JER INVESTORS TRUST INC. 
By First Quarter Highlights:
-- Liquidity: At March 31, 2009, we had $4.0 million in unrestricted cash
and net borrowings on our repurchase agreement of $13.4 million. As of
May 4, 2009, unrestricted cash decreased to $2.9 million and net
borrowings on our repurchase agreement declined to $12.6 million.
-- Earnings and Adjusted Funds from Operations Per Adjusted Diluted Common
Share: Generally accepted accounting principles ("GAAP")
requires that we retrospectively restate earnings per share for our
1-for-10 reverse stock split that occurred on February 20, 2009.
However, under GAAP, we are precluded from retrospectively restating
earnings per common share for our stock dividend paid on January 30,
2009 as a portion of this dividend was paid in cash. Management
believes that it is meaningful to investors to disclose the
retrospective effect of both the 1-for-10 reverse stock split as well as
the stock dividend. Accordingly, we are presenting non-GAAP earnings
per Adjusted Diluted Common Share ("ADCS"). See a
reconciliation of earnings and AFFO per common share calculated under
GAAP to earnings per ADCS at the end of this release.
-- Adjusted Funds from Operations: Adjusted Funds from Operations
("AFFO"), a non-GAAP measure, was $4.3 million, or $0.86
per ADCS, for the three months ended March 31, 2009. See
reconciliations of net income (loss) determined in accordance with
GAAP to AFFO at the end of this release.
-- Operating Results: Net loss was $18.3 million, or $(3.69) per ADCS, for
the three months ended March 31, 2009.
-- Stockholders' Equity: Stockholders' equity at March 31, 2009
was $27.9 million, or $5.60 per diluted share.
-- Real Estate Loan Portfolio Credit Statistics: There were no
delinquencies or loss reserves established related to real estate loans
as of March 31, 2009.
-- CMBS Portfolio Credit Statistics: Outlined below are credit statistics
relating to the approximately $48 billion of unpaid principal balance of
commercial real estate loans, representing approximately 3,500 loans,
that serve as collateral for our "first-loss" conduit CMBS
investments.
-- 60-day and greater delinquencies on loan collateral underlying our
CMBS "first-loss" investments was 165 basis points at
March 31, 2009 compared to 83 basis points at December 31, 2008. As
of April 30, 2009, the 60-day and greater delinquency rate increased
to 191 basis points.
-- Special servicing portfolio at March 31, 2009 consisted of 104 loans
with an unpaid principal balance of approximately $1.2 billion. As
of May 5, 2009, the number of loans in special servicing increased
to 126 loans with an aggregate unpaid principal balance of
approximately $2.3 billion.
-- CMBS Portfolio Loss Projections: Primarily due to the continuing
increases in delinquencies and the special servicing portfolio, as well
as current weakness in the real estate and credit markets, we increased
our loss projections on the approximately $48 billion of commercial real
estate loan collateral underlying our CMBS "first-loss"
investments as of March 31, 2009 to approximately $1.2 billion
(approximately 2.5% of the unpaid principal balance of such loans) from
approximately $964 million (approximately 2.0% of the unpaid principal
balance of such loans) at December 31, 2008, as compared to 1.4% at
original underwriting. In addition, we accelerated the projected timing
of such losses and currently estimate that approximately 59.5% of the
total projected losses will occur through 2011 compared to approximately
51.6% in our December 31, 2008 loss projections, and approximately 15.1%
in our original underwriting. Cumulative actual realized losses on our
"first-loss" conduit CMBS investments through March 31, 2009
were approximately $3.4 million. As we continue to monitor developments
in our portfolio and the overall macroeconomic environment, loss
reserves may increase in the future in response to further deterioration
in the real estate and credit markets.
-- Other Than Temporary Impairment Charges: During the three months ended
March 31, 2009, we recorded $14.5 million of impairment charges related
to our CMBS investments that are not financed by CDOs and relate to
declines in the projected net present value of future cash flows related
to individual CMBS investments and other than temporary impairment
charges on our CMBS driven by the duration and severity of our
unrealized losses on 23 separate CMBS bonds pursuant to EITF 99-20.
