.8 million and $35.4 million
for the three and six months ended June 30, 2007. Due to the adoption of SFAS
No. 159, effective January 1, 2008, as well as discontinuation of hedge
accounting on our non-CDO interest rate swaps, interest expense in the three
and six months ended June 30, 2008 does not include the impact of interest
rate swaps. During the three and six months ended June 30, 2007, interest
expense includes $(0.4) million and $(0.7) million related to interest rate
swaps. After adjusting for this classification difference, the $6.4 million
and $6.9 million decrease in interest expense for the three and six months
ended June 30, 2008, respectively, is primarily related to decreased LIBOR
rates in 2008 compared to 2007 and lower average balances outstanding on
repurchase agreements in 2008 offset in part, by higher borrowing spreads and
related facility costs on our repurchase agreements. In addition, interest
expense during the six months ended June 30, 2008 increased over the same
period in 2007 as a result of our issuance of junior subordinated debentures
in April 2007.
Total management fees were $1.9 million and $3.7 million for the three and
six months ended June 30, 2008 compared to $2.1 million and $4.1 million for
the three and six months ended June 30, 2007. Base management fees were $1.9
million and $3.7 million for each of the three and six months ended June 30,
2008 and 2007. We incurred no incentive management fees during the three and
six months ended June 30, 2008 compared to $0.2 million and $0.4 million
during the same periods in 2007.
General and administrative expenses were $1.9 million and $3.9 million for
the three and six months ended June 30, 2008 compared to $2.0 million and $4.3
million for the same periods in 2007. For the six months ended June 30, 2008
compared to the same period in 2007, the decrease in general and
administrative expenses is primarily due to decreased due diligence expense as
a result of lower acquisition volume.
During the three and six months ended June 30, 2008, other gains (losses),
net, of $14.0 million and $(65.4) million were recorded and consist of the
following (in millions):
Composition of Other Gains (Losses)
For the Three For the Six
Months Ended Months Ended
June 30, 2008 June 30, 2008
Changes in Fair Value
CDO related financial assets and liabilities
CMBS $(428) $(175,189)
Real estate loans (6,856) (11,764)
Notes payable 7,585 274,237
Interest rate swaps 22,322 2,244
Unrealized gain (loss) on CDO related
financial assets and liabilities 22,623 89,528
Non-CDO related financial assets and
liabilities
Loss on CMBS impairment (273) (45,395)
Real estate loans held for sale (506) (28,874)
Interest rate swaps 8,199 3,394
Unrealized gain (loss) on non-CDO
related financial assets and liabilities 7,420 (70,875)
Total changes in fair value 30,043 18,653
Realized Losses
Loss on real estate loan held for sale (1) (9,249) (9,249)
Loss on termination of non-CDO
interest rate swaps (1,370) (1,370)
Total realized losses (10,619) (10,619)
Cash payments on interest rate swaps (4,690) (6,773)
Recognition of amounts in other
comprehensive income (loss)
("AOCI") as of December 31, 2007
Loss on CMBS impairment - (54,457)
Unrealized gain (loss) on non-CDO
interest rate swaps - (10,795)
Amortization of swap termination costs (126) (250)
Amortization of unrealized loss on
CDO related interest rate swaps (575) (1,143)
Total recognition of amounts in AOCI
as of December 31, 2007 (701) (66,645)
Total other gains (losses) $14,033 $(65,384)
(1) Loan carrying value at March 31, 2008 reflected unrealized loss of
$8.1 million.
We recorded unrealized gains, net, on our CDO related financial assets and
liabilities of $22.6 million and $89.5 million, respectively, during the three
and six months ended June 30, 2008. For the three months ended June 30, 2008,
such unrealized gains, net, were primarily due to changes in fair value of our
interest rate swaps. Unrealized gains, net, for the six months ended June 30,
2008 were primarily due to the widening of credit spreads on CDO notes
payable, offset in part, by widening credit spreads on CMBS and real estate
loans.
