3rd Qtr. 07 Newsletter
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NEWSLETTER THIRD QUARTER 2007 President’s Report December 2007 New Debt Investment: Johnson Park Lofts In spite of the continuing turmoil in the mortgage and credit markets, CDT’s financial condition remains solid. Our strong balance sheet leaves us well- positioned to take advantage of new opportunities that provide liquidity to the community development marketplace in 2008. Our debt and equity portfolios continue to perform well as evidenced by our 3rd quarter FFO of $0.21 per share, which is discussed in more detail in the Financial Summary section of the Newsletter. In November, we held our quarterly Board of Directors meeting in Dallas, Texas. This gave us the opportunity to have our Directors visit several of our debt and equity investments in the Dallas market and get a better understanding of both the challenges and opportunities that these investments In September 2007, CDT purchased a $1,015,000 first mortgage present. for Johnson Park Loft Apartments from JPMorgan Chase, the As discussed last quarter, I have continued to visit construction and permanent lender for this property. The our existing debt and equity partners to learn property is adjacent to Johnson Park on the northwest side of firsthand how we can improve and expand our Milwaukee, Wisconsin. The renovation of this site assists in the business relationships. I have also spent a fair ongoing revitalization of the Johnson Park community. The amount of time meeting with new potential property is the conversion of a 1920s five-story, commercial partners, individuals I have known for years in the building renovated to create 24 large, loft-style apartments for community development field, to evaluate how CDT might be able to work with their families. The property also included the renovation of two organizations to continue our mission. ground-floor, retail spaces leased to local nonprofit organizations. While I have seen several potential opportunities on the equity side of the business, I am particularly encouraged by the strong prospects for the debt Johnson Park Lofts was developed by North Avenue side of our business. In addition to our core Community Development Corporation (NACDC) and business of long-term affordable housing lending, Milwaukee Redevelopment LLC. NACDC is a community- we continue to develop our program of new short- based organization founded in 1999 and has been involved in a term lending opportunities. We are also continuing series of developments in its service area on the northwest side to pursue several promising leads with of Milwaukee. The principals of Milwaukee Redevelopment intermediaries and CDFIs throughout the country. LLC have extensive experience in the rehabilitation of existing I look forward to providing an update on these new properties using low income housing tax credits. opportunities and a report on our 2007 performance in our next newsletter. In addition to the loan from JPMorgan Chase, the project was financed with tax credit equity from The Richmond Group, Sincerely, subordinate debt from the City of Milwaukee, and grants, including one from the Helen Bader Foundation. Joseph F. Reilly President & CEO Page 2 Business Activity Loan Activity Summary CDT had a very active third quarter. We acquired $350 approximately $28.5 million in new loans. Through $300 September 30, 2007, we have purchased approximately $250 $42.2 million in loans. Including CDT’s long-term (in millions) LIHTC business and our new Short-Term Participation $200 Program, we have committed just over $50 million $150 through September year-to-date. Our total commitments outstanding as of September 30, 2007 were $83 million. $100 $50 JPMorgan Chase Portfolio $0 In September, we successfully closed a $24.3 million Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 loan portfolio with JPMorgan Chase, one of CDT’s Quarter Ended largest portfolio transactions to date. The portfolio Loans Purchased Loans Committed consisted of 14 transactions from five states, including both closed loans and forward commitments. Five of the loans, totaling $8.7 million, were funded in September. The remaining loans are scheduled to fund in late 2007 and during 2008. All of the loans are secured by first mortgages on LIHTC communities developed by experienced sponsors, located in Indiana, Illinois, Michigan, Wisconsin and Texas. PORTFOLIO PERFORMANCE Debt Portfolio: The portfolio’s September 30, 2007 weighted average DCR of 1.35 was down slightly compared to the June 30, 2007 DCR of 1.39. The strong DCR and the 4.3% weighted average vacancy rate continue to evidence the overall high quality of the portfolio. At September 30, 2007, there were three loans in default. One loan, with a $5.1 million principal balance, that was included in CDT’s 2004 loan securitization, remained in default. CDT provided an overall guarantee of $3.3 million on that securitization. During the quarter ended September 30, 2007, two loans with aggregate principal balances of $1.3 million, defaulted. In each case, CDT is working with the borrowers to achieve a satisfactory resolution of the issues. Equity Portfolio: Occupancy • Same Unit Occupancy at September 30, 2007 of 100% 90.4% was unchanged from the prior quarter. Occupancy Rate 98% • Same Unit Monthly Rental Income for the third quarter of 2007 increased 3% compared to the same 96% quarter a year ago. 94% • Same Unit Quarterly