By a News Reporter-Staff News Editor at Real Estate Weekly News -- Colony Financial, Inc. (NYSE: CLNY) (the "Company") announced financial results for the first quarter ended March 31, 2014 and declares an increased dividend of $0.36 per share of common stock for the second quarter of 2014. First Quarter 2014 Highlights Core Earnings, a non-GAAP financial measure, of $27.1 million, or $0.33 per basic and diluted share and net income attributable to common stockholders of $16.4 million, or $0.20 per basic and diluted share. Core earnings and net income are net of $4.5 million of transaction expenses, or approximately $0.06 per basic share
During the quarter, the Company invested and agreed to invest approximately $630 million composed of: (i) $379 million in ten loan originations; (ii) $100 million in a loan portfolio acquisition; and (iii) $151 million in three real estate equity investments
Issued $230 million of 3.875% Convertible Senior Notes due in January 2021 resulting in net proceeds of $224 million to the Company
Raised net proceeds of $327 million through the sale of 15 million shares of common stock
Declared and paid a first quarter dividend of $0.35 per share of common stock, consistent with the fourth quarter of 2013
Subsequent to quarter end: (i) the Company invested and agreed to invest approximately $169 million in six loan originations; (ii) the Company completed its first securitization transaction within its Transitional CRE Lending Platform; the retained $64 million position, together with an additional $15 million of affiliated loans held outside the trust, yields a blended rate of LIBOR plus 14% before fees and expenses; (iii) Colony American Homes ("CAH") completed a securitization transaction raising $514 million in gross proceeds with a blended rate of LIBOR plus 1.78%; and (iv) declared a second quarter dividend of $0.36 per share of common stock First Quarter Operating Results For the first quarter of 2014, the Company reported total income of $59.2 million and net income attributable to common stockholders of $16.4 million, or $0.20 per basic and diluted share. Colony Financial's Core Earnings were $27.1 million, or $0.33 per basic and diluted share. Core earnings and net income are net of $4.5 million of transaction expenses attributable to common stockholders, or approximately $0.06 per basic share. Of the $4.5 million of transaction expenses, $0.75 million is included in equity in income of unconsolidated joint ventures and the remaining $3.8 million is our share, net of amounts attributable to non-controlling interests, of the $4.6 million of transaction costs itemized on our income statement.
"2014 is off to a great start," said Richard Saltzman, Colony Financial's President and Chief Executive Officer. "The pipeline of prospective transactions is very robust with an emphasis on distressed investing through loan acquisitions and rescue capital originations in Europe and investing in "best in class" equity platforms and first mortgage transitional lending opportunities in the U.S. Simultaneously, our capital markets activity is at a record pace including asset-backed securitizations and corporate financings at a meaningfully reduced cost of capital. Last but not least, Colony American Homes continues to make enormous progress executing its business plan with much improved operating metrics such as occupancy, rental rate increases, and margins; greater internalization of management functions with less reliance on third parties; access to low cost, accretive financing in the securitization markets; and the build-out of a formidable technology platform. All in all, a terrific underpinning to the new year." First Quarter Activity The Company invested in a joint venture with an investment fund managed by an affiliate of the Company's manager ("Co-Investment Fund") to originate a £140 million (approximately $233 million) loan that is primarily collateralized by a first mortgage on a large U.K. shopping center as part of a borrower recapitalization transaction. The loan proceeds were used to refinance an existing loan at a significant discount to par despite the borrower being current on all interest payments. The investment includes: (i) the loan which bears a cash pay interest rate of 10% per annum, has a term of seven years, and has springing recourse to an individual guarantor under certain conditions; and (ii) an equity interest in the shopping center of 35%. It is expected that the borrower will subsequently secure a new first mortgage which will partially pay down the loan and leave the joint venture with a subordinated loan position secured by a second ranking mortgage on the shopping center. There will be an additional exit fee of between £3 million and £4 million (approximately $5 million and $6.7 million, respectively) depending on the timing of this subsequent pay down. Under certain circumstances, the loan may be increased by up to €10 million (approximately $13.8 million). The Company's share of the joint venture with the Co-Investment Fund providing the loan is 96%, or $223 million.
The Company committed $100 million of equity in a consortium including Cerberus Capital Management, L.P. and several other real estate investment firms that agreed to acquire Safeway, Inc. and merge it into the consortium's existing Albertson's national grocery chain enterprise. The pro forma company post-merger has an estimated enterprise value of $14 billion, of which a substantial portion is attributable to real estate value. Through its controlled subsidiary, the Company anticipates soon finalizing the assignment of $50 million of the $100 million commitment (and a ratable share in attendant liabilities) to a passive, third-party co-investment participant. The business plan to be implemented by the consortium upon an expected late 2014 or early 2015 closing is anticipated to generate opportunistic returns.
The Company invested in a joint venture with a Co-Investment Fund to acquire three sub-performing mortgage loans owned by a European bank, with an aggregate unpaid principal balance ("UPB") of approximately $138 million. The loans are collateralized by a luxury destination resort in California, an industrial portfolio in Tennessee, and a regional shopping center in North Carolina. The joint venture purchased the loans at a discount to par with non-recourse matched-term financing for 65% of the purchase price at LIBOR plus 2.85%. The Company's share of this investment is 79%.
The Company originated and committed to originate five first mortgage loans and a related mezzanine loan with an aggregate UPB of $94 million for the Transitional CRE Lending Platform. The loans bear interest, on a weighted average basis, at LIBOR plus 6.2%, have initial terms of approximately 2 to 3 years and feature one to three, 12-month extension options subject to payment of extension fees and satisfaction of certain performance metrics. The underlying collateral includes hospitality, retail, multifamily and mixed-use properties.
A joint venture between the Company, a Co-Investment Fund and an unaffiliated investor acquired a REO property consisting of a five-diamond resort hotel on a 55-acre coastal site located in Hawaii. The hotel received an extensive $180 million renovation in 2006 and 2007, is branded by a renowned luxury hotel operator and includes 73 unsold condos. The property was acquired from a former lender who had foreclosed following a loan default by the previous owners. The total initial capitalization of the investment is approximately $160 million, including an initial funding of $85 million via a third-party first mortgage at the closing of the acquisition. We and the Co-Investment Fund funded $40 million of a $45 million mezzanine loan and $15 million, or 50%, of the equity, with the remainder of the equity owned by the unaffiliated investor. The mezzanine loan has a term of five years and bears a fixed interest rate of 11% which may be paid-in-kind. Our share of the joint venture with the Co-Investment Fund that owns 100% of the mezzanine loan and 50% of the equity is 83%.
The Company originated a $17 million first mortgage loan secured by a Southern California residential land development. The loan bears interest at 15% per annum which may be paid-in-kind and is subject to a 1.0% origination fee. The loan includes a profit participation after the sponsor has attained a 15% return. The initial term of the loan is three years.
Last year, the Company invested in a joint venture with a Co-Investment Fund that originated a $30 million first mortgage loan, with an option to fund an additional $40 million, to finance the acquisition and redevelopment of high-end, single family residential properties in infill coastal Southern California markets. During the first quarter of 2014, the Company and the Co- Investment Fund funded an additional $15 million. The loan bears a fixed interest rate of 15%, of which 7% may be paid in-kind, and is subject to certain other fees including a 1% origination fee and 0.5% exit fee. The term of the loan is four years. The Company's share of the investment is 50%, or $22 million funded to date.
Keywords for this news article include: Real Estate, First Mortgage.
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