Docstoc

Investor Presentation

Document Sample
Investor Presentation Powered By Docstoc
					                             ®



Investor Presentation
 Third Quarter 2005 Update
Forward Looking Statements
                                   -
This presentation contains “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All
                                                                                              -
statements contained in this presentation that are not clearly historical in nature are forward looking, and the words “anticipate,” “believe,”
                                                                                                  -
“expect,” “estimate,” “plan,” and similar expressions are generally intended to identify forward looking statements. Examples of these
       -
forward looking statements include, but are not limited to: our belief that we will elect REIT tax status with our 2006 tax year; our estimate as
to the amount of our historical earnings and profits that we will be required to pay out to our shareholders; and our projected dividends for
2006 and 2007.
           -
All forward looking statements (including statements regarding future financial and operating results) involve risks, uncertainties and
contingencies, many of which are beyond our control, which may cause actual results, performance, or achievements to differ materially from
                                                                  -
anticipated results, performance, or achievements. The forward looking statements in this presentation regarding our anticipated results and
performance as a REIT commencing in 2006 are subject to particular risks including, but not limited to: resolution of, and receipt of final
Board of Directors approval with respect to, relevant legal, accounting and financial matters relating to our election of REIT status beginning
January 1, 2006, and no occurrence of other events that require a change in the timing of our REIT election; our ability to restructure our
corporate entities and existing financings to permit us to position our assets in the most advantageous manner between the REIT and a taxable
REIT subsidiary; material variance in the expected level of our cumulative earnings and profits or our projected dividend payout, and the
implications of any such variance on our stock price; our ability to access the capital markets on attractive terms or at all to obtain the
financing we will require to acquire sufficient additional real estate assets as necessary to implement our new business plan, and the additional
capital we will require to operate as a REIT; our management’s ability to operate our business in accordance with the complex rules and
regulations governing REITs as necessary to ensure our qualification for and maintenance of our REIT status; potential changes in tax laws
that could reduce the benefits we associate with the REIT election; our lack of share ownership limitations and transfer restrictions in our
charter could result in our failure to qualify as a REIT if five or fewer individuals were to acquire 50 percent or more of our outstanding shares
of common stock; and the relative attractiveness of our dividend payout as compared to other investment options should market interest rates
continue to rise.
More detailed information about factors we believe could cause our actual results, performance or achievements to differ materially from
anticipated levels is contained in our filings with the SEC, including the sections captioned “Risk Factors” and “Business” in our Annual
                   -    as
Report on Form 10 K filed with the SEC on March 15, 2005. We are under no obligation to (and expressly disclaim any such obligation to)
                           -
update or alter our forward looking statements, whether as a result of new information, future events or otherwise.



                                                                                                                                 Investor Presentation
                                                                         2
                               ®                                                                                           Third Quarter 2005 Update
Who We Are

  “Super” REIT Structure
       Broad Based Middle Market Lending Platform
       Blending Asset Based Loans, Corporate Loans, Commercial & Healthcare Real Estate Loans
       Deliver a Growing & Predictable Dividend
  Large Scale Platform
       543 Employees
       23 Offices
       Over $5.5 Billion in Assets in Core Business; over 840 Loans to Over 550 Borrowers
       Strong Growth in Core Business and Approximately $3.0B in Residential Mortgage Securities
       Acquired
       Market Leadership Position in All Major Business Lines
  Seasoned, Proven Management Team
  The Most Balanced and Diversified, Tax Advantaged, Dividend Paying
  Enterprise

  Note: Loan data as of September 30, 2005


                                                                                        Investor Presentation
                                               3
                       ®                                                          Third Quarter 2005 Update
Superior Business Attributes

   Focused Business Model
        All Business Units Compete on Service, Expertise and Insight Derived from Being an “Insider”
        All Business Units offer Non-Commodity Products
        Generates Superior Risk Adjusted Returns and Superior Credit Outcomes
   Strong Shareholder Alignment
        Management and the Board Own Approximately $1.6 Billion in Company Stock
        In the Last Six Months, Management and the Board have Purchased Approximately $130
        Million in Company Stock
   Compelling Financial Model
        Large, Broad, Diversified Lending Platform
        High Return on Equity
        Modest Leverage, Diverse Funding Sources
        Tax Efficient Structure
        High Asset Quality; 95% of Loan Assets are Senior Secured
        Largely Interest Rate Insensitive

