Crystal River Capital, Inc. (NYSE: CRZ) -
Crystal River's management will host a dial-in teleconference to
review its second quarter 2008 financial results on August 11,
2008, at 11:00 a.m. (EDT). The teleconference can be accessed by
dialing 888-259-8387 or 913-312-0836 (International). A replay of
the recorded teleconference will be available through August 25,
2008. The replay can be accessed by dialing 888-203-1112 or
719-457-0820 (International) and entering passcode 9477479. 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 June
30, 2008.
Separately, the Company announced that its Board of Directors
has declared a third 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. SECOND QUARTER UPDATE
- Liquidity and leverage update: Crystal River continued its
focus on reducing leverage by paying down its repurchase agreement
debt to $22.1 million at June 30, 2008 from $408.7 million at March
31, 2008 and decreasing the outstanding debt under its secured
revolving credit facility to $38.4 million at June 30, 2008 from
$48.2 million at March 31, 2008. At the time of this release, the
Company had further reduced its outstanding repurchase debt balance
to $14.0 million, while holding the amount drawn under its
revolving credit facility at $38.9 million.
- Operating results: The net loss for the quarter ended June 30,
2008 totaled $75.5 million, or $3.04 per share. Operating Earnings
(defined below) for the quarter ended June 30, 2008 totaled $16.6
million, or $0.67 per share, compared to $16.8 million, or $0.67
per share, for the second quarter of 2007 and $19.5 million, or
$0.79 per share, for the first quarter of 2008. The decrease over
the first quarter was primarily attributable to lower interest
income resulting from the first quarter sale of Crystal River's
Agency MBS portfolio partially offset by lower interest expense on
the debt supporting the remainder of the portfolio.
- Book value: Crystal River's GAAP book value decreased to $2.46
at June 30, 2008 from $5.37 at March 31, 2008.
- Portfolio activity and subsequent events: During the second
quarter, Crystal River sold whole loans for $78.2 million that the
Company had designated for sale in the first quarter of 2008. The
remaining loans that had been designated for sale in the first
quarter were sold in July 2008 for $27.1 million. Also following
the end of the second quarter of 2008, the Company's $9.6 million
investment in the Birchwood Acres construction loan matured. 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 June
30, 2008 totaled $21.6 million, or $0.87 per share, compared to Net
Investment Income of $20.0 million, or $0.80 per share, for the
second quarter of 2007 and Net Investment Income of $24.6 million,
or $0.99 per share, for the first quarter of 2008. The decrease
over the first quarter of 2008 was primarily attributable to lower
interest income resulting from the first quarter sale of the
Company's Agency MBS portfolio partially offset by lower interest
expense on the debt supporting the remainder of the portfolio.
The net loss for the quarter ended June 30, 2008, totaled $75.5
million, or $3.04 per share, compared to a net loss of $9.1
million, or $0.36 per share, for the second quarter of 2007 and a
net loss of $137.7 million, or $5.56 per share, for the first
quarter of 2008. The primary contributors to the second quarter
2008 net loss were impairment charges and mark-to-market
adjustments totaling $87.7 million. Finally, the Company also
recorded a $7.4 million loan loss allowance on its real estate loan
holdings during the quarter ended June 30, 2008.
The following table details the Company's impairment charges and
mark-to-market adjustments on its available for sale securities by
type and by sector and its CDO liabilities for the quarter ended
June 30, 2008:
Impairment charges and mark-to-market adjustments of assets and
liabilities:
CDO Assets and Liabilities:
---------------------------------------------------------------------------
Prime Subprime Liabil-
($ in millions) CMBS(4) RMBS(5) RMBS ities Total
---------------------------------------------------------------------------
Cash flows(1) $ (24.7) $ (8.1) $ (4.5) $ - $ (37.3)
Yield-spread
widening(2) (6.9) (0.4) (2.9) - (10.2)
MTM(3) assets 4.0 - (0.1) - 3.9
MTM liabilities - - - (25.8) (25.8)
---------------------------------------------------------------------------
Total $ (27.6) $ (8.5) $ (7.5) $ (25.8) $ (69.4)
---------------------------------------------------------------------------
(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:
---------------------------------------------------------------------------
Prime Subprime Preferred
($ in millions) CMBS RMBS RMBS Stock Total
---------------------------------------------------------------------------
Cash flows $ (5.6) $ (7.3) $ (2.3) $ - $ (15.2)
Yield-spread widening (1.3) (0.7) (1.0) (0.1) (3.1)
---------------------------------------------------------------------------
Total $ (6.9) $ (8.0) $ (3.3) $ (0.1) $ (18.3)
---------------------------------------------------------------------------
GAAP Book Value
GAAP common equity book value per share was $2.46 at June 30,
2008. As announced in the first quarter earnings release, Crystal
River adopted Statement of Financial Accounting Standards ("SFAS")
No. 159 on January 1, 2008. The new fair-value accounting standard
permits the Company to carry 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 September 30, 2008 of $0.10
per share. The common stock cash distribution will be paid on
October 28, 2008 to stockholders of record as of the close of
business on September 30, 2008.