Recent Events
We did not make interest payments due on
Liquidity
As previously disclosed, the Company has undertaken or expects to commence certain efforts to reduce expenses and preserve liquidity including; (i) discontinuing payment of quarterly dividends and replacing it with payment of an annual dividend to the extent required to satisfy REIT dividend requirements, (ii) seeking to reduce operating costs, primarily our general and administrative costs, (iii) seeking to restructure terms of our recourse indebtedness including extension of scheduled maturity dates and/or modification of near-term interest payment requirements; and (iv) if necessary, pursue sales of selected assets.
Investments
JERT's investments as of
Weighted
March 31, 2009 Average
-------------- ---------
Face % of
Amount/ Total
Cost Invest- Coupon Loss
Basis Amortized Fair ments Rate Adjusted
(1) Cost Value (2) (3) Yield
--------- --------- ------ ------- ------- ---------
CMBS not
financed by
CDOs $432.3 $23.6 $23.6 8.2% 5.2% 57.2%(4)
CMBS financed
by CDO I 418.7 50.5 50.5 17.6% 4.9% 40.7%(4)
CMBS financed
by CDO II 888.9 61.3 61.3 21.3% 5.2% 51.6%(4)
----- ---- ---- ---- --- ----
Total CMBS (5) 1,739.9 135.4 135.4 47.1% 5.1% 47.9%
Real estate
loans, held
for
investment (6) 270.6 270.3 152.0 52.9% 3.6% 3.6%
Investments in
US Debt Fund 0.1 0.1 0.1 0.0% N/A N/A
--- --- --- --- ----- -----
Total $2,010.6 $405.8 $287.5 100.0% 4.9% N/A
======== ====== ====== ===== === =====
(1) For investments in unconsolidated joint ventures.
(2) Based on fair value.
(3) Based on face amount.
(4) Loss adjusted yields for our CMBS investments reflect the impact of
estimated future losses on underlying collateral and are the basis on
which we record interest income on such investments in our GAAP
financial statements in accordance with guidance provided by EITF 99-
20.
(5) Amortized cost has been reduced from original cost primarily due to
the recognition of cumulative impairments of $849.0 million.
(6) Real estate loans are financed by CDO II.
Borrowings
With respect to liabilities, at
-- $127.4 million (or 45.6% of total liabilities) represents the estimated
fair value of borrowings in the form of long term,
"match-funded" notes payable issued to third parties relating
to our two collateralized debt obligation offerings, CDO I and CDO II
with an aggregate face amount of $969.9 million. Pursuant to our
adoption of SFAS No. 159 effective January 1, 2008, we elected to
account for these notes payable using the fair value option. CDO I and
CDO II are not subject to "margin calls" based on
mark-to-market fair value determinations of the underlying collateral
and are generally non-recourse to the Company.
-- $13.4 million (or 4.8% of total liabilities) represents net borrowings
under short-term repurchase facilities with JPMorgan. The facility is
generally subject to "margin calls" based on mark-to-market
fair value determinations of the underlying collateral and is fully
recourse to us.
-- $9.0 million (or 3.2% of total liabilities) represents a note payable
the Company entered into as a result of the restructuring of four
interest rate swaps. On March 3, 2009, we entered into a new agreement
with our counterparty to terminate and replace all of our outstanding
non-CDO interest rate swaps, which had a $245.1 million ending notional
amount and a $21.4 million net fair value liability as of December 31,
2008, in exchange for a new seven-year fixed rate-for-fixed interest
rate agreement. Under such agreement, we will pay a fixed monthly
amount of approximately $0.4 million through February 2017. We have
reflected this agreement, at fair value, as a note payable on our
consolidated balance sheets as it does not meet the definition of a
derivative.
-- $61.9 million (or 22.1% of total liabilities) represents borrowings in
the form of unsecured junior subordinated debentures. These junior
subordinated debentures are not subject to "margin calls"
based on mark-to-market fair value determinations of underlying
collateral but are fully recourse to us. These debentures have a
maturity date of April 2037 and are outstanding in connection with our
April 2007 issuance of $60.0 million of trust preferred securities.
-- $62.1 million (or 22.2% of total liabilities) represents the fair value
of our CDO-related pay-fixed interest rate swaps with a notional balance
at March 31, 2009 of $413.1 million and a weighted-average interest rate
of 5.0%.
-- $5.6 million (or 2.1% of total liabilities) consists of amounts due to
affiliates of $1.3 million, trade payables and other liabilities.
