Group. Financial Overview

Size: px

Start display at page:

Download "Group. Financial Overview"

Edwin Frank Lewis
6 years ago
Views:

1 Centerline Capital Group Financial Overview

2 This presentation contains forward-looking statements. These forward-looking statements are not historical facts, but rather our beliefs and expectations and are based on our current expectations, estimates, projections, beliefs and assumptions about Centerline Holding Company and Centerline Capital Group (collectively, our Company ) and industry. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements. Some of these risks include, among other things: adverse changes in real estate markets, general economic and business conditions; adverse changes in credit markets and risks related to the form and structure of our financing arrangements; the risk that relationships with key investors and developers may not continue; changes in applicable laws and regulations; our tax treatment, the tax treatment of our subsidiaries and the tax treatment of our investments; competition with other companies; risk of loss from direct and indirect investments in commercial mortgage-backed securities ( CMBS ) and collateralized debt obligations ( CDOs ); risk of loss under mortgage gg banking loss sharing agreements; and risks associated with providing credit intermediation. These risks and uncertainties are described in the section captioned Risk Factors in Centerline Holding Company s Annual Report on Form 10-K for the year ended December 31, 2007, which Centerline Holding Company filed with the SEC on March 5, We caution you not to place undue reliance on these forward-looking statements, which reflects the Company s view only as of the respective dates specified in this presentation incorporated by reference. 2

3 Corporate Overview Centerline is an alternative asset manager focused on real estate funds and financing $14.2 Billion in AUM Four business groups: Affordable Housing, Commercial Real Estate, Credit Risk Products, Portfolio Management Key revenue drivers Investment Management Fees Investment Income Transactional Fee Income At June 30,

4 Revenue Composition Projected Full Year 2008 (2) Projected Full Year 2008 (2) Investment Income 25% - 30% Transactional 10% - 15% Commercial Real Estate Portfolio 35% Management 14% Investment Management 50% - 55% Affordable Housing 48% Credit Risk Products - 3% Investment Management Affordable Housing Fund Sponsorship, Asset Management, Servicing and Incentive Fees Investment Income Interest, Co-investments Transactional Loan Origination Fees, Credit Intermediation Fees Revenue is adjusted to exclude Consolidated Partnerships; Centerline s revenues appear in two places on the Company s income statement revenues and equity income (2) Based upon Company projections 4

5 Assets Under Management Direct Assets Under Management(In thousands) Affordable Housing LIHTC Funds (gross equity raised) $9,816,374 Commercial Real Estate CMBS Funds (committed equity) $1,475,397 High-Yield Debt Investment Entities $535,665 Joint Venture Equity Funds $221,641 CDO Asset Management (2) $1,429,062 Third Party Commercial Loan Portfolio $767,777 Subtotal - Direct Assets Under Management $14,245,916 Loan Servicing Portfolio Asset Management Primary Servicing Portfolio $24,980, Named Special Servicer $116,505,000 Subtotal Loan Servicing Portfolio $141,485,000 Total Assets Under Management and Servicing $155,730,916 As of June 30, 2008 (2) Excludes $270.9 million of securities owned by Centerline Real Estate Special Situations Mortgage Fund LLC ( CRESS ), which are included in the High-Yield Debt Investment Entities total above 5

Growth in Assets Under Management $14,000,000 Third Party Commercial Loan Portfolio $12,000,000 CDO Asset Management(2) $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 Joint Venture Equity

6 Growth in Assets Under Management $14,000,000 Third Party Commercial Loan Portfolio $12,000,000 CDO Asset Management(2) $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 Joint Venture Equity Funds High-Yield Debt Investment Entities CMBS Funds LIHTC Funds $ /30/2008 CAGR = 19% Includes predecessor entities (2) Excludes $270.9 million of securities owned by Centerline Real Estate Special Situations Mortgage Fund LLC ( CRESS ), which are included in the High-Yield Debt Investment Entities 6