We recorded non-cash impairment charges of $0.3 million and $99.9 million,
respectively, for the three and six months ended June 30, 2008 on our CMBS
investments not financed by CDO's. The non-cash impairment charges include
charges of $0.3 million and $2.4 million during the three and six months ended
June 30, 2008, respectively, related to declines in the projected net present
value of future cash flows on certain of the CMBS investments pursuant to EITF
99-20. The remaining non-cash CMBS impairment charges of $0 and $97.5 million
during the three and six months ended June 30, 2008 relates to other than
temporary declines in fair value due to widening credit spreads for CMBS
investments which began in the first half of 2007, accelerated throughout the
second half of 2007 and continued through the first quarter of 2008, resulting
in both increased severity of the level of unrealized losses as well as
increased duration of such unrealized losses. For the three and six months
ended June 30, 2007, we recorded no non-cash impairment charges on our CMBS
investments.
Unrealized losses, net, of $0.5 million and $28.9 million, respectively,
were recorded on our real estate loans held for sale during the three and six
months ended June 30, 2008. Note that these amounts are net of the reversal
of prior unrealized losses of $8.1 million on a loan that was sold during the
quarter ended June 30, 2008 at a realized loss of $9.2 million. The losses
were primarily due to spread widening on such loans and the impact of higher
benchmark rates on fixed rate loans. We carry these loans at the lower of
cost or estimated fair value, on an individual loan basis.
Unrealized gains (losses) on non-CDO related interest rate swaps of $8.2
million and $(7.4) million were recorded during the three and six months ended
June 30, 2008 as a result of discontinuing hedge accounting for these swaps
during 2008. These interest rate swaps were originally designated to hedge
existing floating rate indebtedness related to our repurchase agreements and
anticipated future long-term floating rate indebtedness. We discontinued
hedge accounting for these swaps as a result of uncertainty related to our
ability to obtain future long-term financing associated with such swaps due to
continued market disruptions as well as the potential for sales of certain of
our real estate loans held for sale which would ideally be financed by such
borrowings. No unrealized gains (losses) on interest rate swaps were recorded
during the three and six months ended June 30, 2007.
In connection with the sale of a real estate loan in June 2008 and
repayment of associated borrowings, the Company terminated an interest rate
swap with a notional balance of $45.0 million and paid swap termination costs
of $1.4 million.
Losses on interest rate swaps of $5.4 million and $8.2 million,
respectively, consist primarily of net cash settlements on such swaps of $4.7
million and $6.8 million during the three and six months ended June 30, 2008,
amortization of unrealized losses as of December 31, 2007 on CDO related
interest rate swaps of $0.6 million and $1.1 million during the three and six
months ended June 30, 2008 and amortization of swap termination costs, net,
from accumulated other comprehensive income of $0.1 million and $0.2 million
during the three and six months ended June 30, 2008.
Investment Activity
During the three months ended June 30, 2008, we received principal
repayments of $3.3 million related to two real estate loan investments.
In June 2008, we sold a fixed rate real estate loan classified as held for
sale with a face amount of $45.0 million for net proceeds of $36.2 million.
Proceeds from the sale were used to pay down $26.4 million of repurchase
agreement borrowings and $1.4 million in interest rate swap termination costs.
The $34.8 million of proceeds, net of swap termination costs, compares to a
net carrying value of the loan and swap of $33.4 million on March 31, 2008.
Since raising our initial equity capital in June 2004 through June 30,
2008, we have closed 55 investments, comprised of CMBS, real estate loans,
real estate assets and investments in the US Debt Fund totaling approximately
$2.0 billion. In addition, through June 30, 2008 the Company has sold assets
or received principal payments on investments aggregating approximately $523.4
million.
The Company's investments as of June 30, 2008 consist of:
June 30, 2008 Weighted Average
Face % of
Amount/ Amort- Total Coupon Loss
Cost ized Fair Invest- Rate Adjusted
Basis(1) Cost Value ments(2) (5) Yield
($ in millions)
CMBS financed by CDO's $1,307.6 $387.4 $390.4 43.9% 5.1% 20.0%(3)
CMBS not financed by
CDO's 453.1 107.7 100.2 11.3% 5.2% 20.6%(3)
Real estate loans, held
for investment 275.0 274.7 253.7 28.5% 5.3% 5.7%(4)
Real estate loans, held
for sale 187.6 184.7 141.9 16.0% 6.8% 6.6%(4)
Investments in
unconsolidated joint
ventures:
US Debt Fund 3.3 3.3 3.3 0.4% N/A N/A
Total $2,226.6 $957.8 $889.5 100.0% 5.5% 13.4%
(1) For investments in unconsolidated joint ventures.