     Note: Data as of September 30, 2005, except shareholder data which is as of December 31, 2005 and based on a year end
           share price of $22.40
                                                                                                                     Investor Presentation
                                                               4
                        ®                                                                                      Third Quarter 2005 Update
Multiple Lending Products Create a Balanced Portfolio
Core Portfolio
Corporate Loans
   Asset-Based Revolvers
   Senior Secured Cash Flow Loans
   Asset-Based Revolvers to Healthcare Operators
   DIP Loans
Real Estate Lending & Investing
   First Mortgage Debt to Commercial Real Estate Investors
   Asset-Based Loans to Real Estate Lenders
   First Mortgage Debt to Healthcare Operators
   Sale Leaseback Transactions


Residential Investment Strategy
Residential Mortgage Loans
   Agency Whole Pools
   High Credit, Non-Conforming

                                                                   Investor Presentation
                                                5
                    ®                                        Third Quarter 2005 Update
Multiple Business Units

    Corporate Finance                Healthcare Credit          Healthcare Real Estate
 Senior Secured Debt to           Asset Based Lending to      First Mortgage Debt and
 Finance LBO’s                    Healthcare Companies        Sale Leasebacks on Healthcare
                                                              Properties



  Commercial Real Estate                 Rediscount                      BCS
 First Mortgage Debt Secured      Asset Based Lending to      Asset Based Lending, Including
 by All Real Estate Asset Types   Middle Market Finance       DIP Loans and Distressed
                                  Companies                   Investing to Non-Healthcare
                                                              Companies


     Security Finance                 Fee Businesses               CapitalAnalytics
 Asset Based Lending to           Origination and Servicing   Captive In-House Audit and
 Security Alarm Companies         Businesses Leveraging the   Due Diligence Function,
                                  Expertise of the Platform   Playing a Crucial Role in Loan
                                                              Approval and Management

                                                                                  Investor Presentation
                                               6
                    ®                                                       Third Quarter 2005 Update
A Fully Built Out Platform and The Leading Brand




   543 Employees
   390 Investment Professionals                (1)


   23 Offices
   $258.3 Billion of Deals Reviewed From Inception to September 30, 2005
 (1) Investment professionals include Credit Committee, Development Officers, Investment Officers, Loan Officers, Underwriting Officers,
         Loan Analysts, Attorneys and related support staff

                                                                                                                        Investor Presentation
                                                                  7
                           ®                                                                                      Third Quarter 2005 Update
Deals in Review - A Growing Pipeline While Maintaining Discipline

                     $35                                                                                                10%


                     $30                                                                                                9%


                     $25                                                                                                8%
Dollars (Billions)




                                                                                                                              Closing Rate
                     $20                                                                                                7%


                     $15                                                                                                6%


                     $10                                                                                                5%


                     $5                                                                                                 4%


                     $0                                                                                                 3%
                              04




                                      04




                                               04




                                                                    04




                                                                                    05




                                                                                               05




                                                                                                       05
                            20




                                    20




                                             20




                                                                  20




                                                                                  20




                                                                                             20




                                                                                                     20
                           1Q




                                   2Q




                                            3Q




                                                             4Q




                                                                                1Q




                                                                                            2Q




                                                                                                    3Q
                                                 Pipeline ($'s)          Closing Rate (%)

                                                                                                                  Investor Presentation
                                                                          8
                                        ®                                                                   Third Quarter 2005 Update
True Diversification Across All Products and Businesses


         Portfolio by Lending Groups                 Portfolio by Product Mix


                                                               5%

                  29%
                                           38%                          35%
                                                       29%




                          33%                                   31%



               Healthcare & Specialty Finance          Senior Secured Asset-Based
               Corporate Finance                       Senior Secured Cash Flow
               Structured Finance                      First Mortgage
                                                       Mezzanine
Note: Portfolio data as of September 30, 2005
                                                                                 Investor Presentation
                                                 9
                             ®                                             Third Quarter 2005 Update
Highly Diverse Portfolio
                                     Portfolio breakdown by Industry