As of
Non-GAAP Financial Measures
In this earnings release, we may disclose non-GAAP financial measures as defined by SEC Regulation G. In addition, we have used non-GAAP financial measures, in particular Adjusted Funds from Operations, or AFFO, as well as earnings (loss) per adjusted diluted common share, or ADCS, in this press release. A reconciliation of AFFO and earnings (loss) per ADCS and the comparable GAAP financial measure (net income, assets, liabilities and stockholders' equity and earnings per share, as applicable) can be found at the end of this earnings release.
About JER Investors Trust Inc.
JER Investors Trust Inc. is a specialty finance company quoted on the OTC Bulletin Board that originates and acquires commercial real estate structured finance products. Our target investments include commercial mortgage backed securities, mezzanine loans and B-Note participations in mortgage loans, commercial mortgage loans and net leased real estate investments. JER Investors Trust Inc. is organized and conducts its operations so as to qualify as a real estate investment trust ("REIT") for federal income tax purposes. For more information regarding JER Investors Trust Inc. and to be added to our e-mail distribution list, please visit www.jer.com.
Forward-Looking Statements
This press release does not constitute an offer of any securities for sale. Certain items in this press release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. JER Investors Trust can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from JER Investors Trust's expectations include, but are not limited to, changes in the real estate and capital markets, our ability to source and fund new investments and other risks detailed from time to time in JER Investors Trust's SEC reports. Such forward-looking statements speak only as of the date of this press release. JER Investors Trust expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in JER Investors Trust's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
CONTACT:
J. Michael McGillis
Chief Financial Officer
JER Investors Trust Inc.
(703) 714-8000
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
March 31, December 31,
2009 2008
--------- ------------
(unaudited) (audited)
ASSETS
Cash and cash equivalents $3,959 $8,357
Restricted cash 4,587 1,149
CMBS financed by CDOs, at fair value 111,812 180,210
CMBS not financed by CDOs, at fair value 23,616 42,432
Real estate loans, held for investment,
at fair value at
March 31, 2009 and December 31, 2008 152,032 189,980
Investments in unconsolidated joint
ventures 115 843
Accrued interest receivable 7,599 8,343
Due from affiliate 411 157
Deferred financing fees, net 973 981
Other assets 2,130 2,349
-------- --------
Total Assets $307,234 $434,801
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
CDO notes payable, at fair value $127,400 $211,695
Repurchase agreements 13,358 16,108
Junior subordinated debentures 61,860 61,860
Notes payable 9,000 500
Interest rate swap agreements, at fair
value 62,140 91,984
Accounts payable and accrued expenses 1,637 839
Dividends payable - 2,274
Due to affiliate 1,287 689
Other liabilities 2,626 2,489
----- -----
Total Liabilities 279,308 388,438
Stockholders' Equity:
Common stock, $0.01 par value,
100,000,000 shares authorized,
4,987,994 and 2,590,104 shares
issued and outstanding
at March 31, 2009 and December 31,
2008, respectively 50 26
Additional paid-in capital 413,194 392,744
Cumulative cash dividends paid/declared (157,705) (157,705)
Cumulative stock dividends paid/declared (20,462) -
Cumulative deficit (183,960) (165,626)
Accumulated other comprehensive loss (23,191) (23,076)
------ ------
Total Stockholders' Equity 27,926 46,363
------ ------
Total Liabilities and Stockholders'
Equity $307,234 $434,801
======== ========
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except share and per share data)
For the Three
Months Ended March 31,
----------------------
2009 2008
---- ----
REVENUES
Interest income from CMBS $15,237 $21,452
Interest income from real estate loans 2,328 8,886
Interest income from cash and cash
equivalents 11 422
Equity in (losses) earnings, net, of
unconsolidated joint ventures (1,599) 933
Fee income 412 97
--- --
Total Revenues 16,389 31,790
EXPENSES
Interest expense 6,494 15,415
Management fees, affiliate 1,210 1,827
General and administrative 2,782 1,980
----- -----
Total Expenses 10,486 19,222