(2) Based on fair value.
(3) Loss adjusted yields for our CMBS investments reflect the impact of
estimated future losses on underlying collateral and are the basis on
which we record interest income on such investments in our GAAP
financial statements in accordance with guidance provided by EITF
99-20.
(4) Represents yield on amortized cost.
(5) Based on face amount.
Effective January 1, 2008, we elected to account for our CMBS investments
and real estate loans held for investment financed by CDO's using the fair
value option under SFAS No. 159. As a result, changes in the value of such
CMBS and real estate loans held for investment are recorded as a component of
unrealized gains (losses) on CDO related financial assets in our consolidated
statement of operations. With respect to CMBS not financed by CDO's, we
classify these as available for sale. As such, absent impairment, changes in
the estimated fair value of such CMBS investments are reflected as changes to
accumulated other comprehensive income (loss) and affect stockholders' equity.
As of June 30, 2008, unrealized losses, net, of $7.5 million were reflected in
accumulated other comprehensive income (loss) with respect to these CMBS
investments.
In July 2008, we sold a fixed rate real estate loan classified as held for
sale with a face amount of $65.0 million for net proceeds of $54.8 million.
Proceeds from the sale of this loan were used to pay down $40.8 million in
related repurchase agreement borrowings and $4.0 million of swap termination
costs. The $50.8 million of proceeds, net of swap termination costs, compares
to a net carrying value of the loan and swap of $50.8 million on June 30,
2008.
Stockholders' Equity
At June 30, 2008, our GAAP book value per share was $10.15, compared to
$9.88 at March 31, 2008.
If we were to mark all of our assets and liabilities to market as of June
30, 2008, we estimate that our stockholders' equity would approximate $293.9
million or $11.35 per share. At the end of this earnings release is a
proforma calculation of the June 30, 2008 fair value balance sheet and
stockholders' equity.
Credit Quality and Continued Focus on Commercial Real Estate
We continue to focus our business activities on debt securities and loans
collateralized by commercial real estate assets. We have no investments in
single family residential loans or residential mortgage backed securities,
including no investments in "sub prime" residential loans or "sub prime"
residential mortgage backed securities.
For our 26 CMBS investments as of June 30, 2008, the performance of the
underlying collateral in aggregate has generally remained consistent with our
original underwriting. In addition, there are no existing delinquencies or
monetary defaults on any of our 13 real estate loans. Impairment charges of
$0.3 million were recorded during the three months ended June 30, 2008 related
to our CMBS investments that are not financed by CDO's and relates to declines
in the projected net present value of future cash flows on four separate CMBS
bonds pursuant to EITF 99-20.
Through August 4, 2008, the credit ratings of certain of our CMBS
investments have been downgraded by rating agencies. The CMBS deals that were
downgraded include LBUBS 2005- C3, MSCI 2005- IQ10, JPMCC 2005 CIBC-12, JPMCC
2005 CIBC-11, BACM 2005-1 and MLMT 2006- C2, and the downgrade affected bonds
with a face amount of $128.8 million and a fair value of $43.4 million at June
30, 2008. Of these bonds, $98.0 million and $30.8 million of face amount was
financed by CDO I and CDO II, respectively, at June 30, 2008.
For our 26 CMBS investments, 21 are investments in conduit issuances
between 2004 and 2007 in which we own the first-loss position. For the 21
first-loss CMBS positions which are collateralized by approximately 3,500
loans with an aggregate outstanding balance of approximately $48 billion, the
60 day delinquency rate based on the remittance reports as of June 30, 2008
was 31 basis points compared to 32 basis points at March 31, 2008. Including
transfers in and loans returned to the master servicer subsequent to June 30,
2008, there are currently 27 loans totaling approximately $265.2 million that
are being managed by the applicable special servicer, which is an affiliate of
J.E. Robert Company, Inc. Of the $265.2 million of loan balances in special
servicing, 9 loans totaling $90.7 million are current, 3 loans totaling $12.9
million have been foreclosed upon and 15 loans totaling $161.6 million are
delinquent and are in monetary default. Based on the evaluation of the
collateral properties underlying the CMBS investments and giving consideration
to the workout status of the respective loans, we have incorporated estimates
of future loan loss assumptions from the underlying collateral into the cash
flow projections for such CMBS investments. Realized credit losses to date on
collateral for our "first-loss" CMBS investments are $2.7 million, which is
significantly lower than our original underwritten losses to date.