7 Affordable Housing

8 Primary Business Activities Sponsorship of Low-Income Housing Tax Credit Equity Funds 2006 capital raised $ billion 2007 capital raised $1.17 billion AUM at 6/30/08 $9.8 billion Origination of Tax-Exempt Affordable Housing Bonds 2006 capital deployed $379 million 2007 capital deployed $200 million On-balance sheet ownership of subordinate interest in $2.8 billion portfolio Subordinate interest valued at nearly $200 million at June 30, 2008; Expected to produce $28 million - $30 million of tax-exempt cash flow in

9 Primary Earnings Drivers Low-Income Housing Tax-Credit Equity Fund Management Fee Type Fee % GAAP Recognition Upfront Acquisition Fees 2.45% % As Equity is Deployed Upfront Expense Reimbursements 1.25% % As Equity is Deployed Partnership Management Fees 1.00% % Recognized over 5 Years Asset Management Fees Ongoing Expense Reimbursements 20 bps - 40 bps 5 bps - 15 bps Recognized as Earned Based on Collectability Recognized as Earned Based on Collectability Mortgage Revenue Bond Management Fee Type Fee % GAAP Recognition Origination/Construction Servicing Fees 1.75% % Origination - Amortized over Investment Holding Period Construction o Servicing Amortized over Projected Construction Period Fees are based on gross equity 9

10 Commercial Real Estate

11 Primary Business Activities Sponsorship of Commercial Real Estate Funds High-Yield CMBS Funds 2007 capital raised - $585 million AUM at 6/30/08 - $1.475 billion Centerline co-investment at 6/30/08 - $41.3 million (2) Joint Venture Equity Funds 2007 capital raised - $87 million AUM at 6/30/08 - $221.6 million Centerline co-investment at 6/30/08 - $4.5 million (2) High-Yield Debt Funds 2007 capital raised - $179 million CRE CDO Asset Management Manages 3 CDOs of over $2.1 billion AUM at 6/30/08 - $535.7 million Rated CAM1 from Fitch (currently the highest rating for a CDO Asset Centerline co-investment at 6/30/08 - $25.6 million (2) Manager) (3) Committed equity (2) Represents capital invested as of June 30, 2008, not carrying value; Co-investments are recorded on Centerline s balance sheet at their carrying value (3) As of June 30,

12 Primary Business Activities (cont.) Mortgage Originations Fannie Mae/Freddie Mac Originations 2006 originations $901 million 2007 originations $962 million 6/30/08 originations $557 million Conduit/Other Originations 2006 originations $641 million 2007 originations $792 million 6/30/08 originations $11 million 12

13 Primary Earnings Drivers Commercial Real Estate Fund Management Asset Management Fees Incentive Management Fees Co-Investment CMBS Funds 1.25% - 1.5% of committed equity during investment period; invested equity thereafter 15% - 20% of returns above a return hurdle Up to 5% investment earning an 8% - 10% preferred return High-Yield Loan Funds 1.0% - 2.0% of committed equity during investment period; invested equity thereafter 15% - 20% of returns above a return hurdle 5% investment earning an 8% - 9% preferred return Joint Venture Equity Funds 1.0% - 1.5% of committed equity 10% - 20% of returns above a return hurdle 2.5% investment earning an 9% - 11% preferred return Opportunity Funds 0.75% - 1.5% of committed equity during investment period; invested equity thereafter 15% - 20% of returns above a return hurdle Up to 5% investment earning an 9% - 11% preferred return Commercial Mortgage Originations Fee Type Fee % GAAP Recognition Origination Fees bps Recognized when loan is sold Centerline typically co-invests up to 5% of the committed equity in the Company s commercial real estate funds, with the exception of the Company s first CMBS fund in which the Company co-invested in excess of 20% of committed equity 13

