Crystal River Capital, Inc. (NYSE: CRZ) -
Crystal River's management will host a dial-in teleconference to
review its third quarter 2008 financial results on November 3, 2008
at 4:30 p.m. (EST). The teleconference can be accessed by dialing
888-208-1427 or 913-312-0838 (International). A replay of the
recorded teleconference will be available through November 17,
2008. The replay can be accessed by dialing 888-203-1112 or
719-457-0820 (International) and entering passcode 5394173. A live
audio webcast of the call will be accessible on the Company's
website, www.crystalriverreit.com, via a link from the Investor
Relations section. A replay of the audio webcast will be archived
in the Investor Relations section of the Company's website.
Crystal River Capital, Inc. ("Crystal River" or the "Company")
(NYSE: CRZ) today announced its results for the quarter ended
September 30, 2008.
Separately, the Company announced that its Board of Directors
has declared a fourth quarter dividend of $0.10 per share.
For additional information, please refer to Crystal River's
letter to stockholders, which has been posted to the Investor
Relations section of the Company's website at
www.crystalriverreit.com.
I. THIRD QUARTER UPDATE
- Liquidity and leverage update: Crystal River continued its
focus on reducing leverage by paying down its repurchase agreement
debt to $8.3 million at September 30, 2008 from $22.1 million at
June 30, 2008. The amount drawn under the Company's revolving
credit facility was $41.4 million at September 30, 2008.
- Operating results: The net loss for the quarter ended
September 30, 2008 totaled $56.7 million, or $2.28 per share.
Operating Earnings (defined below) for the quarter ended September
30, 2008 totaled $13.9 million, or $0.56 per share, compared to
$20.9 million, or $0.83 per share, for the third quarter of 2007
and $16.6 million, or $0.67 per share, for the second quarter of
2008. The decrease over the second quarter of 2008 was primarily
attributable to lower interest income resulting from the sale of
Crystal River's Agency MBS portfolio and the sale and repayment of
a portion of the Company's real estate loan portfolio, partially
offset by lower interest expense.
- Dividend: Cash flow from operations for the third quarter
represented approximately three times coverage of the quarterly
dividend of approximately $2.5 million, with the remainder being
used to pay down liabilities.
- Book value: Crystal River's GAAP book value per share
decreased to $0.07 at September 30, 2008 from $2.46 at June 30,
2008.
- Portfolio activity and subsequent events: As previously
announced, Crystal River sold $27.1 million of whole loans that the
Company had previously designated for sale. Furthermore, Crystal
River's $9.6 million investment in a construction loan matured
during the third quarter of 2008. The investment, which paid off at
par, had a floating-rate coupon of LIBOR plus 3.1%. The proceeds
from the sales and the loan repayment were used to repay debt.
Discussion of Results
Net Investment Income (defined below) for the quarter ended
September 30, 2008 totaled $18.3 million, or $0.73 per share,
compared to Net Investment Income of $23.5 million, or $0.94 per
share, for the third quarter of 2007 and Net Investment Income of
$21.6 million, or $0.87 per share, for the second quarter of 2008.
The decrease over the second quarter of 2008 was primarily
attributable to lower interest income resulting from the sale of
Crystal River's Agency MBS portfolio and the sale and repayment of
a portion of the Company's real estate loan portfolio, partially
offset by lower interest expense.
The net loss for the quarter ended September 30, 2008 totaled
$56.7 million, or $2.28 per share, compared to a net loss of $93.9
million, or $3.76 per share, for the third quarter of 2007 and a
net loss of $75.5 million, or $3.04 per share, for the second
quarter of 2008. The primary contributors to the third quarter 2008
net loss were impairment charges and mark-to-market adjustments
totaling $59.2 million. Finally, the Company also recorded a $4.4
million loan loss allowance on its real estate loan holdings during
the quarter ended September 30, 2008.
The following table details the Company's impairment charges and
mark-to-market adjustments on its available for sale securities by
type and by sector and its CDO liabilities for the quarter ended
September 30, 2008:
Impairment charges and mark-to-market adjustments of assets and liabilities:
CDO Assets and Liabilities:
----------------------------------------------------------------------------
Subprime
($ in millions) CMBS(4) Prime RMBS(5) RMBS Liabilities Total
----------------------------------------------------------------------------
Cash flows(1) $ (57.4) $ (2.8) $ (3.6) $ - $ (63.8)
Yield-spread
widening(2) (4.4) (5.3) (0.4) - (10.1)
MTM(3) assets (4.0) - 0.1 - (3.9)
MTM liabilities - - - 45.5 45.5
----------------------------------------------------------------------------
Total $ (65.8) $ (8.1) $ (3.9) $ 45.5 $ (32.3)
----------------------------------------------------------------------------
(1) Accounting rule EITF 99-20 refers to changes in cash flow assumptions
on underlying assets.
(2) Accounting rule EITF 99-20 refers to excessive yield-spread widening
on underlying assets.
(3) Mark-to-market adjustments under SFAS 159 ("MTM").
