RAIT's CEO Discusses Q1 2012 Results - Earnings Call Transcript

RAIT Financial Trust (RAS)

Q1 2012 Earnings Call

May 3, 2012 9:30 a.m. ET

Executives

Scott Schaeffer - CEO

Jack Salmon - CFO

Andres Viroslav - Director Corporate Communications

Analysts

Jason Stewart - Compass Point

Brian Gonick - Sunvest Capital

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the First Quarter 2012 RAIT Financial Trust Earnings Conference Call. My name is Jasmine, and I'll be your coordinator for today. (Operator Instructions)

I would now like to turn the presentation over to your host for today's conference, Mr. Andres Viroslav, Director of Corporate Communications. You may proceed.

Andres Viroslav

Thank you, Jasmine, and good morning to everyone. Thank you for joining us today to review RAIT Financial Trust’s first quarter 2012 financial results. On the call with me today are Scott Schaeffer, Chief Executive Officer, and Jack Salmon, RAIT’s Chief Financial Officer.

This morning’s call is being webcast on our website at www.raitft.com. There will be a replay of the call available via webcast on our website and telephonically beginning at approximately 11:30 AM Eastern Time today. The dial-in for the replay is 888-286-8010, with a confirmation code of 20606750.

Before I turn the call over to Scott, I would like to remind everyone that there may be forward-looking statements made in this call. These forward-looking statements reflect RAIT’s current views with respect to future events and financial performance. Actual results could differ substantially and materially from what RAIT has projected. Such statements are made in good faith pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to RAIT’s press release and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations.

Participants may discuss non-GAAP financial measures in this call. A copy of RAIT’s press release containing financial information, other statistical information and a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is attached to RAIT’s most recent current report on Form 8-K, available at RAIT’s website, www.raitft.com, under Investor Relations. RAIT’s other SEC filings are also available through this link. RAIT does not undertake to update forward-looking statements in this call or with respect to matters described herein, except as may be required by law.

Now I’d like to turn the call over to RAIT’s Chief Executive Officer, Scott Schaeffer. Scott?

Scott Schaeffer

Thanks, Andres. And thanks to all of you for joining us on our call today. We had mixed results this quarter. We are reporting a GAAP loss resulting from a $109 million noncash charge. And yes, I want to emphasize noncash charge due to the change in the carrying value of our Taberna debt. Jack will provide more detail on this charge shortly.

Our AFFO was up $0.02 per share year-over-year but lower by $0.09 per share on a linked quarter basis driven by two factors. First, new loan fundings occurring late in the quarter and second, no gains from the sale of CMBS loans during the first quarter.

Looking forward, we expect interest income to rebound in the second quarter as we receive the full benefit of loans that closed later in the first quarter and the additional benefit of loans closing in the second quarter. Year-to-date we've closed $81 million of bridge and mezzanine loans and we have signed term sheets in house for another $100 million of bridge loans that we expect to close before the end of the second quarter.

In our CMBS business, after a slow start due to market turmoil last fall, we have closed or have signed applications for nine CMBS loans representing $65 million of funding and we continue to see good opportunities for growth in this platform.

We expect to fund and sell CMBS loans into securitizations in both the second and third quarters of this year. The recent capital raise of approximately $35 million provided sufficient capital to collateralize our warehouse facilities for future CMBS production and to fund mezzanine loan opportunities, while bridge loans continue to be funded through our existing securitization.

To date we have invested $19 million of this capital and will invest the remaining capital into identified CMBS loans that will close later this quarter.

Our portfolio of directly held real estate continues to improve. Rental income as well as occupancy and NOI continued to move up in our properties. Again, Jack will provide more details shortly.

In our non-traded REIT initiative, we continue to make progress regarding the offering of our multifamily focused non-traded equity REIT named Independence Realty Trust. While IRT has not yet commenced raising investor capital, we now have signed pre-selling agreements representing approximately 600 financial advisors and are in due diligence with another 12 broker dealers representing approximately 17,000 financial advisors. This process has clearly been slower than anticipated but we continue to make progress.

And finally, we've experienced enough positive developments within RAIT's portfolios and stabilized RAIT's balance sheet to the point where we have increased the common dividend to $0.08 per share in the first quarter of 2012 and we are comfortable providing dividend guidance for the balance of 2012. At this time, we expect to continue to declare quarterly dividends on our common shares of at least $0.08 per share for each quarter remaining in 2012.

And at this point, I'd like to turn the call over to Jack.

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