Borrowings / Liquidity
At June 30, 2008, we had $43.4 million in unrestricted cash plus an
additional $1.2 million of restricted cash as well as borrowings on our
repurchase agreements of $151.3 million. As of August 4, 2008, unrestricted
cash decreased by $5.0 million to $38.4 million primarily as a result of
proceeds from sales of real estate loans of $54.8 million reduced by
associated repurchase agreement repayments of $40.8 million and swap
termination costs of $4.0 million, margin calls of $9.5 million and payment of
our second quarter 2008 dividend of $7.8 million. As of August 4, 2008,
borrowings on our repurchase agreements decreased to $100.6 million.
With respect to liabilities, at June 30, 2008, total liabilities were
$685.5 million. The individual components of our liabilities are described as
follows:
-- $431.9 million (or 63.0% of total liabilities) represents the estimated
fair value of borrowings in the form of long term, "match-funded" debt
relating to our two collateralized debt obligation offerings, CDO I and CDO II
with an aggregate face amount of $974.6 million. Pursuant to our adoption of
SFAS No. 159 effective January 1, 2008, we elected to account for these notes
payable using the fair value option. CDO I and CDO II are not subject to
"margin calls" based on mark-to-market fair value determinations of the
underlying collateral, have maturities tied specifically to actual repayments
of underlying collateral and are generally non-recourse to the Company.
Absent the Company purchasing such notes payable at these discounted values or
a situation where the proceeds from collateral were insufficient to satisfy
the notes payable, the Company expects at this time that collateral for the
notes payable will ultimately repay the face amount in full.
-- $151.3 million (or 22.1% of total liabilities) represents borrowings
under short-term repurchase facilities with three separate lenders. These
facilities are generally subject to "margin calls" based on mark-to-market
fair value determinations of the underlying collateral, and contain certain
recourse provisions to us. As of August 4, 2008 and June 30, 2008, repurchase
agreement borrowings consisted of the following:
Amount
August 4, 2008 June 30, 2008
Secured by CMBS
Bear Stearns $14.2 $15.0
JPMorgan 27.3 35.3
Secured by real estate loans
Goldman Sachs 59.1 101.0
$100.6 $151.3
We have recently agreed in principle on terms with JPMorgan related to the
extension and consolidation of our CMBS repurchase agreements with JPMorgan
and Bear Stearns. It is anticipated that the term of the facility will be
extended to August 2009 and require a paydown of outstanding borrowings due to
lower advance rates, among other items. We are in the process of completing
final legal documentation of this agreement.
-- $61.9 million (or 9.0% of total liabilities) represents borrowings in
the form of unsecured junior subordinated debentures. These debentures are
not subject to "margin calls" based on mark-to-market fair value
determinations of underlying collateral but are fully recourse to us. These
debentures have a maturity date of April 2037 and are outstanding in
connection with our April 2007 issuance of $60 million of trust preferred
securities.
-- $27.2 million (or 4.0%) represents the fair value of our CDO-related
pay-fixed interest rate swaps of $19.5 million and non-CDO related pay-fixed
interest rate swaps of $7.7 million, which includes $3.4 million related to a
swap terminated in July 2008.
-- $13.2 million (or 1.9% of total liabilities) was in the form of
dividends declared but not paid to common shareholders of $7.8 million, trade
payables, amounts due to affiliates and other liabilities.
At June 30, 2008, the ratio of total liabilities to stockholders equity
was 2.6x. Excluding the impact of the accumulated other comprehensive income
(loss) component of stockholders' equity, or Adjusted Stockholders' Equity (a
non-GAAP measure), the ratio of total liabilities to Adjusted Stockholders'
Equity was 2.3x at June 30, 2008. We believe Adjusted Stockholders' Equity is
a meaningful measure as certain of the financial covenants within our
repurchase agreements use Adjusted Stockholders' Equity as a measure of our
leverage. At the end of this earnings release is a reconciliation of
stockholders' equity determined in accordance with GAAP to Adjusted
Stockholders' Equity as well as the June 30, 2008 Fair Value Balance Sheet and
Stockholders' Equity.