Due to realized losses and a projected decline in cash flows,
Crystal River expects to generate significant tax operating losses
in 2008 and in future periods, which may cause the Company's
Operating Earnings to exceed its taxable income for the next
several years. This may enable Crystal River to retain a portion of
its Operating Earnings and further strengthen its capital position
by continuing to reduce short-term liabilities and then directing a
portion of its cash flows into new investments. To the extent that
the amount distributed is less than 90% of the year's taxable
income, the Company would expect to declare a special dividend at
the end of the year in order to comply with REIT regulations.
In setting the dividend, the Board of Directors considered a
number of factors, including, but not limited to, operating
results, taxable income and REIT qualification requirements,
available tax losses, economic conditions, capital requirements,
liquidity, retention of capital and other operating trends. Given
the variability of these considerations, the Board of Directors
will continually reevaluate these factors when determining future
dividends. However, at the current time, Crystal River's Board
views the new distribution amount as a sustainable dividend
run-rate.
About Crystal River
Crystal River Capital, Inc. (NYSE: CRZ) is a specialty finance
REIT. The Company invests in commercial real estate, real estate
loans, and real estate-related securities, such as commercial and
residential mortgage-backed securities. For more information, visit
www.crystalriverreit.com.
II. CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
----------------------------------------------------------------------------
June 30, March 31, December 31,
($ in thousands, except share and 2008 2008 2007
per share data) (unaudited) (unaudited)
----------------------------------------------------------------------------
ASSETS
Available for sale securities, at
fair value $ 295,836 $ 355,528 $ 1,815,246
Real estate loans 24,370 50,768 170,780
Real estate loans held for sale 47,504 107,345 -
Commercial real estate, net 231,511 233,137 234,763
Other investments 1,550 1,550 37,761
Intangible assets 78,357 79,765 81,174
Cash and cash equivalents 7,754 8,664 27,521
Restricted cash 27,646 27,455 68,706
Receivables 22,119 32,490 31,637
Due from broker - 393,566 -
Prepaid expenses and other assets 1,763 2,177 540
Deferred financing costs, net 1,707 2,152 10,750
Derivative assets 28 10 560
-----------------------------------------
Total Assets $ 740,145 $ 1,294,607 $ 2,479,438
-----------------------------------------
-----------------------------------------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Liabilities
Accounts payable, accrued
expenses and other $ 2,610 $ 728 $ 1,817
Due to manager 360 693 678
Due to affiliate - 439 -
Dividends payable 7,454 16,835 16,828
Intangible liabilities 75,005 76,375 77,745
Repurchase agreements 22,117 408,677 1,276,121
Collateralized debt
obligations(1) 204,769 182,769 486,608
Junior subordinated notes 51,550 51,550 51,550
Mortgage payable 219,380 219,380 219,380
Senior mortgage-backed notes,
related party 24,087 99,143 99,815
Secured revolving credit
facility, related party 38,420 48,220 67,319
Interest payable 2,454 3,610 9,256
Derivative liabilities 31,037 53,545 61,729
-----------------------------------------
Total Liabilities 679,243 1,161,964 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, 24,775,283;
24,704,945; and
24,704,945 shares issued and
outstanding, respectively 25 25 25
Additional paid-in capital 563,900 563,064 562,930
Accumulated other comprehensive
loss (9,724) (20,135) (15,481)
Declared dividends in excess of
operations (493,299) (410,311) (436,882)
-----------------------------------------
Total Stockholders' Equity 60,902 132,643 110,592
-----------------------------------------
Total Liabilities and
Stockholders' Equity $ 740,145 $ 1,294,607 $ 2,479,438
-----------------------------------------
-----------------------------------------
(1) Fair value at June 30, 2008, and March 31, 2008 and cost at December 31,
2007.