        Hard Money Lender               Hospitality       Media      Mortgage Lender
               1%                          2%              4%              4%          Multi-Familty Real Estate
                                                                                                 2%
        Enhanced Mezzanine                                                                              Office/Retail/Ind RE
               2%                                                                                                3%
         Direct Money Lender                                                                             Rediscount (Other)
                 4%                                                                                             0%
                                                                                                             Resort Finance
                                                                                                                  5%
                 Consumer Prods & Svc
                         9%                                                                                          Retail
                                                                                                                      1%
          Condo Conversion
                3%                                                                                 Security Alarm
                                                                                                        3%

                                         Business Prods & Svc                                              Special Situations
                                                 20%                                                              2%

                                                                  Healthcare                                 Value-Added Man
                                                                    27%                                               6%




                               Auto Lender
                                   2%


                                                                                                                              Investor Presentation
                                                                10
                     ®                                                                                                  Third Quarter 2005 Update
Benefits of a Balanced Business Model

   Diversification, No Large Exposures
   Predictable Growth
   Greater Management Discipline
   Stronger Funding Platform
   Allows for the Application of Best Lending Practices
   Helps Attract and Retain People
   Stable Stream of Cash Flow




                                                                Investor Presentation
                                            11
                  ®                                       Third Quarter 2005 Update
Superior Financial Model

                       CapitalSource Attributes
                    Strong Risk-Adjusted Yields

                    Efficient, Scalable Cost Structure

                    Stable, Diverse Low Cost Funding

                    Conservative Financial Leverage

                    Recurring Revenues
                        No Gain on Sale Accounting
                    Reasonable Loan Growth Targets

                    Strong Credit Quality

                    Tax Efficient Structure


                                                               Investor Presentation
                                   12
              ®                                          Third Quarter 2005 Update
CapitalSource Portfolio Growth

              $6.0
                                                                                             $5.49

                                                                             $5.07
              $5.0                                                   $4.72

                                                             $4.28

              $4.0                                   $3.78
($Billions)




                                             $3.30

              $3.0                   $2.75
                             $2.42

                     $1.99
              $2.0




              $1.0
                     3Q03    4Q03    1Q04    2Q04     3Q04   4Q04    1Q05    2Q05             3Q05


                                                                                           Investor Presentation
                                                     13
                              ®                                                      Third Quarter 2005 Update
Our Strategy – Attractive, Defensible, High Margin Niches


                                                                                      Sale              HealthCare
Low                                                                                Leasebacks           Real Estate



                                                                      Asset-                            HealthCare
                                                                      Based        DIP Loans             Working
                                                                     Revolvers                           Capital
 LIQUIDITY




                                                                                                           Small
                                                                     Structured
                                                                                   Rediscount             Sponsor
                                                                     Real Estate
                                                          ns
                                                                                                         Cash Flow

                                                      tur
                                                d  Re         on
                                                                e
                                             te             Z
                                        djus          u rce
                                    skA         a lSo
                                  Ri      a pit
                               er      eC
                          H igh      Th
High
                                                                       Large
             Equipment          Conduit                                                                  Mezzanine
                                                                      Sponsor
              Leasing          Real Estate                                                                Loans
                                                                     Cash Flow



                         Low                                                                    High
                                                            EXPERTISE
                                                                                                             Investor Presentation
                                                                14
                               ®                                                                       Third Quarter 2005 Update
CapitalSource Return on Equity

   20%
                                                                                       19%




                                                                               15%
   15%
                                                      14%




                      12%




   10%
                      2003                           2004                      2005E   2006E
                         c orporation tax rates, 2005 and 2006 are estimates
Note: 2003 pro forma for - c
                                                                                             Investor Presentation
                                                                   15
                             ®                                                         Third Quarter 2005 Update
Diverse, Stable, Low Cost Funding Sources
             Diverse Funding Sources                                   Demonstrated Capital Markets Access
                                                                        Equity Markets
                  Total: $5.7 billion                                       $367 million IPO – August ’03
                                                                            $430 million Secondary Offering – February ’04
                                                                                              - n
                                                                            $429 million Follow OOffering – October ‘05
                                                   Credit
     Equity                                        Facilities           Convertible Market
                                                                            $225 million 1.25%- March ’04
                                                                            $330 million 3.50%- July ’04