Dividends
On June 13, 2008, the Board of Directors approved the declaration of a
regular cash dividend of $0.30 per common share for the three months ended
June 30, 2008. The dividends were paid on July 31, 2008 to common
stockholders of record on June 30, 2008.
2008 Outlook
In 2008, we will continue to focus our efforts on maintaining liquidity,
monitoring and managing credit risk, and if excess liquidity is available,
targeting investments that will generate the highest risk adjusted returns.
Maintaining liquidity may require us to sell assets which could result in
lower future revenues and/or result in realized losses. In addition, we
expect that our GAAP earnings will continue to be volatile, primarily as a
result of our adoption of SFAS No. 159 for which we will reflect changes in
the market values of our CDO related financial assets and liabilities in the
income statement, discontinuation of hedge accounting for our interest rate
swaps and treating certain of our real estate loans as held for sale. As a
result, we will continue to report AFFO as a measure of our operating
performance as we believe it is a meaningful measure of our operating results
and cash flows.
About JER Investors Trust Inc.
JER Investors Trust Inc. is a New York Stock Exchange listed specialty
finance company that originates and acquires commercial real estate structured
finance products. The Company's target investments include commercial
mortgage backed securities, mezzanine loans and B-Note participations in
mortgage loans, commercial mortgage loans and net leased real estate
investments. JER Investors Trust Inc. is organized and conducts its
operations so as to qualify as a real estate investment trust ("REIT") for
federal income tax purposes. For more information regarding JER Investors
Trust Inc. and to be added to our e-mail distribution list, please visit
www.jer.com.
Conference Call
Management will host an earnings conference call on Thursday, August 7,
2008 at 9 A.M. eastern daylight time. A copy of the earnings release will be
posted to the Investor Resources section of the JER Investors Trust Inc.
website provided below. All interested parties are welcome to participate on
the live call. You can access the conference call by dialing (866) 770-7051
(from within the U.S.) or (617) 213-8064 (from outside of the U.S.) ten
minutes prior to the scheduled start of the call; please reference passcode
"93358008."
A webcast of the conference call will be available to the public on a
listen-only basis at www.jer.com. A replay of the earnings call will be
available until August 28, 2008 by dialing (888) 286-8010 (from within the
U.S.) or (617) 801-6888 (from outside of the U.S.); please reference passcode
"84669516."
Non-GAAP Financial Measures
During the quarterly conference call, we may discuss non-GAAP financial
measures as defined by SEC Regulation G. In addition, we have used non-GAAP
financial measures, in particular Adjusted Funds from Operations, or AFFO,
Adjusted Stockholders' Equity and a Fair Value Balance Sheet in this press
release. Reconciliations of AFFO, Adjusted Stockholders' Equity, the Fair
Value Balance Sheet and the comparable GAAP financial measure (net income,
assets, liabilities and stockholders' equity, as applicable) can be found at
the end of this earnings release.
Forward-Looking Statements
Certain items in this press release may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are based on management's current expectations and
beliefs and are subject to a number of trends and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. JER Investors Trust can give no assurance that
its expectations will be attained. Factors that could cause actual results to
differ materially from JER Investors Trust's expectations include, but are not
limited to, changes in the real estate and capital markets, our continued
ability to source and fund new investments, satisfactory resolution of
negotiations regarding extension terms for our CMBS repurchase agreements, and
other risks detailed from time to time in JER Investors Trust's SEC reports.
Such forward-looking statements speak only as of the date of this press
release. JER Investors Trust expressly disclaims any obligation to release
publicly any updates or revisions to any forward-looking statements contained
herein to reflect any change in JER Investors Trust's expectations with regard
thereto or change in events, conditions or circumstances on which any
statement is based.
CONTACTS:
J. Michael McGillis
Chief Financial Officer
JER Investors Trust Inc.
