MCLEAN, Va., June 4 /PRNewswire-FirstCall/ -- JER Investors Trust Inc. (Pink Sheets: JERT)("JERT" or the "Company") released its annual Statement of Affairs of the Company for the twelve months ended December 31, 2009.
2009 Unaudited Operating Results:
- Operating Results: Net loss was $74.9 million and $254.2 million, or $(14.20) and $(98.75) per diluted common share, for the twelve months ended December 31, 2009 and 2008, respectively.
- Stockholders' Equity: Stockholders' equity (deficit) at December 31, 2009 was $(25.2) million, or $(4.32) per common share.
The unaudited consolidated balance sheets as of December 31, 2009 and 2008 and consolidated statements of operations for the twelve months ended December 31, 2009, 2008 and 2007 are attached as an exhibit to this release.
The Company's unrestricted cash balances were $0.7 million and $0.9 million at December 31, 2009 and June 2, 2010, respectively. The Company had repurchase agreement balances outstanding of $7.0 million at December 31, 2009, and had no repurchase agreements outstanding at June 2, 2010.
As previously disclosed, the Company continues to have outstanding payment defaults related to the following:
- Unfunded capital calls of $3.3 million related to its investment in the JER US Debt Co-Investment Vehicle, L.P. (the "US Debt Fund"). As a result of these defaults, effective January 1, 2010, the Company no longer receives a management fee from the US Debt Fund.
- Payment default on its interest rate swap obligations to National Australia Bank Limited ("NAB") (the "NAB Note Payable"), which based on its terms is classified as a note payable on the Company's balance sheet. As of April 19, 2010, NAB terminated the NAB Note Payable, and established a termination value of $29.0 million.
- Payment default on its junior subordinated notes with an outstanding face amount of $70.3 million, exclusive of unpaid interest and penalties.
Currently, the Company's primary source of liquidity is from its non-CDO CMBS investments. The Company is no longer receiving distributions from its retained interests in CDO I and CDO II, and it does not expect to receive distributions from such CDOs for the foreseeable future, if at all. In addition, the Company's US Debt Fund investment is not expected to generate any liquidity to the Company in the foreseeable future, and the Company anticipates that any future distributions from the US Debt Fund will be retained by the US Debt Fund to reduce the Company's unfunded capital call obligations to the US Debt Fund. As a result, the Company is focused on seeking to preserve liquidity by minimizing its non-CDO cash operating costs, to the extent possible, primarily by (i) ceasing management fee payments to its external manager effective December 2009, after significantly reducing such cash payments from April 2009 to November 2009, (ii) filing a Form 15 with the Securities and Exchange Commission (the "SEC") on March 31, 2010 and ceasing to be an SEC reporting company, and (iii) effective January 1, 2010, discontinuing payments currently due on its NAB Note Payable and junior subordinated notes.
The Company's recent historical cash receipts by source are as follows (in thousands):
For the Three Months Ending
March 31, 2009
June 30, 2009
September 30, 2009
December 31, 2009
For the Twelve Months Ending December 31, 2009
Year to Date Through May 31, 2010
Non-CDO CMBS currently
Non-CDO CMBS sold in
CDO I retained interest
CDO II retained interest
US Debt Fund
(1) Includes proceeds from sale of these bonds of $5.5 million, compared to a December 31, 2009 estimated fair value of $6.4 million.
As noted above, the Company's cash receipts continue to decline as delinquencies and special servicing transfers on loans underlying our CMBS continue to increase.
Below are selected credit statistics on our CMBS investments and the commercial real estate loans that serve as collateral on our first-loss CMBS investments (dollars in thousands):
December 31, 2008
September 30, 2009
December 31, 2009
Total CMBS investments
Face amount of CMBS investments
CMBS investments in which JRT owns the
Face amount of first-loss CMBS investments
Face amount of collateral pool for first-loss
Credit Statistics on Collateral Pool for
60-day delinquency amount
60-day delinquency rate
Special servicing amount
Special servicing rate
Realized losses to date
Appraisal reductions to date
Projected losses over life of collateral pool
Projected loss rate over life of collateral pool
We expect that delinquencies and transfers of loans to special servicing, realized losses and appraisal reductions will continue to increase during 2010, further eroding cash flows to the CMBS bonds owned by JERT, and in particular, to the non-CDO CMBS bonds which are the Company's primary source of liquidity at this time.
If the credit losses that are ultimately realized are in line with the Company's current expectations regarding the amount and timing of such losses, it is expected that the Company's common stockholders would not recover any value and unsecured creditors of the Company would receive little, if any value.
Balance Sheet Review:
The Company's assets and liabilities at December 31, 2009 can be broken down by financing sources as follows (in thousands):
Other Unsecured Financing
Cash and cash equivalents
CMBS financed by CDO I (face amount of $418,748)
CMBS financed by CDO II (face amount of $863,941)
Non-CDO CMBS (face amount of $423,599) (1)
Real estate loans (face amount of $268,455)
Investment in US Debt Fund
CDO I notes payable, at fair value (face amount of $268,286)
CDO II notes payable, at fair value (face amount of $690,328)
Junior subordinated notes
Interest rate swaps, at fair value
Due to affiliates
Accounts payable, accrued expenses and other liabilities
Implied equity (deficit) by financing source
(1) Proforma for the March 2010 sale of certain CMBS bonds, the face amount is $270.3 million.