(4) Commercial mortgage-backed securities ("CMBS").
(5) Residential mortgage-backed securities ("RMBS").
Non-CDO Assets:
------------------------------------------------------------------
Subprime
($ in millions) CMBS Prime RMBS RMBS Total
------------------------------------------------------------------
Cash flows $ (4.9) $ (4.4) $ (0.3) $ (9.6)
Yield-spread
widening (13.0) (3.3) (1.0) (17.3)
------------------------------------------------------------------
Total $ (17.9) $ (7.7) $ (1.3) $ (26.9)
------------------------------------------------------------------
GAAP Book Value
GAAP common equity book value per share was $0.07 at September
30, 2008. Following Crystal River's adoption of Statement of
Financial Accounting Standards ("SFAS") No. 159 on January 1, 2008,
the Company carries both the assets and liabilities of its two
securitized CDO entities at their fair values. As a result,
unrealized gains and losses on the available for sale securities
held within the Company's CDOs, the corresponding CDO liabilities,
and swaps previously designated as a hedge are recorded directly
into earnings in the Company's consolidated statements of
operations.
Dividend Information
Crystal River announced that its Board of Directors declared a
cash distribution for the quarter ended December 31, 2008 of $0.10
per share of common stock. The cash distribution will be paid on
January 30, 2009 to stockholders of record as of the close of
business on December 31, 2008.
In setting the dividend, the Board of Directors considered a
number of factors, including, but not limited to, operating
results, taxable income and REIT qualification requirements,
available tax losses, economic conditions, capital requirements,
liquidity, retention of capital and other operating trends. Given
the variability of these considerations, the Board of Directors
will continually reevaluate these factors when determining future
dividends.
About Crystal River
Crystal River Capital, Inc. (NYSE: CRZ) is a specialty finance
REIT. The Company invests in commercial real estate, real estate
loans, and real estate-related securities, such as commercial and
residential mortgage-backed securities. For more information, visit
www.crystalriverreit.com.
II. CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
----------------------------------------------------------------------------
September 30, June 30, December 31,
($ in thousands, except 2008 2008 2007
share and per share data) (unaudited) (unaudited)
----------------------------------------------------------------------------
ASSETS
Available for sale securities,
at fair value $ 191,367 $ 295,836 $ 1,815,246
Real estate loans 11,069 24,370 170,780
Real estate loans
held for sale 20,375 47,504 -
Commercial real estate, net 229,885 231,511 234,763
Other investments 1,550 1,550 37,761
Intangible assets 76,949 78,357 81,174
Cash and cash equivalents 7,035 7,754 27,521
Restricted cash 26,924 27,646 68,706
Receivables 21,621 22,119 31,637
Prepaid expenses and
other assets 1,097 1,763 540
Deferred financing costs, net 1,553 1,707 10,750
Derivative assets 5 28 560
-------------- ------------- --------------
Total Assets $ 589,430 $ 740,145 $ 2,479,438
-------------- ------------- --------------
-------------- ------------- --------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Accounts payable, accrued
expenses and other $ 2,666 $ 2,610 $ 1,817
Due to manager 57 360 678
Due to affiliate - - -
Dividends payable 2,498 7,454 16,828
Intangible liabilities 73,635 75,005 77,745
Repurchase agreements 8,335 22,117 1,276,121
Collateralized debt
obligations(1) 153,362 204,769 486,608
Junior subordinated notes 51,550 51,550 51,550
Mortgages payable 219,380 219,380 219,380
Senior mortgage-backed
notes, related party - 24,087 99,815
Secured revolving credit
facility, related party 41,420 38,420 67,319
Interest payable 2,457 2,454 9,256
Derivative liabilities 32,320 31,037 61,729
-------------- ------------- --------------
Total Liabilities 587,680 679,243 2,368,846
-------------- ------------- --------------
Commitments and contingencies
Stockholders' Equity
Preferred stock, par value $0.001
per share, 100,000,000 shares
authorized, no shares
issued and outstanding - - -
Common stock, $0.001 par
value, 500,000,000
shares authorized,
24,875,282; 24,775,283; and
24,704,945 shares issued and
outstanding, respectively 25 25 25
Additional paid-in capital 564,441 563,900 562,930
Accumulated other
comprehensive loss (10,171) (9,724) (15,481)
Accumulated deficit (552,545) (493,299) (436,882)
-------------- ------------- --------------
Total Stockholders' Equity 1,750 60,902 110,592
-------------- ------------- --------------
Total Liabilities and
Stockholders' Equity $ 589,430 $ 740,145 $ 2,479,438
-------------- ------------- --------------
-------------- ------------- --------------
----------------------------------------------------------------------------
(1) Fair value at September 30, 2008, and June 30, 2008 and cost at
December 31, 2007.