14 Primary Earnings Drivers Commercial Real Estate Fund Management Fee Type Fee % GAAP Recognition Asset Management Fees 0.75% - 2.0% of committed equity during investment period; invested equity thereafter Recognized as Earned Based on Collectability Incentive Management Fees 10% - 20% of returns above a return hurdle Recognized as Earned Based on Current Period Fund Liquidation Value (2) Co-Investment t 2.5% - 5.0% investment e earning an Recognized ed as Pro Rata Share of Fund 8% - 11% preferred return Earnings CRE CDO Asset Management Fee Type Fee % GAAP Recognition Collateral Management & Advancing Agent Fees 0.35% % of the average balance of the assets in the CDOs Recognized as Earned Based on Collectability Centerline typically co-invests up to 5% of the committed equity in the Company s commercial real estate funds, with the exception of the Company s first CMBS fund in which the Company co-invested in excess of 20% of committed equity (2) Centerline currently recognizes incentive fees by assuming the fund is liquidated at quarter end and calculating what would be earned at that point in time, assuming no future performance 14

15 Portfolio Management

16 Primary Business Activities Primary Loan Servicing Servicing balance at 6/30/08 $25.0 billion Escrow balance at 6/30/08 $344.0 million Weighted average servicing i fee at 6/30/ bps (20.4 bps for Fannie/Freddie portfolio) Special Servicing Named special servicer balance at 6/30/08 $116.5 billion Loan balance in special servicing at 6/30/08 $401.3 million Includes CMBS and non-cmbs 16

17 Primary Earnings Drivers Primary Servicing Fee Type Fee % GAAP Recognition Servicing Fee Risk Share 15 bps - 45 bps Recognized as Earned Servicing Fee Non Risk Share 2 bps - 8 bps Recognized as Earned Escrow / Reserve Interest Income 1% - 2% of outstanding servicing balance paying Fed Funds (net of amount paid to borrowers) Recognized as Earned Special Servicing Fee Type Fee % GAAP Recognition Base Fees 20 bps - 30 bps (per year) Recognized as Earned Liquidation Fees Assumption/Modification Fees 1.0% of loan balance upon resolution 0.5% - 1.0%; split between Special Servicer and Master Servicer Recognized as Earned Recognized as Earned In the Company s segment reporting, a portion of primary servicing fees are earned in our Commercial Real Estate Group. Our Portfolio Management Group earns a market servicing fee through intercompany fee arrangements 17

18 Credit Risk Products

19 Primary Business Activities Credit Derivate Products Low-Income Housing Tax Credit Equity Funds 2007 volume $420 million Mortgage Revenue Bonds 2007 volume $332 million 19

20 Primary Earnings Drivers Credit Derivative Products Fee Type Fee % GAAP Recognition LIHTC Fund Enhancement Fees 3.0% - 7.0% of Gross equity Raised Recognized Over 15 Years on Risk Weighted Basis (2) Debt Enhancement Fees 0.45% - 2.0% Recognized as Earned In the Company s segment reporting, a portion of LIHTC Fund Enhancement Fees are earned in our Affordable Housing Group (2) LIHTC fund enhancement fees typically are recognized as follows: 60% of the fee is recognized over the first three years; 30% of the fee is recognized over years four and five; 10% is recognized over the remaining life of the fund 20