Condensed Consolidated Statements of Operations (Unaudited)
----------------------------------------------------------------------------
($ in
thousands,
except share Three months ended Six months ended
and per June 30, March 31, June 30, June 30, June 30,
share data) 2008 2008 2007 2008 2007
----------------------------------------------------------------------------
Revenues
Interest
income -
available
for sale
securities $ 24,355 $ 39,937 $ 50,823 $ 64,292 $ 101,027
Interest
income -
real
estate
loans 2,207 2,612 4,404 4,819 8,729
Other
interest
and
dividend
income 218 669 2,276 887 4,976
---------------------------------------------------------------
Total
interest
and
dividend
income 26,780 43,218 57,503 69,998 114,732
Rental
income, net 5,550 5,662 5,110 11,212 5,658
---------------------------------------------------------------
Total
revenues 32,330 48,880 62,613 81,210 120,390
---------------------------------------------------------------
Expenses
Interest
expense 10,732 24,268 43,179 35,000 83,298
Management
fees,
related
party 418 667 1,828 1,085 4,181
Professional
fees 585 668 1,204 1,253 1,986
Depreciation
and
amortization 3,022 3,022 2,798 6,044 3,109
Incentive
fees - - - - 124
Insurance
expense 480 330 325 810 407
Directors'
fees 127 153 178 280 340
Public
company
expense 302 111 161 413 232
Commercial
real
estate
expenses 420 417 334 837 344
Provision
for loss
on real
estate
loans 7,386 9,063 - 16,449 -
Other
expenses 521 129 208 896 296
---------------------------------------------------------------
Total
expenses 23,993 38,828 50,215 63,067 94,317
---------------------------------------------------------------
Other
revenues
(expenses)
Realized
net gain
(loss) on
sale of
securities
available
for sale,
real
estate
loans, and
other
investments (1,263) (3,785) (440) (5,048) 1,180
Realized
and
unrealized
gain (loss)
on
derivatives 5,351 (43,382) (3,598) (38,031) (12,207)
Impairments
on available
for sale
securities (18,310) (67,154) (22,058) (85,464) (22,693)
Net change
in assets
and
liabilities
valued
under fair
value
option (69,355) (32,848) - (102,203) -
Foreign
currency
exchange
gain - - 4,249 - 4,751
Income
(loss) from
equity
investments - (40) 589 (40) 1,438
Other (295) (529) (214) (578) (72)
---------------------------------------------------------------
Total
other
expenses (83,872) (147,738) (21,472) (231,364) (27,603)
---------------------------------------------------------------
Net loss $ (75,535) $ (137,686) $ (9,074) $ (213,221) $ (1,530)
---------------------------------------------------------------
---------------------------------------------------------------
Net loss
per share
- basic
and
diluted $ (3.04) $ (5.56) $ (0.36) $ (8.60) $ (0.06)
---------------------------------------------------------------
---------------------------------------------------------------
Weighted
average
shares of
common
stock
outstanding:
Basic and
diluted 24,807,529 24,750,048 25,029,782 24,778,788 25,036,870
---------------------------------------------------------------
---------------------------------------------------------------
Dividends
declared
per share
of common
stock $ 0.30 $ 0.68 $ 0.68 $ 0.98 $ 1.36
---------------------------------------------------------------
---------------------------------------------------------------
Net Investment Income (Unaudited)
----------------------------------------------------------------------------
($ in
thousands,
except share Three months ended Six months ended
and per June 30, March 31, June 30, June 30, June 30,
share data) 2008 2008 2007 2008 2007
---------------------------------------------------------------
Total
interest
and
dividend
income $ 26,780 $ 43,218 $ 57,503 $ 69,998 $ 114,732
Rental
income, net 5,550 5,662 5,110 11,212 5,658
Income
(loss)
from
equity
investments - (40) 589 (40) 1,438