Condensed Consolidated Statements of Operations (Unaudited)
----------------------------------------------------------------------------
($ in thousands,
except share Three months ended Nine months ended
and per share Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
data) 2008 2008 2007 2008 2007
----------------------------------------------------------------------------
Revenues
Interest income -
available
for sale
securities $ 21,069 $ 24,355 $ 52,945 $ 85,361 $ 153,972
Interest
income real
estate loans 936 2,207 4,512 5,755 13,241
Other interest
and dividend
income 185 218 2,220 1,072 7,196
---------- ----------- ---------- ---------- -----------
Total interest
and dividend
income 22,190 26,780 59,677 92,188 174,409
Rental income, net 5,399 5,550 4,998 16,611 10,656
---------- ----------- ---------- ---------- -----------
Total revenues 27,589 32,330 64,675 108,799 185,065
---------- ----------- ---------- ---------- -----------
Expenses
Interest expense 9,302 10,732 41,920 44,302 125,218
Management fees,
related party 243 418 1,416 1,328 5,597
Professional fees 480 585 857 1,733 2,843
Depreciation and
amortization 3,022 3,022 2,816 9,066 5,925
Incentive fees - - - - 124
Insurance expense 480 480 265 1,290 672
Directors' fees 86 127 173 366 513
Public company
expense 105 302 225 518 457
Commercial real
estate expenses 348 420 333 1,185 677
Provision for
loss on real
estate loans 4,401 7,386 - 20,850 -
Other expenses 237 521 105 1,133 401
---------- ----------- ---------- ---------- -----------
Total expenses 18,704 23,993 48,110 81,771 142,427
---------- ----------- ---------- ---------- -----------
Other revenues
(expenses)
Realized net gain
(loss) on sale of
securities
available for
sale, real
estate loans,
and other
investments 97 (1,263) (2,502) (4,951) (1,322)
Realized and
unrealized
gain (loss)
on derivatives (6,152) 5,351 (27,644) (44,183) (39,851)
Impairments on
available for
sale securities (26,876) (18,310) (81,293) (112,340) (103,986)
Net change in
assets and
liabilities
valued under
fair value
option (32,305) (69,355) - (134,508) -
Foreign currency
exchange gain - - (459) - 4,292
Income (loss) from
equity investments - - 741 (40) 2,179
Other (397) (295) 658 (975) 586
---------- ----------- ---------- ---------- -----------
Total other
expenses (65,633) (83,872) (110,499) (296,997) (138,102)
---------- ----------- ---------- ---------- -----------
Net loss $ (56,748) $ (75,535) $ (93,934) $ (269,969) $ (95,464)
---------- ----------- ---------- ---------- -----------
---------- ----------- ---------- ---------- -----------
Net loss per
share - basic
and diluted $ (2.28) $ (3.04) $ (3.76) $ (10.88) $ (3.82)
---------- ----------- ---------- ---------- -----------
---------- ----------- ---------- ---------- -----------
Weighted average
shares of common
stock outstanding:
Basic and
diluted 24,882,612 24,807,529 24,995,885 24,813,649 25,023,058
---------- ----------- ---------- ---------- -----------
---------- ----------- ---------- ---------- -----------
Dividends
declared per
share of
common stock $ 0.10 $ 0.30 $ 0.68 $ 1.08 $ 2.04
------- ----------- ---------- ---------- -----------
------- ----------- ---------- ---------- -----------
Net Investment Income (Unaudited)
----------------------------------------------------------------------------
($ in thousands,
except share Three months ended Nine months ended
and per share Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
data) 2008 2008 2007 2008 2007
----------------------------------------------------------------------------
Total interest
and dividend
income $ 22,190 $ 26,780 $ 59,677 $ 92,188 $ 174,409
Rental
income, net 5,399 5,550 4,998 16,611 10,656
Income (loss)
from equity
investments - - 741 (40) 2,179
Interest expense (9,302) (10,732) (41,920) (44,302) (125,218)
------------ ----------- ----------- ----------- -----------
Net Investment
Income $ 18,287 $ 21,598 $ 23,496 $ 64,457 $ 62,026
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Net Investment
Income
per share $ 0.73 $ 0.87 $ 0.94 $ 2.60 $ 2.48
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Weighted average
shares of
common stock
outstanding:
Basic and
diluted 24,882,612 24,807,529 24,995,885 24,813,649 25,023,058
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
----------------------------------------------------------------------------
Reconciliation of Net Loss to Operating Earnings (Unaudited)
----------------------------------------------------------------------------
($ in thousands,
except share Three months ended Nine months ended
and per share Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
data) 2008 2008 2007 2008 2007
----------------------------------------------------------------------------
Net loss $ (56,748) $ (75,535) $ (93,934) $ (269,969) $ (95,464)
Realized net
(gain) loss
on sale of
securities
available for
sale, real
estate loans,
and other
investments (97) 1,263 2,502 4,951 1,322
Realized and
unrealized
(gain) loss
on derivatives 6,152 (5,351) 27,644 44,183 39,851
Impairments on
available