(703) 714-8182
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, 2008 Dec. 31, 2007
(unaudited) (audited)
ASSETS
Cash and cash equivalents $43,364 $87,556
Restricted cash 1,153 6,687
CMBS financed by CDOs, at fair value 390,491 562,056
CMBS not financed by CDOs, at fair value 100,176 155,384
Real estate loans, held for
investment, at fair value at
June 30, 2008 and amortized cost
at December 31, 2007 253,659 274,734
Real estate loans, held for sale,
at lower of cost or fair value 141,913 221,599
Investments in unconsolidated
joint ventures 3,261 40,764
Accrued interest receivable 9,437 10,415
Due from affiliate 189 199
Deferred financing fees, net 2,076 14,454
Other assets 2,575 2,333
Total Assets $948,294 $1,376,181
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
CDO notes payable, at fair value
at June 30, 2008; face amount
at December 31, 2007 $431,903 $974,578
Repurchase agreements 151,301 261,864
Junior subordinated debentures 61,860 61,860
Interest rate swap agreements, at
fair value 27,237 32,881
Accounts payable and accrued expenses 907 921
Dividends payable 7,752 28,391
Due to affiliate 1,477 1,195
Other liabilities 3,058 3,693
Total Liabilities 685,495 1,365,383
Stockholders' Equity:
Common stock, $0.01 par value,
100,000,000 shares authorized,
25,901,035 shares issued and outstanding 259 259
Additional paid-in capital 392,481 392,270
Cumulative dividends paid/declared (147,680) (132,186)
Cumulative earnings 50,632 68,437
Accumulated other comprehensive income
(loss) (32,893) (317,982)
Total Stockholders' Equity 262,799 10,798
Total Liabilities and
Stockholders' Equity $948,294 $1,376,181
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except share and per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
REVENUES
Interest income from CMBS $24,719 $20,531 $46,171 $38,354
Interest income from real
estate loans 7,447 10,630 16,333 19,379
Interest income from cash
and cash equivalents 194 1,564 616 3,550
Lease income from real
estate assets - 1,404 - 2,777
Equity in earnings, net,
of unconsolidated joint
ventures 34 - 967 -
Fee income 156 - 253 -
Other income - 31 - 31
Total Revenues 32,550 34,160 64,340 64,091
EXPENSES
Interest expense 13,782 19,793 29,197 35,424
Management fees, affiliate 1,874 1,850 3,701 3,705
Incentive fees, affiliate - 235 - 387
Depreciation and
amortization of real
estate assets - 206 - 412
General and administrative 1,937 1,975 3,917 4,255
Total Expenses 17,593 24,059 36,815 44,183
INCOME BEFORE OTHER GAINS
(LOSSES) 14,957 10,101 27,525 19,908
OTHER GAINS (LOSSES)
Unrealized loss on financial
assets financed with CDOs (7,319) - (186,988) -
Unrealized gain, net, on
CDO related financial
liabilities 29,942 - 276,516 -
Loss on interest rate swaps (5,391) - (8,166) -
Loss on impairment of CMBS (273) - (99,852) -
Unrealized loss, net, on
real estate loan held for
sale (506) - (28,874) -
Unrealized gain (loss) on
non-CDO interest rate
swaps 8,199 - (7,401) -
Loss on sale of real
estate loan held for
sale (9,249) - (9,249) -
Loss on termination of
non-CDO interest rate
swap agreement (1,370) - (1,370) -
Total other gains
(losses) 14,033 - (65,384) -
NET INCOME (LOSS) $28,990 $10,101 $(37,859) $19,908
Net earnings per share:
Basic $1.13 $0.39 $(1.47) $0.77
Diluted $1.13 $0.39 $(1.47) $0.77
Weighted average shares of
common stock outstanding:
Basic 25,738,893 25,695,178 25,723,476 25,693,615
Diluted 25,761,345 25,720,330 25,762,299 25,715,513
Dividends declared per
common share $0.30 $0.45 $0.60 $0.89
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(In thousands)
Common Stock Additional Cumulative
Paid-in Dividends
Shares Amount Capital Paid/Declared
Balance at December 31, 2007 25,901 $259 $392,270 $(132,186)
Cumulative effect of adoption of
SFAS No. 159
Assets
Liabilities
Total cumulative effect of
adoption of SFAS No. 159
Comprehensive income (loss):
Net income (loss)
Recognition of previously
unrealized losses on non
CDO-related interest rate swap