Interest
expense (10,732) (24,268) (43,179) (35,000) (83,298)
---------------------------------------------------------------
Net
Investment
Income $ 21,598 $ 24,572 $ 20,023 $ 46,170 $ 38,530
---------------------------------------------------------------
---------------------------------------------------------------
Net
Investment
Income per
share $ 0.87 $ 0.99 $ 0.80 $ 1.86 $ 1.54
---------------------------------------------------------------
---------------------------------------------------------------
Weighted
average
shares of
common
stock
outstanding:
Basic and
diluted 24,807,529 24,750,048 25,029,782 24,778,788 25,036,870
---------------------------------------------------------------
---------------------------------------------------------------
----------------------------------------------------------------------------
Reconciliation of Net Loss to Operating Earnings (Unaudited)
----------------------------------------------------------------------------
($ in
thousands,
except share Three months ended Six months ended
and per June 30, March 31, June 30, June 30, June 30,
share data) 2008 2008 2007 2008 2007
----------------------------------------------------------------------------
Net loss $ (75,535) $ (137,686) $ (9,074) $ (213,221) $ (1,530)
Realized
net (gain)
loss on
sale of
securities
available
for sale,
real
estate
loans, and
other
investments 1,263 3,785 440 5,048 (1,180)
Realized
and
unrealized
(gain) loss
on
derivatives (5,351) 43,382 3,598 38,031 12,207
Impairments
on
available
for sale
securities 18,310 67,154 22,058 85,464 22,693
Net change
in assets
and
liabilities
valued
under fair
value option 69,355 32,848 - 102,203 -
Provision
for loss on
real estate
loans 7,386 9,063 - 16,449 -
Foreign
currency
exchange
gain - - (4,249) - (4,751)
Depreciation
and
amortization 3,022 3,022 2,798 6,044 3,109
Cash
settlements
on economic
hedges that
did not
qualify for
hedge
accounting
treatment (1,818) (2,044) 1,186 (3,862) 1,179
---------------------------------------------------------------
Operating
Earnings $ 16,632 $ 19,524 $ 16,757 $ 36,156 $ 31,727
---------------------------------------------------------------
---------------------------------------------------------------
Operating
Earnings
per share $ 0.67 $ 0.79 $ 0.67 $ 1.46 $ 1.27
---------------------------------------------------------------
---------------------------------------------------------------
Weighted
average
number of
shares
outstanding:
Basic and
diluted 24,807,529 24,750,048 25,029,782 24,778,788 25,036,870
---------------------------------------------------------------
---------------------------------------------------------------
----------------------------------------------------------------------------
Comprehensive Loss (Unaudited)
----------------------------------------------------------------------------
Three months ended Six months ended
($ in June 30, March 31, June 30, June 30, June 30,
thousands) 2008 2008 2007 2008 2007
----------------------------------------------------------------------------
Net loss $ (75,535) $ (137,686) $ (9,074) $ (213,221) $ (1,530)
Changes in
OCI -
securities
available
for sale(1) 1,784 (7,983) (29,361) (6,199) (50,474)
Unrealized
loss on
effective
cash flow
hedges 8,327 (4,128) 18,815 4,199 16,699
Realized and
unrealized
(gain) loss
on cash flow
hedges - 8,982 281 8,982 (2,457)
Amortization
of net
(gain)
loss on
cash flow
hedges into
interest
expense 300 145 (432) 445 (822)
----------------------------------------------------------------------------
Comprehensive
loss $ (65,124) $ (140,670) $ (19,771) $ (205,794) $ (38,584)
----------------------------------------------------------------------------
(1) Represents reclassification from OCI ("Other Comprehensive Income") to
impairments on available for sale securities.