for sale
securities 26,876 18,310 81,293 112,340 103,986
Net change in
assets and
liabilities
valued under
fair value option 32,305 69,355 - 134,508 -
Provision for
loss on real
estate loans 4,401 7,386 - 20,850 -
Foreign currency
exchange gain - - 459 - (4,292)
Depreciation and
amortization 3,022 3,022 2,816 9,066 5,925
Cash settlements
on economic
hedges that did
not qualify for
hedge accounting
treatment (2,026) (1,818) 79 (5,888) 1,258
------------ ----------- ----------- ----------- -----------
Operating
Earnings $ 13,885 $ 16,632 $ 20,859 $ 50,041 $ 52,586
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Operating
Earnings
per share $ 0.56 $ 0.67 $ 0.83 $ 2.02 $ 2.10
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
Weighted average
number of shares
outstanding:
Basic and
diluted 24,882,612 24,807,529 24,995,885 24,813,649 25,023,058
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
----------------------------------------------------------------------------
Comprehensive Loss (Unaudited)
----------------------------------------------------------------------------
Three months ended Nine months ended
Sept. 30, June 30, Sept. 30, Sept. 30, Sept. 30,
($ in thousands) 2008 2008 2007 2008 2007
----------------------------------------------------------------------------
Net loss $ (56,748) $ (75,535) $ (93,934) $ (269,969) $ (95,464)
Changes in OCI -
securities
available
for sale(1) (1,033) 1,784 (39,683) (7,232) (90,157)
Realization of
deferred
unrealized
losses on cash
flow hedges - 8,327 (25,374) 13,181 (11,132)
Amortization of
net gain (loss)
on cash flow hedges
into interest
expense 586 300 (894) 1,031 (1,716)
----------------------------------------------------------------------------
Comprehensive
loss $ (57,195) $ (65,124) $ (159,885) $ (262,989) $ (198,469)
----------------------------------------------------------------------------
(1) Represents reclassification from OCI ("Other Comprehensive Income") to
impairments on available for sale securities.
Reconciliation of Net Loss to Estimated REIT Taxable Income (Unaudited)
----------------------------------------------------------------------------
Three months Nine months
($ in thousands, ended ended
except share and per share data) Sept. 30, 2008 Sept. 30, 2008
----------------------------------------------------------------------------
GAAP net loss $ (56,748) $ (269,969)
------------- ---------------
Adjustments to GAAP net loss:
Net loss of taxable REIT subsidiary 1 496
Share-based compensation 14 (80)
Net tax adjustments related to
interest income (1,716) (7,371)
Tax derivative loss in excess of book loss 718 (15,360)
Capital-loss limitation 314 36,163
Impairment losses not deductible
for tax purposes 26,876 112,340
Net change in assets and liabilities
valued under fair value option 32,305 134,508
Loan loss allowance not deductible
for tax purposes 4,401 20,850
GAAP-to-tax difference on rent escalation
and lease amortization (387) (1,161)
Other (21) (67)
------------- ---------------
Net adjustments from GAAP net loss to
estimated REIT taxable income 62,505 280,318
------------- ---------------
Estimated REIT Taxable Income 5,757 10,349
------------- ---------------
Estimated REIT Taxable Income per share(1) $ 0.23 $ 0.42
------------- ---------------
------------- ---------------
Weighted average number of shares
outstanding:
Basic and diluted 24,882,612 24,813,649
------------- ---------------
------------- ---------------
----------------------------------------------------------------------------
(1) As a REIT, we are required to distribute the greater of 90% of (a) our
REIT taxable income and (b) the excess inclusion income generated by
our CDOs.
III. SUPPLEMENTAL INFORMATION
Total Investment Portfolio at September 30, 2008
The following table summarizes the Company's investment portfolio at
September 30, 2008, June 30, 2008, and September 30, 2007:
----------------------------------------------------------------------------
September 30, 2008 June 30, 2008 September 30, 2007
Carrying Carrying Carrying
($ in millions) Value % Total Value % Total Value % Total
----------------------------------------------------------------------------
Available for sale
securities
Agency MBS $ - - $ - - $ 1,423.6 54.3%
CMBS 158.7 34.9% 241.7 40.2% 468.0 17.8%
Prime RMBS 22.7 5.0% 37.8 6.3% 144.6 5.5%
Subprime RMBS 10.0 2.2% 16.3 2.7% 79.5 3.0%
ABS(1) - - - - 20.2 0.8%
Preferred stock 0.0 0.0% 0.0 0.0% 1.7 0.1%
Direct real estate
loans
Construction loans 2.7 0.6% 16.0 2.7% 25.3 1.0%
Mezzanine loans(2) 26.2 5.8% 26.3 4.4% 31.8 1.2%
Whole loans 2.5 0.6% 29.6 4.9% 155.8 5.9%
Real estate finance
fund - - - - 34.6 1.3%
Commercial real
estate-owned(3) 229.9 50.6% 231.5 38.5% 236.9 9.0%
Other 1.6 0.3% 1.6 0.3% 1.6 0.1%
----------------------------------------------------------------------------
Total $ 454.3 100.0% $ 600.8 100.0% $ 2,623.6 100.0%
----------------------------------------------------------------------------
(1) Asset-backed securities ("ABS").
(2) Includes two loans in the amount of $20.4 million held for sale.