With respect to the implied equity (deficit) of our CDOs, while the Company believes the balance sheet reflects the fair value of the individual CDO related assets and liabilities, the Company believes the estimated economic fair value of its CDO retained interests is significantly less than the implied equity determined in accordance with GAAP. The Company does not currently project any future distributions from its retained interests in these CDOs. The Company has negative equity at December 31, 2009, and that negative equity would further increase if (i) the face amount of CDO Notes Payable were substituted for the fair value of such liabilities and (ii) the termination value of the NAB Note Payable of $29.0 million were substituted for the carrying value of the NAB Note Payable of $10.8 million.
As previously reported, on March 30, 2010, the Company sold certain of its CMBS investments with a face amount of $152.9 million for $5.5 million, the majority of the proceeds of which were used to repay all outstanding repurchase agreement borrowings.
The Company did not declare any dividends in 2009 and, given the Company's expectations of continued tax losses, the Company does not expect to declare dividends in the foreseeable future, if at all.
2010 Annual Meeting of Shareholders:
The 2010 annual meeting of shareholders of the Company is scheduled to be held on June 28, 2010 at 11:00 AM, Eastern Daylight Time, at the Courtyard by Marriott—Tysons Corner, 1960-A Chain Bridge Road, McLean, Virginia 22102. At the 2010 annual meeting, shareholders will be asked to vote upon a proposal to elect three directors to serve until the 2011 annual meeting of shareholders and until their respective successors are elected and duly qualified. In addition, this statement of affairs will be submitted at the annual meeting and filed in the Company's corporate records within twenty (20) calendar days following the annual meeting.
The December 31, 2009 financial statements included in this press release have not been audited at this time by our independent registered public accounting firm. Accordingly, the Company gives no assurance that such financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP").
About JER Investors Trust Inc.
JER Investors Trust Inc. is a specialty finance company quoted on the Pink Sheets that manages a portfolio of commercial real estate structured finance products. Our investments include commercial mortgage backed securities, mezzanine loans and participations in mortgage loans, and an interest in the US Debt Fund. 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., please visit www.jerinvestorstrust.com.
This press release does not constitute an offer of any securities. 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. The Company can give no assurance that its expectations will be attained. Factors that could cause actual results to differ materially from the Company's expectations include, but are not limited to, changes in the real estate and capital markets, our ability to maintain existing financing arrangements and other risks detailed in the Company's previously filed SEC reports and other press releases/ public filings made by the Company and/or available at www.jerinvestorstrust.com. As noted above, the Company filed a Form 15 with the SEC on March 31, 2010 and has ceased to be an SEC reporting company. Since the Company is no longer an SEC reporting company, the information contained in previously filed SEC reports is not current and circumstances may have changed significantly since the dates of such filings. Any forward-looking statements contained herein speak only as of the date of this press release. The Company expressly disclaims any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or change in events, conditions or circumstances on which any statement is based.
J. Michael McGillis
Chief Financial Officer
JER Investors Trust Inc.
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
(In thousands, except share data)
Cash and cash equivalents
CMBS financed by CDOs, at fair value
CMBS not financed by CDOs, at fair value
Real estate loans, held for investment, financed by CDOs, at fair value
Investments in unconsolidated joint ventures
Accrued interest receivable
Due from affiliate
Deferred financing fees, net
LIABILITIES AND STOCKHOLDERS' EQUITY
CDO notes payable, at fair value
Junior subordinated debentures and notes
Interest rate swap agreements related to CDOs, at fair value
Accounts payable and accrued expenses
Due to affiliate
Common stock, $0.01 par value, 100,000,000 shares authorized,
5,827,678 and 2,590,104 shares issued and outstanding
at December 31, 2009 and 2008, respectively
Additional paid-in capital
Cumulative cash dividends paid/declared
Cumulative stock dividends paid/declared
Accumulated other comprehensive loss
Total Stockholders' Equity (Deficit)
Total Liabilities and Stockholders' Equity (Deficit)
JER INVESTORS TRUST INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(In thousands, except share and per share data)
For the Twelve Months Ended
Interest income from CMBS
Interest income from real estate loans
Interest income from cash and cash equivalents
Lease income from real estate assets
Equity in (losses) earnings, net, of unconsolidated joint ventures
Management fees, affiliate
Incentive fees, affiliate
Depreciation and amortization of real estate assets
General and administrative
INCOME BEFORE OTHER GAINS (LOSSES)
OTHER GAINS (LOSSES)
Unrealized loss on financial assets financed with CDOs
Unrealized gain (loss), net, on CDO related financial liabilities
Loss on interest rate swaps
Loss on impairment of CMBS
Unrealized gain (loss), net, on real estate loans held for sale
Unrealized gain (loss) on non-CDO related interest rate swaps
Unrealized (loss) due to hedge ineffectiveness
Gain on exchange and cancellation of TRUPs
Loss on sale of real estate loans held for sale
Loss on termination of interest rate swaps
Total other gains (losses)
NET INCOME (LOSS)
Net income (loss) per share:
Weighted average shares of common stock outstanding:
Dividends declared per common share
SOURCE JER Investors Trust Inc.