Operating Expenses for the third 92% quarter of 2007 decreased by 2% compared to the 90% same quarter a year ago. • Same Unit Quarterly Net Operating Income for the 88% third quarter of 2007 was 14% higher than the same Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 quarter a year ago. Q u a r t e r En d e d In summary, third quarter 2007 operations at ten of the sixteen portfolio properties, owned over one year, improved compared to the same quarter a year ago, but were offset by a significant decline in operations at one Texas property. CDT continues to work closely with its partners and property management towards improving the performance of all of the portfolio’s properties. Page 3 S TA F F A N N O U N C E M E N T S PROMOTIONS: • Patricia Tagarello, Vice President - Operations Patricia Tagarello joined CDT in 2002 and has been promoted to Vice President of Operations. Pat will be responsible for human resources, information technology and general office management. • Brian M. Dowling, Vice President - Underwriting Brian Dowling joined CDT in 2005 and has been promoted to Vice President of Underwriting. Brian will manage our team of underwriters/analysts, who will work on debt, equity and new product development opportunities. • Christopher Blair, Associate Chris Blair joined CDT in 2006 and has been promoted to Associate – Asset Management. Chris will continue to perform asset management of our debt and equity portfolios. F I N A N C I A L S U M M A RY Operations - FFO per share for the third quarter of 2007 increased 16.7% to $0.21 per share versus $0.18 per share last year. However, in dollar terms, FFO for the third quarter of 2007 was $1,108,424, down slightly from the $1,153,161 in the third quarter of 2006. The increase in FFO per share is primarily a result of fewer common shares outstanding in 2007. For the first nine months of 2007, FFO was $2,755,897, down 3.5% from the $2,857,316 for the nine months ended September 30, 2006. On a per share basis, FFO for the first nine months of 2007 was $0.51, compared to $0.55 for the same period in 2006. The decline in FFO so far this year is primarily attributable to weaker performance in several of our equity assets and lower fee income versus 2006. Fair Market Value - CDT’s FMV as of September 30, 2007 is $12.49 per share, which represents a 6.8% decrease from the FMV of $13.40 per share at June 30, 2007 and a decrease of 8.4% from the $13.64 FMV per share at September 30, 2006. Dividends - The Board of Directors declared a quarterly dividend of $0.18 per share on all Class B common shares. The dividend was payable on November 15, 2007 to all common stockholders of record as of November 13, 2007. The Board also approved a regular quarterly dividend of $0.53125 per share on the 4.25% convertible preferred shares, payable on November 30, 2007 to all preferred stockholders of record as of November 13, 2007. FFO FMV $0.25 $14.00 $13.50 $0.20 Per Share Per Share $13.00 $0.15 $12.50 $0.10 $12.00 $0.05 $11.50 $0.00 $11.00 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Quarter Ended Quarter Ended THE COMMUNITY DEVELOPMENT TRUST, INC. F I N A N C I A L S U M M A RY - T H I R D Q UA R T E R 2 0 0 7 UNAUDITED Preserving America’s Communities (in thousands, except per share data) CDT is the country's only Balance Sheet private real estate investment September 30, December 31, trust with a public purpose. 2007 2006 Working with local and Assets national partners, our Cash and cash equivalents $ 14,938 $ 12,069 Restricted cash 3,515 3,543 organization makes long- Investments 29,944 39,360 term equity investments in Real estate, including investments in joint ventures 50,661 51,761 Senior mortgage loan participations 5,507 - affordable communities and Subordinate mortgage loans, net 21,572 17,460 serves as a secondary market Mortgage loans, net 939 2,168 Other assets 2,849 2,256 provider for low-income Total Assets $ 129,925 $ 128,617 multifamily mortgages. After eight years of opera- Liabilities and Stockholders' Equity Mortgages payable $ 28,256 $ 28,811 tions, CDT has invested or Other liabilities 3,669 4,404 committed approximately Stockholders’ equity 98,000 95,402 $629 million in debt and Total Liabilities and Stockholders’ Equity $ 129,925 $ 128,617 equity capital to properties Income Statement in 38 states and regions— For the quarter ended helping to preserve or add September 30, 2007 September 30, 2006 over 24,900 units to the nation's affordable housing Amount Per share Amount Per share stock. Total revenues $ 3,936 $ 2,920 Total expenses 3,389 3,117 Net income (loss) $ 547 $ (197) Preferred stock dividend (680) - Visit Our Website! Net loss applicable to common stock $ (133) $ (0.02) $ (197) $ (0.03) www.cdt.biz Add back property depreciation 1,325 1,350 Other GAAP adjustments, net (84) - Funds from operations $ 1,108 $ 0.21 $ 1,153 $ 0.18 1350 Broadway, Suite 700 New York, NY 10018 Common dividends paid $ 973 $ 0.18 $ 1,108 $ 0.17 Phone: 212-271-5080 Fax: 212-271-5079 Weighted average number of shares Email: email@example.com outstanding - Basic 5,392 6,519 For additional information on CDT’s programs and invest- Neither the information in this report nor any opinion expressed herein constitutes an offer, or an invitation to make ments, please visit our website. an offer, to buy or sell any securities. Statements regarding future prospects may not be realized. Past performance is not necessarily a guide to future performance.