(3) Excludes intangible assets.
Third Quarter 2008 Securities Roll-Forward Table
The table below details the impact of purchases and sales, principal
paydowns, premium and discount amortization, and adjustments to market
value on our available for sale securities during the third quarter of 2008:
----------------------------------------------------------------------------
Total
($ in millions) CMBS Prime RMBS Subprime RMBS Portfolio
----------------------------------------------------------------------------
Carrying Value
June 30, 2008 $ 241.7 $ 37.8 $ 16.3 $ 295.8
Sales - - - -
Principal paydowns 0.2 (0.2) (1.3) (1.3)
Principal loss - (0.3) (0.1) (0.4)
Amortization of discount 1.4 1.3 0.3 3.0
Market value adjustments:
CDO assets (65.8) (8.1) (3.9) (77.8)
Non-CDO assets (17.9) (7.7) (1.3) (26.9)
OCI (0.9) (0.1) - (1.0)
----------------------------------------------------------------------------
Carrying Value
September 30, 2008 $ 158.7 $ 22.7 $ 10.0 $ 191.4
----------------------------------------------------------------------------
COMMERCIAL REAL ESTATE ("CRE") INVESTMENT PORTFOLIO
At September 30, 2008, Crystal River's CRE investment portfolio totaled
$233.2 million. The CRE portfolio consists of three high-quality office
buildings 100% leased on a triple-net basis to JPMorgan Chase. The
buildings are financed with long-term fixed-rate mortgage loans.
CRE investment portfolio at September 30, 2008:
----------------------------------------------------------------------------
Year of Book Mortgage Net Book
Lease Total Area Value(1) Debt Equity
Location Tenant Expiry (000s Sq. Ft.) (Millions) (Millions) (Millions)
----------------------------------------------------------------------------
Houston, JPMorgan
Texas Chase 2021 428.6 $ 60.8 $ 53.4 $ 7.4
Arlington, JPMorgan
Texas Chase 2027 171.5 21.5 20.9 0.6
Phoenix, JPMorgan
Arizona Chase 2021 724.0 150.9 145.1 5.8
----------------------------------------------------------------------------
Total CRE 1,324.1 $ 233.2 $ 219.4 $ 13.8
----------------------------------------------------------------------------
(1) Book value includes intangible assets and intangible liabilities, but
excludes rent-enhancement receivables.
REAL ESTATE LOAN INVESTMENT PORTFOLIO
At September 30, 2008, Crystal River's real estate loan
portfolio, which consists of mezzanine loans, a construction loan
and a whole loan, totaled $31.4 million and had a weighted average
interest rate of 9.1%. Crystal River recorded a $4.4 million loan
loss allowance on its real estate loan holdings during the quarter
ended September 30, 2008.
As previously announced, Crystal River sold whole loans for
$27.1 million in the third quarter of 2008 that the Company had
previously designated for sale. Furthermore, Crystal River's $9.6
million investment in a construction loan matured during the third
quarter of 2008. The investment, which paid off at par, had a
floating-rate coupon of LIBOR plus 3.1%. The proceeds from the
sales and the loan repayment were used to repay debt.
Real estate loan portfolio at September 30, 2008:
Mezzanine Loans Construction Loans
($ in millions) Fixed Floating Fixed Floating
----------------------------------------------------------------------------
Outstanding
Face Amount $ 26.1 $ 5.9 $ 14.6 $ -
Carrying Value 20.4 5.9 2.7 -
Amortized Cost 26.0 5.9 14.6 -
Fair Value 20.4 5.7 2.7 -
Number of Loans 2 1 1 -
WA LTV(2) 82% 54% 164% -
Number of loans that
are delinquent - - 1 -
WA Fixed Rate 8.83% n/a 16.00%(4) -
WA Floating Rate:
Spread over LIBOR(3) n/a 11.47% n/a -
----------------------------------------------------------------------------
Whole Loans Total / WA(1)
($ in millions) Fixed Floating Fixed Floating
----------------------------------------------------------------------------
Outstanding
Face Amount $ - $ 2.5 $ 40.7 $ 8.4
Carrying Value - 2.5 23.1 8.4
Amortized Cost - 2.5 40.6 8.4
Fair Value - 2.4 23.1 8.1
Number of Loans - 1 3 2
WA LTV(2) - 85% 111% 63%
Number of loans that
are delinquent - - 1 -
WA Fixed Rate - n/a 8.83%(5) n/a
WA Floating Rate:
Spread over LIBOR(3) - 5.73% n/a 9.74%
----------------------------------------------------------------------------
(1) Weighted Average ("WA").
(2) Loan-to-Value ("LTV").
(3) London Interbank Offered Rate ("LIBOR").
(4) Construction loan has been placed on non-accrual status.
(5) Excludes 16.00% WA fixed rate for construction loan.