                                       28%                              Term Debt Securitizations
                  26%                                                       Over $4.2 billion in Proceeds from Seven
                                                                            Oversubscribed Transactions
                                                                        $2.4B in Credit Facility Capacity
               10%                                                      Attractive Financial Characteristics
                                 36%                                    Cost of Funds:
                                                                            2003: 3.32%; 211 bps Spread to Libor
                                                                            2004: 3.08%; 155 bps Spread to Libor
Convertible                                       Term Debt                 YTD05: 4.61%; 110 bps Spread to Libor
Debentures                                                              All Financings Accounted for on Balance
                                                                        Sheet
                Debt/Equity: 2.84x                                          No Gain on Sale Recognized

 Note: Financial information is as of September 30, 2005. Pro forma
                                                                        Largely Interest Rate Insensitive
       for equity offering in early October 2005.
                                                                                                                  Investor Presentation
                                                                  16
                            ®                                                                               Third Quarter 2005 Update
Risk and Credit Management

   Zero Loss Tolerance
   More (and Better) Resources in the Process
   85+ Experienced Underwriters at CapitalAnalytics
      Independent Underwriting, Forensic Accounting and Field Examination Function
      Lending Group Focused; Sector Specific Methodologies
      Staff with Average of 10+ Years of Experience; ~75% with a CPA and/or MBA
   Numerous Checks and Balances
   Best-in-Class Information Systems
   Unanimous Approval of Credit Committee Required for Every Loan
      Committee Composed of CEO, President, CCO, Chief Legal Officer and Group President
      Same Team has Approved all Loans made to Date




                                                                                      Investor Presentation
                                             17
                 ®                                                              Third Quarter 2005 Update
High Degree of Deal Selectivity

           $ Billions                                                                 %

             $258.3                                      Screened prospects


                                                                    Term sheets
               $56.3                                                                 21.8%
                                                                     proposed


                                                                    Term sheets
               $25.2                                                 accepted        9.8%

                                                                        Closed
               $13.4                                                                 5.2%

Source: Unaudited, CapitalSource DealTracker from inception to September 30, 2005.


                                                                                            Investor Presentation
                                                                              18
                                 ®                                                    Third Quarter 2005 Update
“Super REIT” vs. Peer BDC and REIT

                             CapitalSource                    Monoline           Monoline          Monoline
                             "Super REIT"                      BDC           Residential REIT   Commercial REIT

       Diversified                   Yes                           No               No                   No


      Asset Profile           Senior Secured            Mezzanine / Equity    Senior Secured    Mezzanine / B Loan


 Growth Drivers                   Multiple                       Single           Single               Single

        Employees                    543                         132(1)           N/A(1)                99 (1)

"True" Leverage                    Low (2)                      High (2)          High (2)            High (2)

Retain Earnings               Able to in TRS                       No         Not Generally       Not Generally


(1)   Average of Composite (Internally Managed Only)
(2)   Considering all the Leverage Inherent in the Capital Structure



                                                                                                         Investor Presentation
                                                                       19
                              ®                                                                    Third Quarter 2005 Update
Superior Business Attributes

   Focused Business Model
        All Business Units Compete on Service, Expertise and Insight Derived from Being an “Insider”
        All Business Units offer Non-Commodity Products
        Generates Superior Risk Adjusted Returns and Superior Credit Outcomes
   Strong Shareholder Alignment
        Management and the Board Own Approximately $1.6 Billion in Company Stock
        In the Last Six Months, Management and the Board have Purchased Approximately $130
        Million in Company Stock
   Compelling Financial Model
        Large, Broad, Diversified Lending Platform
        High Return on Equity
        Modest Leverage, Diverse Funding Sources
        Tax Efficient Structure
        High Asset Quality; 95% of Loan Assets are Senior Secured
        Largely Interest Rate Insensitive
     Note: Data as of September 30, 2005, except shareholder data which is as of December 31, 2005 and based on a year end
           share price of $22.40
                                                                                                                     Investor Presentation
                                                              20
                        ®                                                                                      Third Quarter 2005 Update
                    ®




Supplemental Information
Balance Sheet

                ($000s)
                                                    12/31/2004     9/30/2005    Growth
                Cash                                $ 206,077     $ 125,405       -39%
                Restricted Cash                        237,176       169,782      -28%

                Loans                                4,274,525     5,487,256      28%
                Deferred Loan Fees                    (98,936)     (109,875)      11%
                Allowance for Loan Losses             (35,208)      (81,498)     131%
                Loans, net                           4,140,381     5,295,883      28%

