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Capital Trust Inc. Reports Operating Results (10-Q)

November 03, 2009 | About:

Capital Trust Inc. (CT) filed Quarterly Report for the period ended 2009-09-30.

Capital Trust Inc. is an investment management and real estate finance company designed to take advantage of high-yielding lending and investment opportunities in commercial real estate and related assets. Capital Trust Inc. has a market cap of $40.6 million; its shares were traded at around $1.84 with and P/S ratio of 0.2. Capital Trust Inc. had an annual average earning growth of 35.4% over the past 5 years.

Highlight of Business Operations:

During the first nine months of 2009, the state of the commercial real estate markets continued to deteriorate. Occupancy and rental rates declined in virtually all product types and geographic markets, and borrowers with near-term refinancing needs encountered increased difficulty finding replacement financing. As a result, commercial mortgage delinquencies and defaults are rising rapidly, as sponsors are unable (or unwilling) to support projects in the face of value decline. In the first nine months of 2009, our portfolio experienced significant credit deterioration, evidenced by $113.7 million of new provisions for loan losses and $98.8 million of impairments on our securities portfolio and real estate owned. We expect this trend to continue for the foreseeable future and expect significant challenges ahead for our business. These challenges are discussed in the risk factors contained in Exhibit 99.1 to this Form 10-Q.

On March 16, 2009, we also entered into an agreement to terminate the master repurchase agreement with Goldman Sachs, pursuant to which we satisfied the indebtedness due under the Goldman Sachs secured credit facility. Specifically, we: (i) pre-funded certain required advances of approximately $2.4 million under one loan in the collateral pool, (ii) paid Goldman Sachs $2.6 million to effect a full release to us of another loan, and (iii) transferred all of the other assets that served as collateral for Goldman Sachs to Goldman Sachs for a purchase price of $85.7 million as payment in full for the balance remaining under the secured credit facility. Goldman Sachs agreed to release us from any further obligation under the secured credit facility.

In some cases our Loan originations are not fully funded at closing, creating an obligation for us to make future fundings, which we refer to as Unfunded Loan Commitments. Typically, Unfunded Loan Commitments are part of construction and transitional Loans. As of September 30, 2009, our six Unfunded Loan Commitments totaled $12.6 million, which will only be funded when and/or if the borrower meets certain performance hurdles with respect to the underlying collateral. As of September 30, 2009, $5.6 million of the Unfunded Loan Commitments relates to a Loan classified as held-for-sale, as described in Note 5 to the consolidated financial statements.

During the nine months ended September 30, 2009, three Loans with an aggregate outstanding balance of $33.8 million were fully repaid. In addition, six Loans with an aggregate outstanding balance of $140.8 million as of September 30, 2009, which did not qualify for extension pursuant to the corresponding loan agreements, were extended during the nine months ended September 30, 2009.

Also, in May 2009, we negotiated a discounted partial repayment with one of our borrowers, which resulted in a repayment of $3.0 million to us, and the forgiveness of an additional $1.0 million of the borrower s indebtedness. Following this discounted repayment, we were relieved of a $3.8 million Unfunded Loan Commitment under this loan. As a result of this transaction, we recorded a $1.0 million loss during the second quarter under the provision for loan losses on our consolidated statement of operations.

As of September 30, 2009, we had 13 Loans with an aggregate net book value of $95.7 million ($214.3 million gross carrying value, net of $118.6 million of reserves) against which we had recorded a provision for loan losses. During the nine months ended September 30, 2009, we recorded $113.7 million in provision for loan losses.

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