CMBS INVESTMENT PORTFOLIO
CMBS portfolio by credit rating at September 30, 2008:
----------------------------------------------------------------------------
Weighted Average
------------------------
($ in millions) Amortized Cost Carrying Value Yield(1) Term (Yrs)(2)
----------------------------------------------------------------------------
BBB $ 56.4 $ 56.4 25.5% 8.3
BB 44.4 44.4 33.6% 9.1
B 26.0 26.0 35.4% 9.2
Below B 30.9 31.9 31.9% 5.3
----------------------------------------------------------------------------
Total CMBS $ 157.7 $ 158.7 30.7% 8.1
----------------------------------------------------------------------------
(1) Yield is the calculated internal rate of return based on amortized cost
and expected loss-adjusted cash flows.
(2) Refers to the loss-adjusted weighted average remaining life.
Credit characteristics of CMBS portfolio by vintage at September 30, 2008:
CDO Assets:
----------------------------------------------------------------------------
Outst- Cumu-
Original anding Principal lative
WA Face Face Carrying Subord- Delinquency Loss to
Vintage Rating(1) Amount Amount Value ination 60+/FC/REO(2) Date(3)
----------------------------------------------------------------------------
Pre-2005 B $ 2.8 $ 2.8 $ 0.9 3.60% 1.54% 0.00%
2005 BB- 244.8 244.8 57.0 2.60% 1.05% 0.00%
2006 BB- 248.3 248.3 57.1 2.29% 0.27% 0.00%
2007 BB+ 27.9 27.9 6.2 2.70% 0.16% 0.00%
----------------------------------------------------------------------------
Total
CMBS BB- $ 523.8 $523.8 $ 121.2 2.46% 0.63% 0.00%
----------------------------------------------------------------------------
(1) Rounded to nearest rating.
(2) "60+" means that a payment on an underlying collateral loan is more
than 60 days past due; "FC" means that the collateral underlying the
loan is under foreclosure; "REO" means that the collateral underlying
the loan has been foreclosed and is owned by the issuing trust.
(3) Actual losses based on securities we own; based on original face amount.
Non-CDO Assets:
----------------------------------------------------------------------------
Outst- Cumu-
Original anding Principal lative
WA Face Face Carrying Subord- Delinquency Loss to
Vintage Rating Amount Amount Value ination 60+/FC/REO Date
----------------------------------------------------------------------------
2005 CCC+ $ 50.8 $ 43.3 $ 3.4 0.21% 1.12% 14.82%
2006 B- 119.6 119.6 16.8 0.60% 0.44% 0.00%
2007 B 132.8 132.8 17.3 1.17% 0.37% 0.00%
----------------------------------------------------------------------------
Total
CMBS B- $ 303.2 $ 295.7 $ 37.5 0.78% 0.51% 2.48%
----------------------------------------------------------------------------
PRIME RMBS INVESTMENT PORTFOLIO
Prime RMBS portfolio by credit rating at September 30, 2008:
----------------------------------------------------------------------------
Weighted Average
----------------------
($ in millions) Amortized Cost Carrying Value Yield Term (Yrs)
----------------------------------------------------------------------------
BBB $ 0.4 $ 0.4 45.6% 5.7
BB 7.1 7.1 66.0% 6.5
B 6.9 6.9 153.6% 4.9
Below B 8.3 8.3 128.1% 6.0
----------------------------------------------------------------------------
Total Prime RMBS $ 22.7 $ 22.7 115.3% 5.8
----------------------------------------------------------------------------
Credit Characteristics of Prime RMBS portfolio by vintage at September 30,
2008:
CDO Assets:
----------------------------------------------------------------------------
Outst- Cumu-
Original anding Principal lative
WA Face Face Carrying Subord- Delinquency Loss to
Vintage Rating Amount Amount Value ination 60+/FC/REO Date
----------------------------------------------------------------------------
2003 B $ 1.9 $ 1.8 $ 0.7 0.23% 0.46% 0.00%
2004 CCC+ 18.8 12.9 1.5 1.81% 8.38% 0.00%
2005 CCC+ 92.9 78.3 10.1 1.33% 9.33% 0.37%
----------------------------------------------------------------------------
Total
Prime
RMBS CCC+ $ 113.6 $ 93.0 $ 12.3 1.38% 9.02% 0.32%
----------------------------------------------------------------------------
Non-CDO Assets:
----------------------------------------------------------------------------
Outst- Cumu-
Original anding Principal lative
WA Face Face Carrying Subord- Delinquency Loss to
Vintage Rating Amount Amount Value ination 60+/FC/REO Date
----------------------------------------------------------------------------
2003 NR $ 1.9 $ 1.8 $ 0.1 0.00% 0.46% 0.70%
2004 NR 4.2 2.2 0.1 0.00% 1.30% 44.31%
2005 CC 95.5 76.9 8.0 0.54% 5.59% 6.12%
2006 CC 5.0 4.9 0.7 0.62% 1.89% 0.00%
2007 C 19.1 18.6 1.5 0.16% 1.40% 2.26%
----------------------------------------------------------------------------
Total
Prime
RMBS CC $ 125.7 $ 104.4 $ 10.4 0.46% 4.49% 5.65%
----------------------------------------------------------------------------
SUBPRIME RMBS INVESTMENT PORTFOLIO
Subprime RMBS Investment Portfolio at September 30, 2008:
----------------------------------------------------------------------------
Weighted Average
-------------------------
($ in millions) Amortized Cost Carrying Value Yield Term (Yrs)
----------------------------------------------------------------------------