Reconciliation of Net Loss to Estimated REIT Taxable Income (Loss)
(Unaudited)
----------------------------------------------------------------------------
Three months Six months
($ in thousands, ended ended
except share and per share data) June 30, 2008 June 30, 2008
----------------------------------------------------------------------------
GAAP net loss $ (75,535) $ (213,221)
-----------------------------
Adjustments to GAAP net loss:
Net loss of taxable REIT subsidiary - 495
Share-based compensation 89 (94)
Net tax adjustments related to interest
income (2,751) (5,655)
Tax derivative loss in excess of book loss (28,953) (16,078)
Capital-loss limitation 1,532 35,849
Impairment losses not deductible for tax
purposes 18,310 85,464
Net change in assets and liabilities valued
under fair value option 69,355 102,203
Loan loss allowance not deductible for tax
purposes 7,386 16,449
GAAP-to-tax difference on rent escalation and
lease amortization (393) (774)
Other (23) (46)
-----------------------------
Net adjustments from GAAP net loss to
estimated REIT taxable income 64,552 217,813
-----------------------------
Estimated REIT taxable income (loss) (10,983) 4,592
-----------------------------
Estimated REIT taxable income (loss) per share $ (0.44) $ 0.19
-----------------------------
-----------------------------
Weighted average number of shares
outstanding:
Basic and diluted 24,807,529 24,778,788
-----------------------------
-----------------------------
----------------------------------------------------------------------------
III. SUPPLEMENTAL INFORMATION
Total Investment Portfolio at June 30, 2008
The following table summarizes the Company's investment portfolio at June
30, 2008, March 31, 2008, and June 30, 2007:
----------------------------------------------------------------------------
June 30, 2008 March 31, 2008 June 30, 2007
Carrying Carrying Carrying
($ in millions) Value % Total Value % Total Value % Total
----------------------------------------------------------------------------
Available for sale
securities
Agency MBS $ - - $ - - $ 2,369.2 63.3%
CMBS 241.7 40.2% 271.1 36.2% 510.9 13.6%
Prime RMBS 37.8 6.3% 56.3 7.5% 168.0 4.5%
Subprime RMBS 16.3 2.7% 28.0 3.7% 113.4 3.0%
ABS(1) - - - - 42.0 1.1%
Preferred
stock(2) 0.0 0.0% 0.1 0.0% 3.4 0.1%
Direct real estate
loans
Construction loans 16.0 2.7% 16.4 2.2% 20.5 0.5%
Mezzanine
loans(3) 26.3 4.4% 31.9 4.3% 31.9 0.9%
Whole loans(4) 29.6 4.9% 109.8 14.7% 213.5 5.7%
Real estate finance
fund - - - - 35.3 1.0%
Commercial real
estate-owned 231.5 38.5% 233.1 31.2% 212.2 5.7%
Other 1.6 0.3% 1.6 0.2% 23.4 0.6%
----------------------------------------------------------------------------
Total $ 600.8 100.0% $ 748.3 100.0% $ 3,743.7 100.0%
----------------------------------------------------------------------------
(1) Asset-backed securities ("ABS").
(2) Exact balance at June 30, 2008 of $24,250.
(3) Includes two loans in the amount of $20.4 million as held for sale.
(4) Includes two loans in the amount of $27.1 million as held for sale,
which were sold subsequent to the end of the second quarter.
Second Quarter 2008 Securities Roll-Forward Table
The table below details the impact of purchases and sales,
principal paydowns, premium and discount amortization, and
adjustments to market value on our available for sale securities
during the second quarter of 2008:
----------------------------------------------------------------------------
Prime Subprime Preferred Total
($ in millions) CMBS RMBS RMBS Stock Portfolio
----------------------------------------------------------------------------
Carrying Value
March 31, 2008 $ 271.1 $ 56.3 $ 28.0 $ 0.1 $ 355.5
Sales - - - - -
Principal paydowns 0.0 (3.1) (0.7) - (3.8)
Principal loss - (0.3) - - (0.3)
Amortization 3.1 1.4 (0.1) - 4.4
Market value adjustments:
CDO assets (27.6) (8.5) (7.5) - (43.6)
Non-CDO assets (6.8) (8.0) (3.4) (0.1) (18.3)
OCI 1.9 - - - 1.9
----------------------------------------------------------------------------
Carrying Value
June 30, 2008 $ 241.7 $ 37.8 $ 16.3 $ - $ 295.8
----------------------------------------------------------------------------
COMMERCIAL REAL ESTATE ("CRE") INVESTMENT PORTFOLIO
At June 30, 2008, Crystal River's CRE investment portfolio
totaled $234.9 million. The CRE portfolio consisted 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 June 30, 2008:
----------------------------------------------------------------------------
Year Total
of Area Book Mortgage Net Book
Lease (000s Value(1) Debt Equity
Location Tenant Expiry Sq. Ft.) (Millions) (Millions) (Millions)
----------------------------------------------------------------------------
Houston,
Texas JPMorgan Chase 2021 428.6 $ 61.3 $ 53.4 $ 7.9
Arlington,
Texas JPMorgan Chase 2027 176.0 21.6 20.9 0.7
Phoenix,
Arizona JPMorgan Chase 2021 724.0 152.0 145.1 6.9
----------------------------------------------------------------------------
Total CRE 1,328.6 $ 234.9 $ 219.4 $ 15.5
----------------------------------------------------------------------------
(1) Book value includes intangible assets and intangible liabilities, but
excludes rent-enhancement receivables.