agreements in other comprehensive
income at December 31, 2007
Amortization of swap termination costs
Amortization of unrealized losses on
CDO related interest rate swaps
in other comprehensive income at
December 31, 2007
Unrealized (losses) on non-CDO CMBS
available for sale
Recognition of previously unrealized
losses on non-CDO related CMBS in
other comprehensive income at
December 31, 2007
Total comprehensive income (loss)
Dividends declared (15,494)
Stock based compensation- restricted
share awards 211
Balance at June 30, 2008 25,901 $259 $392,481 $(147,680)
Cumulative Accumulated
Earnings Other
(Losses) Comprehensive
Income (Loss) Total
Balance at December 31, 2007 $68,437 $(317,982) $10,798
Cumulative effect of adoption of
SFAS No. 159
Assets (248,347) 225,991 (22,356)
Liabilities 268,401 - 268,401
Total cumulative effect of
adoption of SFAS No. 159 20,054 225,991 246,045
Comprehensive income (loss):
Net income (loss) (37,859) (37,859)
Recognition of previously unrealized
losses on non CDO- related
interest rate swap agreements in
other comprehensive income at
December 31, 2007 10,795 10,795
Amortization of swap termination costs 250 250
Amortization of unrealized losses on
CDO related interest rate swaps
in other comprehensive income at
December 31, 2007 1,144 1,144
Unrealized (losses) on non-CDO CMBS
available for sale (7,548) (7,548)
Recognition of previously unrealized
losses on non-CDO related CMBS
in other comprehensive income at
December 31, 2007 54,457 54,457
Total comprehensive income (loss) $21,239
Dividends declared (15,494)
Stock based compensation- restricted
share awards 211
Balance at June 30, 2008 $50,632 $(32,893) $262,799
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
For the Six Months Ended
June 30,
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(37,859) $19,908
Adjustments to reconcile net income
to net cash provided by operating
activities:
CMBS accretion income (1,395) 1,444
Amortization of debt issuance costs 1,771 908
Accretion of premiums or discounts on
real estate loans - (505)
Amortization of other comprehensive
(income) loss related to CDO related
interest rate swap agreements 1,397 215
Depreciation and amortization on real
estate assets - 413
Unrealized (gain) loss on CDO related
financial assets and liabilities, net (89,528) -
Unrealized loss on interest rate swap
agreement 8,764 -
Unrealized loss on impairment of CMBS 99,852 -
Loss on sale of real estate loan held
for sale 9,249 -
Unrealized loss on real estate loans
held for sale, net 28,874 -
Equity in earnings, net, from
unconsolidated joint ventures (966) -
Distributions from unconsolidated
joint ventures 1,252 -
Straight line rental income - (819)
Payment-in-kind (PIK) interest on real
estate loan held for sale (2,099) -
Stock compensation expense 211 242
Changes in assets and liabilities:
Decrease (increase) in other assets (242) (185)
Decrease (increase) in accrued interest
receivable 978 (1,929)
Increase (decrease) in due to/from
affiliates, net 302 (409)
Increase (decrease) in accounts payable
and accrued expenses and other
liabilities, net (662) 2,600
Net cash provided by operating
activities 19,899 21,883
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of CMBS - (181,590)
Purchase of real estate loans - (413,048)
Purchase of real estate assets - (38,749)
Investment in unconsolidated joint ventures (2,231) -
Decrease in restricted cash, net 5,534 4,080
Proceeds from sale of unconsolidated joint
ventures 39,448 -
Proceeds from repayment of real estate
loans 7,471 150,064
Proceeds from sale of real estate loans
held for sale 36,191 -
Net cash provided by (used in)
investing activities 86,413 (479,243)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (36,133) (29,843)
Proceeds from repurchase agreements 1,556 473,868
Repayment of repurchase agreements (112,119) (180,581)
Proceeds from issuance of junior
subordinated debentures - 61,860
Purchase of common equity in JERIT TS
Statutory Trust I - (1,860)