BBB $ 3.0 $ 3.0 50.8% 4.8
BB 0.4 0.4 130.1% 4.6
B 0.8 0.8 52.7% 15.6
Below B 5.7 5.8 154.4% 6.4
----------------------------------------------------------------------------
Total Subprime RMBS $ 9.9 $ 10.0 114.1% 6.6
----------------------------------------------------------------------------
Credit Characteristics of Subprime RMBS portfolio by vintage at September
30, 2008:
CDO Assets:
----------------------------------------------------------------------------
Outst- Cumu-
Original anding Principal lative
WA Face Face Carrying Subord- Delinquency Loss to
Vintage Rating Amount Amount Value ination 60+/FC/REO Date
----------------------------------------------------------------------------
2005 CCC- $ 80.3 $ 70.3 $ 5.8 5.33% 30.29% 0.00%
----------------------------------------------------------------------------
Total
Subprime
RMBS CCC- $ 80.3 $ 70.3 $ 5.8 5.33% 30.29% 0.00%
----------------------------------------------------------------------------
Non-CDO Assets:
----------------------------------------------------------------------------
Outst- Cumu-
Original anding Principal lative
WA Face Face Carrying Subord- Delinquency Loss to
Vintage Rating Amount Amount Value ination 60+/FC/REO Date
----------------------------------------------------------------------------
2005 CC $ 26.2 $ 25.1 $ 1.6 3.33% 35.42% 0.00%
2006 CCC+ 25.2 24.5 2.0 5.23% 31.21% 0.00%
2007 CC 9.1 9.1 0.6 2.01% 24.92% 0.00%
----------------------------------------------------------------------------
Total
Subprime
RMBS CCC- $ 60.5 $ 58.7 $ 4.2 3.91% 32.04% 0.00%
----------------------------------------------------------------------------
Financing Details
The following table shows the Company's available for sale
securities, real estate loans, other investments and other assets
as of September 30, 2008 and the different lines used to finance
such assets, categorized by (i) CDO debt, (ii) other term debt,
such as mortgage loans on commercial real estate and trust
preferred securities, (iii) the Company's secured revolving credit
facility and (iv) reverse repurchase agreements:
----------------------------------------------------------------------------
Assets Debt
----------------------------------------------------------------------------
Carrying CDO Other Term Funding Repurchase
($ in millions) Value Debt(1) Debt Facility Agreements
----------------------------------------------------------------------------
CMBS $ 158.7 $ 148.2 $ - $ - $ 8.3
Prime RMBS 22.7 3.5 - - -
Subprime RMBS 10.0 1.7 - - -
Real estate loans 31.4 - - 26.4 -
Commercial real estate 229.9 - 219.4 - -
Trust Preferred
Securities - - 51.6 - -
Other 136.7 - - 15.0 -
----------------------------------------------------------------------------
Total $ 589.4 $ 153.4 $ 271.0 $ 41.4 $ 8.3
----------------------------------------------------------------------------
(1) CDO debt has been allocated based upon the asset mix within the
Company's CDOs.
CDO and Non-CDO Assets
The table below summarizes the breakdown of our available for
sale securities between assets held by non-recourse securitization
subsidiaries financed by CDO debt and assets held directly at
September 30, 2008:
----------------------------------------------------------------------------
Consolidated
($ in millions) Carrying Value CDO Assets Non-CDO Assets
----------------------------------------------------------------------------
CMBS $ 158.7 $ 121.2 $ 37.5
Prime RMBS 22.7 12.3 10.4
Subprime RMBS 10.0 5.8 4.2
----------------------------------------------------------------------------
Total $ 191.4 $ 139.3 $ 52.1
----------------------------------------------------------------------------
Our securitized assets are held by two non-recourse
securitization subsidiaries financed by CDO debt. The table below
details the assets and liabilities of these securitizations at
September 30, 2008:
----------------------------------------------------------------------------
Consolidated
Outstanding Consolidated
($ in millions) Face Amount Carrying Value CDO I CDO II
----------------------------------------------------------------------------
CMBS $ 523.8 $ 121.2 $ 23.4 $ 97.8
Prime RMBS 93.0 12.3 12.3 -
Subprime RMBS 70.3 5.8 5.8 -
Receivables, cash and
other assets - 7.5 4.6 2.9
Collateralized debt
obligations (474.4) (153.4) (39.5) (113.9)
Derivative and other
liabilities, net - (14.2) (2.5) (11.7)
----------------------------------------------------------------------------
Net Equity $ 212.7 $ (20.8) $ 4.1 $ (24.9)
----------------------------------------------------------------------------
OTHER INFORMATION
The Company expects to file its Form 10-Q for the quarter ended
September 30, 2008 with the Securities and Exchange Commission by
5:30 p.m. EST on Monday, November 10, 2008. Please read the Form
10-Q carefully as it will contain Crystal River's consolidated
financial statements and notes thereto and Management's Discussion
and Analysis of Financial Condition and Results of Operations. The
Form 10-Q also will be made available under the Investor Relations
section of Crystal River's website at www.crystalriverreit.com.