21 Financial Statements

22 Income Statement ($000s, except per share amounts) 6/30/2008 Mortgage bond and other interest income Revenues Mortgage bond interest $ 24,976 Mortgage revenue bond interest income $ 24,976 Servicing escrow 4,011 Other interest income 42,501 Freddie Mac A-certificate 10,111 Fee income 56,445 Freddie Mac B-certificates 8,348 Other revenues 7,414 Stabilization escrow 4,034 Total Revenues 131,336 CMBS/Re-REMIC 5,245 AMAC Loan 2,368 Expens es Promissory notes 828 Interest expense 42,803 Cash and other 7,556 General and administrative 87,127 Depreciation and amortization 23,347 Fee income Impairment of assets 21,440 AH fund sponsorship $ 14,344 Total Expenses 174,717 AH asset management 18,475 Gain (loss) before other income (43,381) AH origination (mortgage bonds) 1,267 CRE origination 2,803 Equity and other income 9,565 CRE asset management (AMAC, CUC) 2,659 Loss on resecuritization of mortgage revenue bonds 795 Servicing (2) 15,560 Income allocated to preferred shares (2) and minority interest, net of tax 10,057 Loss before income tax (22,964) Income tax provision (1,004) Net Loss (23,968) Dividends for preferred and redeemable securities (10,467) Effect of redeemable share conversions (14,020) Net Loss for EPS calculation $ (48,455) Net Loss per share: Basic $ (0.93) Diluted $ (0.93) As of June 30, 2008; Adjusted to exclude Consolidated Partnerships Credit intermediation (2) 1,337 Other revenues Prepayment penalties $ 1,420 Expense reimbursements (AH, AMAC) 2,968 Other 3,026 Equity and other income CRE asset mgmt./participating inc. (CMBS, CRESS) $ 8,444 CRE incentive fee (CMBS, CRESS) 2,820 Co-investment income (CMBS, CRESS) 668 Other (AH, AMAC) (1,761) Investment management income is shown in blue, transactional income is shown in brown and investment income is shown in green (2) In the Company s segment reporting, servicing fee income is reported in both Commercial Real Estate and Portfolio Management and credit intermediation fees are reported in both Affordable Housing and Credit Risk Products. For purposes of this report, all servicing fees are classified in servicing and all credit intermediation fees are classified as credit intermediation 22

23 Balance Sheet ($000s) 6/30/2008 Investments - Available-for-sale Retained interests Freddie Mac A-1 certificates 377,500 Freddie Mac B certificates 199,096 Retained CMBS certificates 33,152 M t b d CMBS 11,139 Syndicated corporate debt 23,066 Marketable securities 2,239 Assets Cash/cash equivalents $ 113,141 Restricted cash 34,961 Investments Available-for-sale 737,738 Mortgage revenue bonds 91,546 Equity method 39,174 Other 131,251 Investments in and loans to affiliates 192,864 Goodwill and other intangibles 501,629 Deferred costs and other assets 125,448 Total Assets $ 1,876,206 Liabilities Notes payable $ 410,369 Financing arrangements/secured financings 62,757 Preferred shares of subsidiary (subject to mandatory repurchase) 273,500 Accounts payable and other liabilities 229,685 Total Liabilities 976,311 Mezzanine Equity Minority interest in consolidated subsidiaries 159,593 Preferred e ed shares of subsidiary (not subject 104,000 0,000 (to mandatory repurchase) Redeemable securities 324,623 Total Mezzanine Equity 588,216 Investments - Equity method and Other Equity interests in LIHTC properties 39,174 Mortgage loans (for FNMA/Freddie) 39,740 Mortgage loans held for investment 14,173 Stabilization escrow 69,509 Other 7,829 Investments in and loans to affiliates Loan to AMAC 79,877 Investment in AMAC common/preferred 5,497 Loan to CMBS Fund 33,968 Other 73,522 Goodwill and other intangibles Goodwill 342,311 Mortgage servicing rights 55,923 Other intangible assets 103,395 Total Shareholders' Equity 311,679 Total Liabilities and Equity $ 1,876,206 Deferred costs and other assets Net deferred costs 23,325 Receivables and other assets 102, As of June 30, 2008; Adjusted to exclude Consolidated Partnerships and mortgage revenue bonds re-securitized in December 2007 not accounted for as a sale 23