REAL ESTATE LOAN INVESTMENT PORTFOLIO
At June 30, 2008, Crystal River's real estate loan portfolio,
which consists of mezzanine loans, construction loans and whole
loans, totaled $71.9 million and had a weighted average interest
rate of 8.5%. Crystal River recorded a $7.4 million loan loss
allowance on its real estate loan holdings during the quarter ended
June 30, 2008. Included in this charge is a $5.7 million net
mark-to-market adjustment resulting from designating two loans in
its real estate loan portfolio as held for sale.
During the second quarter, Crystal River sold whole loans for
$78.2 million that the Company had designated for sale in the first
quarter of 2008. The remaining loans that had been designated for
sale in the first quarter were sold in July 2008 for $27.1 million.
Also subsequent to the second quarter of 2008, the Company's $9.6
million investment in construction loan Birchwood Acres matured.
The investment, which paid off at par, had a floating-rate coupon
of LIBOR plus 3.1%.
Real estate loan portfolio at June 30, 2008:
----------------------------------------------------------------------------
Construction
Mezzanine Loans Loans Whole Loans Total / WA(1)
($ in Floa- Floa- Floa- Floa-
millions) Fixed ting Fixed ting Fixed ting Fixed ting
----------------------------------------------------------------------------
Outstanding
Face Amount $ 26.1 $ 5.9 $ 13.9 $ 9.7 $ 29.9 $ 2.5 $ 69.9 $ 18.1
Carrying
Value 20.4 5.9 6.3 9.7 27.1 2.5 53.8 18.1
Amortized
Cost 26.0 5.9 13.9 9.7 29.8 2.5 69.7 18.1
Fair Value 20.4 5.7 6.8 9.6 27.1 2.4 54.3 17.6
Number of
Loans 2 1 1 1 2 1 5 3
WA LTV(2) 80% 37% 116% 24% 55% 55% 76% 32%
Number of
loans that
are
delinquent - - 1 - - - 1 -
WA Fixed
Rate 8.83% n/a 16.00% n/a 5.36% n/a 8.77% n/a
WA Floating
Rate:
Spread over
LIBOR(3) n/a 11.47% n/a 5.56% n/a 5.73% n/a 7.50%
----------------------------------------------------------------------------
(1) Weighted Average ("WA").
(2) Loan-to-Value ("LTV").
(3) London Interbank Offered Rate ("LIBOR").
CMBS INVESTMENT PORTFOLIO
CMBS portfolio by credit rating at June 30, 2008:
---------------------------------------------------------------------------
Weighted Average
--------------------------
($ in millions) Amortized Cost Carrying Value Yield(1) Term (Yrs)(2)
---------------------------------------------------------------------------
BBB $ 103.1 $ 104.8 18.5% 8.6
BB 56.0 58.0 23.2% 8.8
B 39.7 41.0 23.5% 8.9
Below B 37.0 37.9 17.1% 6.9
---------------------------------------------------------------------------
Total CMBS $ 235.8 $ 241.7 20.2% 8.4
---------------------------------------------------------------------------
(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 June 30, 2008:
CDO Assets:
--------------------------------------------------------------------------
Cumul-
Princ- Delin- ative
WA Original Outstanding ipal quency Loss
Rating Face Face Carrying Subordi- 60+/FC/ to
Vintage (1) Amount Amount Value nation REO Date(2)
--------------------------------------------------------------------------
Pre-2005 BB- $ 2.8 $ 2.8 $ 1.6 3.15% 1.54% 0.00%
2005 BB- 244.8 244.8 91.2 2.60% 1.23% 0.00%
2006 BB 248.3 248.3 83.4 2.26% 0.20% 0.00%
2007 BB+ 27.9 27.9 9.2 2.69% 0.05% 0.00%
--------------------------------------------------------------------------
Total
CMBS BB- $ 523.8 $ 523.8 $ 185.4 2.45% 0.68% 0.00%
--------------------------------------------------------------------------
(1) Rounded to nearest rating.