INCOME BEFORE OTHER GAINS (LOSSES) 5,903 12,568
OTHER GAINS (LOSSES)
Unrealized loss on financial assets
financed with CDOs (100,236) (179,669)
Unrealized gain, net, on CDO related
financial liabilities 95,585 246,574
Loss on interest rate swaps (6,654) (2,775)
Loss on impairment of CMBS (14,512) (99,579)
Unrealized loss, net, on real estate
loans held for sale - (28,368)
Unrealized gain (loss) on non-CDO
interest rate swaps 13,860 (15,600)
Loss on termination of interest rate
swaps (12,280) -
------- ---
Total other gains (losses) (24,237) (79,417)
------- -------
NET LOSS $(18,334) $(66,849)
======== ========
Net loss per share:
Basic $(4.36) $(26.00)
====== =======
Diluted $(4.36) $(25.97)
====== =======
Weighted average shares of common
stock outstanding:
Basic 4,201,006 2,570,830
========= =========
Diluted 4,203,975 2,573,644
========= =========
Dividends declared per common share $- $-
=== ===
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF OTHER GAINS (LOSSES) (unaudited)
(In thousands)
For the Three
Months Ended March 31,
---------------------
2009 2008
---- ----
Changes in Fair Value
CDO related financial assets and liabilities
CMBS $(65,726) $(174,761)
Real estate loans (34,510) (4,908)
Notes payable 79,601 266,652
Interest rate swaps 15,984 (20,078)
------ -------
Unrealized gain (loss) on CDO related financial
assets and liabilities (4,651) 66,905
------ ------
Non-CDO related financial assets and liabilities
Loss on CMBS impairment (14,512) (45,123)
Real estate loans held for sale - (28,368)
Interest rate swaps 13,860 (4,804)
------ ------
Unrealized gain (loss) on non-CDO related
financial assets
and liabilities (652) (78,295)
---- -------
Total changes in fair value (5,303) (11,390)
------ -------
Realized Losses
Loss on termination of interest rate swaps (12,280) -
------- ---
Total realized losses (12,280) -
------- ---
Cash payments on interest rate swaps (5,927) (2,083)
------ ------
Recognition of amounts in other comprehensive
income (loss) ("AOCI") as of December 31, 2007
Loss on CMBS impairment - (54,457)
Unrealized gain (loss) on non-CDO related
interest rate swaps - (10,795)
Amortization of swap termination costs (132) (124)
Amortization of unrealized loss on CDO related
interest rate swaps (595) (568)
---- ----
Total recognition of amounts in AOCI as of
December 31, 2007 (727) (65,944)
---- -------
-------- --------
Total other gains (losses) $(24,237) $(79,417)
======== ========
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(In thousands)
For the Three
Months Ended March 31,
----------------------
2009 2008
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(18,334) $(66,849)
Adjustments to reconcile net income to net cash
provided by operating activities:
CMBS and real estate loan (accretion)
amortization 6,139 179
Amortization of debt issuance costs 9 223
Amortization of other comprehensive (income)
loss related to
CDO related interest rate swap agreements 727 696
Unrealized (gain) loss on CDO related
financial assets and liabilities, net 4,651 (66,905)
Unrealized and realized losses on interest
rate swaps (1,581) 15,202
Unrealized loss on impairment of CMBS 14,512 99,579
Unrealized (gain) loss on real estate loans
held for sale, net - 28,368
Equity in (earnings) losses, net, from
unconsolidated joint ventures 1,599 (933)
Distributions from unconsolidated joint
ventures - 1,252
Stock compensation expense 11 49
Changes in assets and liabilities:
Decrease (increase) in other assets 216 160
Decrease (increase) in accrued interest
receivable 745 571
Increase (decrease) in due to/from
affiliates, net 344 (374)
Increase (decrease) in accounts payable and
accrued expenses
and other liabilities, net 932 267
----- ------
Net cash provided by operating
activities 9,970 11,485
----- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in unconsolidated joint ventures (871) (413)
(Increase) decrease in restricted cash, net (3,438) 5,528
Proceeds from repayment of real estate loans 3,439 4,133
----- -----
Net cash provided by (used in)
investing activities (870) 9,248
---- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid (2,274) (28,391)
Proceeds from repurchase agreements - 1,393
Repayment of repurchase agreements (2,750) (67,198)
Repayment of CDO notes payable, net (4,694) -
Repayment of notes payable (500) -
Payment of financing costs - (1,428)
Payment of interest rate swap termination costs (3,280) -