Definition of Operating Earnings
This press release and accompanying financial information make
reference to Operating Earnings on a total and per share basis. The
Company considers its Operating Earnings to be income after
operating expenses but before loan loss provisions, realized and
unrealized gains and losses, hedge ineffectiveness, foreign
currency exchange impact, loss on impairment of assets, commercial
real estate depreciation and amortization and net change in assets
and liabilities valued under fair value option. The Company
believes Operating Earnings provides useful information to
investors because it views Operating Earnings as an effective
indicator of the Company's profitability and financial performance
over time. Operating Earnings can and will fluctuate based on
changes in asset levels, funding rates, available reinvestment
rates, expected losses on credit-sensitive positions and the return
on the Company's investments as the underlying assets are carried
at estimated fair value. The Company has provided the components of
Operating Earnings and a full reconciliation from net loss to
Operating Earnings with the financial statements accompanying this
press release. Operating Earnings is a non-GAAP measure that does
not have any standard meaning prescribed by GAAP and therefore may
not be comparable to similar measures presented by other
companies.
Definition of Net Investment Income
This press release and accompanying financial information make
reference to Net Investment Income on a total and per share basis.
The Company considers its Net Investment Income to be total
revenues including income from equity investments less interest
expense. The Company believes Net Investment Income provides useful
information to investors because it represents the largest
component of the Company's Operating Earnings, which management
believes is an effective indicator of the Company's profitability
and financial performance over time. The Company provides the
components of Net Investment Income with the financial statements
accompanying this press release. Net Investment Income is a
non-GAAP measure that does not have any standard meaning prescribed
by GAAP and therefore may not be comparable to similar measures
presented by other companies.
Definition of Estimated REIT Taxable Income
Estimated REIT Taxable Income is a non-GAAP financial measure
and does not purport to be an alternative to net loss determined in
accordance with GAAP as a measure of operating performance or to
cash flows from operating activities as a measure of liquidity.
Estimated REIT Taxable Income excludes the net loss of Crystal
River's domestic taxable REIT subsidiary. This non-GAAP financial
measure is important to Crystal River and its stockholders because,
as a real estate investment trust, we are required to pay
substantially all of our REIT taxable income in the form of
distributions to our stockholders and Estimated REIT Taxable Income
is an effective indicator of the total amount of REIT taxable
income available for distributions. Because not all REITs use
identical calculations, this presentation of Estimated REIT Taxable
Income may not be comparable to other similarly titled measures
prepared and reported by other companies. The Company provides a
full reconciliation from net loss to Estimated REIT Taxable Income
with the financial statements accompanying this press release.
Forward-Looking Information
This news release, and our public documents to which we refer,
contain or incorporate by reference certain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, including statements relating to our future
financial results and future dividend payments. Forward-looking
statements that are based on various assumptions (some of which are
beyond our control) may be identified by reference to a future
period or periods or by the use of forward-looking terminology,
such as "may," "will," "believe," "expect," "anticipate,"
"continue," "should," "intend," or similar terms or variations on
those terms or the negative of those terms. Although we believe
that the expectations contained in any forward-looking statement
are based on reasonable assumptions, we can give no assurance that
our expectations will be attained. Factors that could cause actual
results to differ materially from those set forth in the
forward-looking statements include, but are not limited to, changes
in interest rates, changes in yield curve, changes in prepayment
rates, the effectiveness of our hedging strategies, the
availability of mortgage-backed securities and other targeted
investments for purchase and origination, the availability and cost
of capital for financing future investments and, if available, the
terms of any such financing, changes in the market value of our
assets, future margin reductions and the availability of liquid
assets to post additional collateral, changes in business
conditions and the general economy, competition within the
specialty finance sector, changes in government regulations
affecting our business, our ability to maintain our qualification
as a real estate investment trust for federal income tax purposes,
and other risks disclosed from time to time in our filings with the
Securities and Exchange Commission. For more information on the
risks facing the Company, see the risk factors in Exhibit 99.1 to
our Form 10-Q for the period ended June 30, 2008, filed with the
SEC on August 11, 2008 and the updated version of those risk
factors that the Company will file as Exhibit 99.1 to our Form 10-Q
for the period ended September 30, 2008 that we expect to file with
the SEC by 5:30 p.m. EST on November 10, 2008. We do not undertake,
and specifically disclaim any obligation, to publicly release any
update or supplement to any forward-looking statements to reflect
the occurrence of anticipated or unanticipated events or
circumstances after the date of such statements.
Contacts: Crystal River Capital, Inc. Marion Hayes, Investor
Relations (212) 549-8413 Email: mhayes@crystalriverreit.com
Website: www.crystalriverreit.com (CRZ-F)
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