(2) Based on original face amount.
Non-CDO Assets:
--------------------------------------------------------------------------
Cumul-
Princ- Delin- ative
Original Outstanding ipal quency Loss
WA Face Face Carrying Subordi- 60+/FC/ to
Vintage Rating Amount Amount Value nation REO Date
--------------------------------------------------------------------------
2005 NR $ 50.8 $ 43.1 $ 3.7 0.28% 1.05% 15.18%
2006 B- 119.6 119.6 23.4 0.58% 0.65% 0.00%
2007 B 132.8 132.8 29.2 1.16% 0.39% 0.00%
--------------------------------------------------------------------------
Total
CMBS B- $ 303.2 $ 295.5 $ 56.3 0.80% 0.59% 2.54%
--------------------------------------------------------------------------
PRIME RMBS INVESTMENT PORTFOLIO
Prime RMBS portfolio by credit rating at June 30, 2008:
-------------------------------------------------------------------------
Weighted Average
---------------------
($ in millions) Amortized Cost Carrying Value Yield Term (Yrs)
-------------------------------------------------------------------------
BBB $ 5.6 $ 5.6 27.5% 6.1
BB 9.9 9.9 48.1% 6.6
B 17.7 17.7 64.3% 6.4
Below B 4.6 4.6 111.2% 2.2
-------------------------------------------------------------------------
Total Prime RMBS $ 37.7 $ 37.8 60.5% 5.9
-------------------------------------------------------------------------
Credit Characteristics of Prime RMBS portfolio by vintage at June 30, 2008:
CDO Assets:
--------------------------------------------------------------------------
Cumul-
Princ- Delin- ative
Original Outstanding ipal quency Loss
WA Face Face Carrying Subordi- 60+/FC/ to
Vintage Rating Amount Amount Value nation REO Date
--------------------------------------------------------------------------
2003 B $ 1.9 $ 1.8 $ 0.7 0.22% 0.34% 1.44%
2004 BB 18.8 12.9 2.6 2.05% 7.53% 0.22%
2005 B+ 92.9 79.6 16.3 1.50% 8.03% 0.01%
--------------------------------------------------------------------------
Total
Prime
RMBS B+ $ 113.6 $ 94.3 $ 19.6 1.55% 7.82% 0.07%
--------------------------------------------------------------------------
Non-CDO Assets:
--------------------------------------------------------------------------
Cumul-
Princ- Delin- ative
Original Outstanding ipal quency Loss
WA Face Face Carrying Subordi- 60+/FC/ to
Vintage Rating Amount Amount Value nation REO Date
--------------------------------------------------------------------------
2003 NR $ 1.9 $ 1.8 $ 0.2 0.00% 0.34% 2.13%
2004 NR 4.2 2.9 0.5 0.00% 0.93% 28.05%
2005 CCC- 104.3 83.9 13.7 0.55% 5.05% 10.40%
2006 B 5.0 4.9 1.2 0.64% 1.57% 0.00%
2007 CCC 19.1 19.0 2.6 0.31% 1.61% 0.24%
--------------------------------------------------------------------------
Total
Prime
RMBS CCC- $ 134.5 $ 112.5 $ 18.2 0.49% 4.14% 9.00%
--------------------------------------------------------------------------
SUBPRIME RMBS INVESTMENT PORTFOLIO
Subprime RMBS Investment Portfolio at June 30, 2008:
-----------------------------------------------------------------
Weighted Average
------------------
($ in millions) Amortized Cost Carrying Value Yield Term (Yrs)
-----------------------------------------------------------------
BBB $ 3.6 $ 3.6 36.5% 7.2
BB 1.2 1.2 44.6% 4.9
B 0.8 0.8 41.6% 10.2
Below B 10.7 10.7 64.4% 10.1
-----------------------------------------------------------------
Total Subprime
RMBS $ 16.3 $ 16.3 55.7% 9.0
-----------------------------------------------------------------
Credit Characteristics of Subprime RMBS portfolio by vintage at June 30,
2008:
CDO Assets:
--------------------------------------------------------------------------
Cumul-
Princ- Delin- ative
Original Outstanding ipal quency Loss
WA Face Face Carrying Subordi- 60+/FC/ to
Vintage Rating Amount Amount Value nation REO Date
--------------------------------------------------------------------------
2005 BB- $ 80.3 $ 74.2 $ 10.5 5.79% 29.77% 0.00%
--------------------------------------------------------------------------
Total
Subprime
RMBS BB- $ 80.3 $ 74.2 $ 10.5 5.79% 29.77% 0.00%
--------------------------------------------------------------------------
Non-CDO Assets:
--------------------------------------------------------------------------
Cumul-
