Newcastle Investment Corp. has a market cap of $1.08 billion; its shares were traded at around $7.44 with a P/E ratio of 5.4 and P/S ratio of 3.7. The dividend yield of Newcastle Investment Corp. stocks is 10.6%.
Highlight of Business Operations:We strive to maintain access to a broad array of capital resources in an effort to insulate our business from potential fluctuations in the availability of capital. We seek to utilize multiple forms of financing, including collateralized debt obligations (CDOs), other securitizations, term loans, and trust preferred securities, as well as short term financing in the form of loans and repurchase agreements. As we discuss in more detail under “–Market Considerations” below, while market conditions have improved meaningfully since 2008, the current conditions continue to reduce the array of capital resources available to us and have made the terms of capital resources we are able to obtain generally less favorable to us relative to the terms we were able to obtain prior to the onset of challenging conditions. Specifically, the economic environments and capital markets have become volatile in recent months. That said, we have recently been able to access more types of capital – and on better terms – than we had been able to access during 2008 and 2009.
We seek to match fund our investments with respect to interest rates and maturities in order to reduce the impact of interest rate fluctuations on earnings and reduce the risk of refinancing our liabilities prior to the maturity of the investments. We seek to finance a substantial portion of our real estate securities and loans through the issuance of term debt, which generally represents obligations issued in multiple classes secured by an underlying portfolio of assets. Specifically, our CDO financings offer us the structural flexibility to buy and sell certain investments to manage risk and, subject to certain limitations, to optimize returns.
We utilize multiple forms of financing, depending on their appropriateness and availability, to finance our investments, including collateralized debt obligations (CDOs) or other securitizations, private or public offerings of debt, term loans, trust preferred securities, and short-term financing in the form of loans and repurchase agreements. One component of our investment strategy is to use match funded financing structures, such as CDOs, at rates that provide a positive net spread relative to our investment returns.
In addition, we acquired our first portfolio of senior living assets in July 2012 for an aggregate purchase price of approximately $143 million plus related expenses. These assets comprise more than 800 beds in senior living facilities located in California, Oregon, Utah, Arizona and Idaho. We funded the purchase price with an equity investment of approximately $55 million and non-recourse financing of approximately $88 million. The financing currently has a weighted average interest rate of 3.45% and is secured by, among other things, a first lien security interest in each of the properties. We have retained an affiliate of Fortress to manage the properties. Pursuant to a management agreement for each property, we will pay a management fee equal to 6% of the properties’ gross income (as defined in each agreement) for the first two years and 7% thereafter, and we will reimburse the manager for certain property-level expenses. We are exploring opportunities to invest in additional classes of operating real estate, including senior living facilities.
With respect to dividends, we have paid all dividends on our preferred stock through July 31, 2012. We declared a quarterly dividend of $0.20 per common share for the second quarter of 2012, which was paid in July 2012. We may elect to adjust or not to pay any future dividend payments to reflect our current and expected cash from operations or to satisfy future liquidity needs.
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