Payment of financing costs (2,438) (1,030)
Payment of interest rate swap termination
costs (1,370) -
Net cash provided by (used in)
financing activities (150,504) 322,414
Net (decrease) increase in cash and
cash equivalents (44,192) (134,946)
Cash and cash equivalents at
beginning of period 87,556 143,443
Cash and cash equivalents at end of period $43,364 $8,497
Supplemental Disclosures of Cash Flow
Information
Cash paid for interest $34,878 $33,474
Dividends declared but not paid $7,752 $11,609
JER INVESTORS TRUST INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)
(in thousands, except share and per share data)
For the For the
Three Months Six Months
Ended June 30, Ended June 30,
2008 2007 2008 2007
Net income (loss) available to common
stockholders $28,990 $10,101 $(37,859) $19,908
Add:
Depreciation on unconsolidated and
consolidated real estate assets - 206 238 412
Unrealized gain, net, on CDO related
financial assets and liabilities (22,623) - (89,528) -
Amortization of December 31, 2007
unrealized loss on CDO related
interest rate swaps 575 1,144
Unrealized loss on impairment of CMBS 273 - 99,852 -
Unrealized loss on real estate loan
held for sale 8,645 - 37,013 -
Reversal of unrealized loss on real
estate loan sold during period (8,139) (8,139)
Unrealized (gain) loss on non-CDO
interest rate swap agreements (8,199) - 7,401 -
Realized loss on sale of real estate
loan held for sale 9,249 - 9,249 -
Realized loss on termination of non-
CDO interest rate swap agreement 1,370 - 1,370 -
CMBS (accretion) amortization (1,725) 834 (1,387) 1,446
Stock compensation expense 162 166 211 242
Adjusted Funds from Operations (AFFO) $8,578 $11,307 $19,565 $22,008
AFFO per share:
Basic $0.33 $0.44 $0.76 $0.86
Diluted $0.33 $0.44 $0.76 $0.86
JER INVESTORS TRUST INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)
(in thousands, except ratios)
As of
June 30, 2008 Dec. 31, 2007
Stockholders' equity $262,799 $10,798
Add:
Accumulated other comprehensive (income) loss 32,893 317,982
Adjusted Stockholders' Equity $295,692 $328,780
Total liabilities $685,495 $1,365,383
Ratio of total liabilities to Adjusted
Stockholders' Equity 2.3x 4.2x
JER INVESTORS TRUST INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)
(In thousands, except share and per share data)
Proforma
June 30, Proforma June 30,
2008 Adjustments 2008
ASSETS
Cash and cash equivalents $43,364 $43,364
Restricted cash 1,153 1,153
CMBS financed by CDOs, at fair
value 390,491 390,491
CMBS not financed by CDOs, at fair
value 100,176 100,176
Real estate loans, held for
investment, at fair value 253,659 253,659
Real estate loans, held for sale,
at lower of cost or fair value 141,913 141,913
Investments in unconsolidated
joint ventures 3,261 3,261
Accrued interest receivable 9,437 9,437
Due from affiliate 189 189
Deferred financing fees, net 2,076 (2,076) -
Other assets 2,575 2,575
Total Assets $948,294 $(2,076) $946,218
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
CDO notes payable, at fair value $431,903 $431,903
Repurchase agreements 151,301 151,301
Junior subordinated debentures 61,860 (33,223) 28,637
Interest rate swap agreements, at
fair value 27,237 27,237
Accounts payable and accrued
expenses 907 907
Dividends payable 7,752 7,752
Due to affiliate 1,477 1,477
Other liabilities 3,058 3,058
Total Liabilities 685,495 (33,223) 652,272
Stockholders' Equity:
Common stock, 25,901,035 shares
issued and outstanding 259 259
Additional paid-in capital 392,481 392,481
Cumulative dividends paid/declared (147,680) (147,680)
Cumulative earnings 50,632 31,147 81,779
Accumulated other comprehensive
income (loss) (32,893) (32,893)
Total Stockholders' Equity 262,799 31,147 293,946
Total Liabilities and
Stockholders' Equity $948,294 $(2,076) $946,218
Ratio of total liabilities to
stockholders equity 2.6x 2.2x
Book value per share $10.15 $11.351
SOURCE JER Investors Trust Inc.
J. Michael McGillis, Chief Financial Officer, of JER Investors Trust Inc.,
+1-703-714-8182