Princ- Delin- ative
Original Outstanding ipal quency Loss
WA Face Face Carrying Subordi- 60+/FC/ to
Vintage Rating Amount Amount Value nation REO Date
--------------------------------------------------------------------------
2005 BB- $ 30.2 $ 29.2 $ 2.4 4.62% 33.10% 0.00%
2006 B 25.2 24.6 2.8 5.49% 28.99% 0.00%
2007 CCC 9.1 9.1 0.6 1.93% 21.22% 0.00%
--------------------------------------------------------------------------
Total Sub-
prime RMBS B $ 64.5 $ 62.9 $ 5.8 4.57% 29.77% 0.00%
--------------------------------------------------------------------------
Financing Details
The following table shows the Company's available for sale
securities, real estate loans, and other investments as of June 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 $ 241.7 $ 188.3 $ - $ - $ 21.7
Prime RMBS 37.8 10.6 - - 0.4
Subprime RMBS 16.3 5.8 - - -
Preferred Stock(2) 0.0 - - - -
Real estate loans 71.9 - 24.1 21.4 -
Commercial real
estate 231.5 - 219.4 17.0 -
Real Estate
Finance Fund - - - - -
Trust Preferred
Securities - - 51.6 - -
Other 1.6 - - - -
---------------------------------------------------------------------------
Total $ 600.8 $ 204.7 $ 295.1 $ 38.4 $ 22.1
---------------------------------------------------------------------------
(1) CDO debt has been allocated based upon the asset mix within the
Company's CDOs.
(2) Exact balance of $24,250.
CDO and Non-CDO Assets
The table below summarizes the breakdown of our available for
sale securities between assets held by non-recourse securitization
subsidiaries financed by CDO debt and assets held directly at June
30, 2008:
------------------------------------------------------------------
Consolidated
($ in millions) Carrying Value CDO Assets Non-CDO Assets
------------------------------------------------------------------
CMBS $ 241.7 $ 185.4 $ 56.3
Prime RMBS 37.8 19.6 18.2
Subprime RMBS 16.3 10.5 5.8
ABS - - -
Preferred Stock(1) 0.0 - 0.0
------------------------------------------------------------------
Total $ 295.8 $ 215.5 $ 80.3
------------------------------------------------------------------
(1) Exact balance of $24,250.
Our securitized assets are held by two non-recourse
securitization subsidiaries financed by CDO debt. The table below
details the assets and liabilities of these securitizations at June
30, 2008:
---------------------------------------------------------------------------
Consolidated
Outstanding Consolidated
($ in millions) Face Amount Carrying Value CDO I CDO II
---------------------------------------------------------------------------
CMBS $ 523.8 $ 185.4 $ 39.7 $ 145.7
Prime RMBS 94.3 19.6 19.6 -
Subprime RMBS 74.2 10.5 10.5 -
Collateralized debt
obligations (480.3) (204.8) (48.2) (156.6)
---------------------------------------------------------------------------
Net Equity $ 212.0 $ 10.7 $ 21.6 $ (10.9)
---------------------------------------------------------------------------
OTHER INFORMATION
The Company will file its Form 10-Q for the quarter ended June
30, 2008 with the Securities and Exchange Commission by 5:30 p.m.
EDT on Monday, August 11, 2008. Please read the Form 10-Q carefully
as it contains 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 and
commercial real estate depreciation and amortization. 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 income (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 (Loss)
Estimated REIT Taxable Income (Loss) 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 (Loss) excludes the
undistributed taxable income (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 (Loss) 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
(Loss) 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
(Loss) 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. 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 March 31,
2008, filed with the SEC on May 12, 2008 and the updated version of
those risk factors that the Company will file as Exhibit 99.1 to
the Form 10-Q for the period ended June 30, 2008 that we expect to
file with the SEC on August 11, 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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