                Investments                              44,044        90,442    105%
                Other Assets                            109,151        90,301    -17%
                Total Assets                        $ 4,736,829   $ 5,771,813     22%

                Credit Facilities                   $ 964,843     $ 1,998,582    107%
                Term Debt                             2,186,311     2,094,511     -4%
                Unsecured Debt                          555,000       555,000      NA
                Total Borrowings                      3,706,154     4,648,093     25%
                Other Liabilities                        84,284        44,123    -48%
                Total Liabilities                     3,790,438     4,692,216     24%
                Total Equity                            946,391     1,079,597     14%
                Total Liabilities and Equity        $ 4,736,829   $ 5,771,813     22%

                                                                                               Investor Presentation
                                               22
                 ®                                                                       Third Quarter 2005 Update
Income Statement


     ($000s, except per share data)
                                                            FY 2003             FY 2004           Growth     3Q2004         3Q2005         Growth
     Total Interest and Fee Income                        $ 225,765           $ 400,151              77%   $ 112,354      $ 169,251           51%

     Interest Expense                                         (39,956)            (79,053)          98%        (21,922)       (50,981)       133%
     Net Interest and Fee Income                              185,809             321,098           73%          90,432        118,270        31%

     Reserves                                                 (11,337)            (25,710)         127%         (7,832)       (42,884)       448%
     Net Interest & Fee Income                                174,472             295,388           69%         82,600          75,386        -9%
     after Chargeoffs & Provision

     Total Operating Expenses                               (67,807)           (107,748)            59%      (28,465)       (33,295)           17%
     Total Other Income                                       25,815              17,781           -31%         4,014          2,743          -32%
     Pre-tax Income                                          132,480             205,421            55%        58,149         44,834          -23%
     Taxes                                                  (50,342)            (80,570)            60%      (23,841)       (16,751)          -30%
     Net Income                                           $ 82,138            $ 124,851             52%    $ 34,308       $ 28,083            -18%

     EPS (Fully Diluted)                                  $        0.77       $            1.06     38%    $      0.29    $      0.24         -17%



Note: After-tax net income for 2003 is pro forma based on a 38% effective tax rate.


                                                                                                                                       Investor Presentation
                                                                                      23
                                   ®                                                                                             Third Quarter 2005 Update
Allowance of Loan Loss as % of Loans

 1.50%


 1.25%


 1.00%




                                                                                                                                       1 .49 %
 0.75%




                                                                                                              0 .96 %
 0.50%




                                                                                                                          0.8 8%
                                                                                       0 .8 6 %
                                                                 0 .8 4 %




                                                                                                   0 .82 %
                                             0.7 6%



                                                       0.7 5%




                                                                             0.7 5%
                                  0 .66 %
          0.6 2%



                    0.5 9%




 0.25%


 0.00%
         4Q02      1Q03          2Q03       3Q03      4Q03      1Q04        2Q04      3Q04        4Q04       1Q05        2Q05         3Q05




                                                                                                                              Investor Presentation
                                                                       24
                             ®                                                                                          Third Quarter 2005 Update
Recovery Analysis through September 30, 2005

         Since June 2003, CapitalSource has Reported 25 Loans (Totaling $278.2Million)
         as Delinquent and/or Non-Accrual
         Fourteen Loans ($133.0 Million) were Resolved with a Net Recovery of 88%
                  Senior Secured Asset-Based: 2 Loans ($14.2 Million); Net Recovery of 93%
                  Senior Secured Cash Flow: 5 Loans ($52.2 Million); Net Recovery of 78%
                  First Mortgage: 7 Loans ($66.6 Million); Net Recovery of 96%
         Eleven Loans ($145.1 Million) Remain Unresolved
                  Senior Secured Asset-Based: 2 Loans ($5.3 Million)
                  Senior Secured Cash Flow : 3 Loans ($66.0 Million)
                  First Mortgage : 6 Loans ($73.8 Million)


                                            ccrual and Delinquent Loan Balances as of Date Loans First
  Note: Data as of September 30, 2005. Non- A
        Disclosed in Credit Statistics.
  Source: CapitalSource Asset Manager (CAM)- Unaudited

                                                                                                               Investor Presentation
                                                                25
                           ®                                                                             Third Quarter 2005 Update
®

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:3
posted:12/7/2011
language:
pages:26