24 Balance Sheet (cont.) ($000s) 6/30/2008 Notes Payable Term loan Assets Loan size $109,040 Cash/cash equivalents $ 113,141 Spread LIBOR % Restricted cash 34,961 Rate at period end (2) 7.75% Investments Revolver Available-for-sale 737,738 Facility size $245,000 Equity method 39,174 Outstanding balance $211,000 Spread LIBOR % Other 131,251 Rate at period end (2) 7.65% Investments in and loans to affiliates 192,864 Mortgage banking warehouse facility Goodwill and other intangibles 501,629 Facility size $150,000 Deferred costs and other assets 125,448 Outstanding balance $0 Total Assets $ 1,876,206 Spread LIBOR % Rate at period end (3) 3.48% Liabilities Multifamily ASAP Plus Notes payable $ 410,369 Outstanding balance $39,617 Rate at period end 2.46% Financing arrangements/secured financings 62,757 Syndicated corporate debt warehouse Preferred shares of subsidiary (subject to Facility size $100,000 mandatory repurchase) 273,500 Outstanding balance $17,014 Accounts payable and other liabilities 229,685 Spread 3-Month LIBOR % Total Liabilities 976,311 Rate at period end 4.13% Mezzanine Equity Minority interest in consolidated subsidiaries 159,593 Preferred shares of subsidiary (not subject 104,000 to mandatory repurchase) Redeemable securities 324,623 Total Mezzanine Equity 588,216 Total Shareholders' Equity 311,679 Total Liabilities and Equity $ 1,876,206 Repurchase facility Outstanding balance $30,987 Rate at period end 3.39% Other Outstanding balance $2,711 Weighted average rate 8.00% Financing arrangements Secured Financing Outstanding $62,757 Weighted average rate 4.22% Preferred shares of subsidiary (4) Mandatory redemp./no mandatory redemp. $273,500/$104,000 Weighted average fixed rate 6.655% As of June 30, 2008; Adjusted to exclude Consolidated Partnerships and mortgage revenue bonds re-securitized in December 2007 not accounted for as a sale (2) Includes the cost or benefit of our outstanding interest rate swaps (3) Rate in effect at period end calculated by using LIBOR rate in the beginning of June 2008 (4) $104 million of the preferred debt is not subject to mandatory redemption and is shown as mezzanine equity on the GAAP balance sheet 24

25 Balance Sheet (cont.) ($000s) 6/30/2008 Minority Interests SCUs Amount $147,440 Units outstanding 14.1 million Assets Cash/cash equivalents $ 113,141 Restricted cash 34,961 Investments Available-for-sale l Equity method 737, ,174 Distributions payable pari passu with common; equal to common dividend divided by.72 Other 131,251 Investments in and loans to affiliates 192,864 Goodwill and other intangibles 501,629 Deferred costs and other assets 125,448 Total Assets $ 1,876,206 SCIs Amount $3,708 Shares outstanding 0.3 million Distributions ib ti payable pari passu with common Liabilities Notes payable $ 410,369 Financing arrangements/secured financings 62,757 Preferred shares of subsidiary (subject to mandatory repurchase) 273,500 Accounts payable and other liabilities 229,685 Total Liabilities 976,311 Mezzanine Equity Minority interest in consolidated subsidiaries 159,593 Preferred shares of subsidiary (not subject 104,000 (to mandatory repurchase) Redeemable securities 324,623 Total Mezzanine Equity 588,216 Total Shareholders' Equity 311,679 Total Liabilities and Equity $ 1,876,206 Other $8,445 Redeemable Securities Convertible Redeemable CRA Shares $88,607 Redeemable CRA Shares 4,585 Convertible Redeemable CRA Preferred Shares 49,840 Redeemable CRA Preferred Shares 52, % Cumulative Convertible Preferred Shares 129,457 Common Equity Shares outstanding 51,171 Book value/share $8.80 CRA Preferred Shares outstanding 519 CRA Preferred Shares $5,886 As of June 30, 2008; Adjusted to exclude Consolidated Partnerships and mortgage revenue bonds re-securitized in December 2007 not accounted for as a sale 25

Centerline Capital Group. Corporate Overview

Centerline Capital Group. Corporate Overview Centerline Capital Group Corporate Overview This presentation contains forward-looking statements. These forward-looking statements are not historical facts, but rather our beliefs and expectations and