------ ---
Net cash (used in) provided by
financing activities (13,498) (95,624)
------- -------
Net decrease in cash and cash equivalents (4,398) (74,891)
Cash and cash equivalents at beginning of period 8,357 87,556
------ -------
Cash and cash equivalents at end of period $3,959 $12,665
====== =======
Supplemental Disclosures of Cash Flow Information
Cash paid for interest $11,834 $18,121
======= =======
Non-cash note payable in satisfaction
of interest rate swap agreements $9,000 $-
====== ===
Dividends declared but not paid $- $-
=== ===
1. Adjusted Funds from Operations
JER INVESTORS TRUST INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)
(in thousands, except share and per share data)
For the Three
Months Ended March 31,
----------------------
2009 2008
---- ----
(unaudited)
Net income (loss) available to common stockholders $(18,334) $(66,849)
Add:
Unrealized gain, net, on CDO related financial
assets and liabilities 4,651 (66,905)
Amortization of December 31, 2007 unrealized loss
on CDO related interest rate swaps 594 569
Unrealized loss on impairment of CMBS 14,512 99,579
Unrealized (gain) loss on real estate loan held
for sale - 28,368
Unrealized (gain) loss on non-CDO interest rate
swap agreements (13,860) 15,600
Realized loss on termination of non-CDO interest
rate swap agreement 12,280 -
Equity in (earnings) losses, net, of
unconsolidated joint ventures 1,599 (933)
Cash distributions from unconsolidated joint
ventures - 1,252
Redirection of CDO II cash flow to amortize CDO
II class A note payable (4,290) -
Depreciation on consolidated real estate assets - 238
CMBS and real estate loan (accretion) amortization 6,139 179
Estimated costs of unsuccessful equity offering 999 -
--- ---
Adjusted Funds from Operations (AFFO) $4,290 $11,098
====== =======
AFFO per ADCS:
Basic $0.86 $2.23
===== =====
Diluted $0.86 $2.23
===== =====
2. Earnings, AFFO and Book Value per Adjusted Diluted Common Share
("ADCS") (1)
JER INVESTORS TRUST INC. AND SUBSIDIARIES
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES (unaudited)
EPS (Basic)
-----------
For the Three Months Ended
March 31,
--------------------------
2009 2008
---- ----
Earnings per share (basic) under
GAAP $(4.36) $(26.00)
Add (deduct) impact of stock
dividend 0.67 12.55
---- -----
Earnings per adjusted share
(basic) $(3.69) $(13.45)
====== =======
EPS (Diluted)
-------------
For the Three Months Ended
March 31,
--------------------------
2009 2008
---- ----
Earnings per share (diluted)
under GAAP $(4.36) $(25.97)
Add (deduct) impact of stock
dividend 0.68 12.52
---- -----
Earnings per ADCS $(3.68) $(13.45)
====== =======
AFFO per Share (Basic)
----------------------
For the Three Months Ended
March 31,
--------------------------
2009 2008
---- ----
AFFO per share (basic) under GAAP $1.02 $4.32
Add (deduct) impact of stock
dividend (0.16) (2.09)
----- -----
AFFO per adjusted share (basic) $0.86 $2.23
===== =====
AFFO per Share (Diluted)
------------------------
For the Three Months Ended
March 31,
--------------------------
2009 2008
---- ----
AFFO per share (diluted) under
GAAP $1.02 $4.31
Add (deduct) impact of stock
dividend (0.16) (2.08)
----- -----
AFFO per ADCS $0.86 $2.23
===== =====
Book Value per Share (Basic)
----------------------------
As of As of
March 31, December 31,
2009 2008
----------- -------------
Book value per share (basic)
under GAAP $5.60 $17.90
Add (deduct) impact of stock
dividend - (8.61)
--- -----
Book value per adjusted share
(basic) $5.60 $9.29
===== =====
Book Value per Share (Diluted)
------------------------------
As of As of
March 31, December 31,
2009 2008
----------- -------------
Book value per share (diluted)
under GAAP $5.60 $17.90
Add (deduct) impact of stock
dividend - (8.61)
--- -----
Book value per ADCS $5.60 $9.29
===== =====
(1) GAAP requires that we retrospectively restate earnings per share for
our 1-for-10 reverse stock split that occurred on February 20, 2009.
However, under GAAP, we are precluded from retrospectively restating
earnings per share for our stock dividend paid on January 30, 2009 as
a portion of this dividend was paid in cash. Management believes it
is meaningful to investors to disclose the retrospective effect of
both the 1-for-10 reverse stock split as well as the stock dividend.
Accordingly, we are presenting the non-GAAP measure earnings per
Adjusted Diluted Common Share ("ADCS").
SOURCE JER Investors Trust Inc.
