x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
Maryland
|
|
13-3978906
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
|
|
|
40
East 52nd
Street, New York, New York
|
|
10022
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
Large accelerated filer þ
|
|
Accelerated filer ¨
|
|
Non-accelerated filer ¨
|
PART
I – FINANCIAL INFORMATION
|
Page
|
|
Item
1.
|
Financial
Statements
|
4
|
Consolidated
Statements of Financial Condition (Unaudited)
|
||
At
September 30, 2008 and December 31, 2007
|
4
|
|
Consolidated
Statements of Operations (Unaudited)
|
||
For
the Three and Nine Months Ended September 30, 2008 and
2007
|
5
|
|
Consolidated
Statement of Changes in Stockholders' Equity (Unaudited)
|
||
For
the Nine Months Ended September 30, 2008
|
6
|
|
Consolidated
Statements of Cash Flows (Unaudited)
|
||
For
the Nine Months Ended September 30, 2008 and 2007
|
7
|
|
Notes
to Consolidated Financial Statements (Unaudited)
|
8
|
|
Item
2.
|
Management's
Discussion and Analysis of Financial Condition and
|
|
Results
of Operations
|
41
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
75
|
|
||
Item
4.
|
Controls
and Procedures
|
79
|
Part
II – OTHER INFORMATION
|
||
Item
1.
|
Legal
Proceedings
|
80
|
Item
1A.
|
Risk
Factors
|
80
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
84
|
Item
5.
|
Other
Information
|
85
|
Item
6.
|
Exhibits
|
85
|
SIGNATURES
|
86
|
September 30, 2008
|
December 31, 2007
|
||||||||||||
ASSETS
|
|||||||||||||
Cash
and cash equivalents
|
$
|
45,810
|
$
|
91,547
|
|||||||||
Restricted
cash equivalents
|
16,019
|
32,105
|
|||||||||||
Securities
held-for-trading, at estimated fair value:
|
|||||||||||||
Subordinated
commercial mortgage-backed securities (“CMBS”)
|
$
|
607,864
|
$
|
1,380
|
|||||||||
Investment
grade CMBS
|
1,005,630
|
15,923
|
|||||||||||
Residential
mortgage-backed securities (“RMBS”)
|
840
|
901
|
|||||||||||
Total
securities held-for-trading
|
1,614,334
|
18,204
|
|||||||||||
Securities
available-for-sale, at estimated fair value:
|
|||||||||||||
Subordinated
CMBS
|
-
|
1,026,773
|
|||||||||||
Investment
grade CMBS
|
-
|
1,230,075
|
|||||||||||
RMBS
|
-
|
9,282
|
|||||||||||
Total
securities available-for-sale
|
-
|
2,266,130
|
|||||||||||
Commercial
mortgage loans (net of loan loss reserve of $43,752 in
2008)
|
897,955
|
983,387
|
|||||||||||
Commercial
mortgage loan pools, at amortized cost
|
1,223,630
|
1,240,793
|
|||||||||||
Equity
investments
|
136,545
|
108,748
|
|||||||||||
Derivative
instruments, at estimated fair value
|
495,032
|
404,910
|
|||||||||||
Other
assets (includes $1,389 at estimated fair value in 2008)
|
64,948
|
101,886
|
|||||||||||
Total
Assets
|
$
|
4,494,273
|
$
|
5,247,710
|
|||||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||||||||
Liabilities:
|
|||||||||||||
Borrowings:
|
|||||||||||||
Secured
by pledge of subordinated CMBS
|
$
|
189,299
|
$
|
293,287
|
|||||||||
Secured
by pledge of investment grade CMBS
|
121,448
|
207,829
|
|||||||||||
Secured
by pledge of commercial mortgage loans
|
201,348
|
244,476
|
|||||||||||
Secured
by pledge of equity investments
|
30,000
|
-
|
|||||||||||
Collateralized
debt obligations ("CDOs") (at estimated fair value in
2008)
|
1,040,435
|
1,823,328
|
|||||||||||
Senior
unsecured notes (at estimated fair value in 2008)
|
47,305
|
162,500
|
|||||||||||
Senior
unsecured convertible notes (at estimated fair value in
2008)
|
58,744
|
80,000
|
|||||||||||
Junior
unsecured notes (at estimated fair value in 2008)
|
16,641
|
73,103
|
|||||||||||
Junior
subordinated notes to subsidiary trusts issuing preferred
securities
(at estimated fair value in 2008)
|
37,056
|
180,477
|
|||||||||||
Secured
by pledge of commercial mortgage loan pools
|
1,205,628
|
1,225,223
|
|||||||||||
Total
borrowings
|
2,947,904
|
4,290,223
|
|||||||||||
Payable
for investments purchased
|
-
|
4,693
|
|||||||||||
Distributions
payable
|
26,784
|
21,064
|
|||||||||||
Derivative
instruments, at estimated fair value
|
523,898
|
442,114
|
|||||||||||
Other
liabilities
|
34,015
|
38,245
|
|||||||||||
Total
Liabilities
|
3,532,601
|
4,796,339
|
|||||||||||
Commitments
and Contingencies
|
|||||||||||||
12%
Series E-1 Cumulative Convertible Redeemable Preferred Stock, liquidation
preference $23,375
|
23,275
|
-
|
|||||||||||
12%
Series E-2 Cumulative Convertible Redeemable Preferred Stock, liquidation
preference $23,375
|
23,275
|
-
|
|||||||||||
Stockholders’
Equity:
|
|||||||||||||
Preferred
stock, 100,000,000 shares authorized;
9.375%
Series C Preferred Stock, liquidation preference $57,500
|
55,435
|
55,435
|
|||||||||||
8.25%
Series D Preferred Stock, liquidation preference $86,250
|
83,259
|
83,259
|
|||||||||||
Common
Stock, par value $0.001 per share; 400,000,000 shares authorized;
76,660,206 shares issued and outstanding in 2008; 63,263,998 shares
issued
and outstanding in 2007
|
77
|
63
|
|||||||||||
Additional
paid-in capital
|
782,930
|
691,071
|
|||||||||||
Retained
earnings (distributions in excess of earnings)
|
24,073
|
(122,738
|
)
|
||||||||||
Accumulated
other comprehensive loss (“OCI”)
|
(30,652
|
)
|
(255,719
|
)
|
|||||||||
Total
Stockholders’ Equity
|
915,122
|
451,371
|
|||||||||||
Total
Liabilities, Mezzanine and Stockholders’ Equity
|
$
|
4,494,273
|
$
|
5,247,710
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Income:
|
|||||||||||||
Interest
from securities
|
$
|
53,387
|
$
|
49,560
|
$
|
156,261
|
$
|
147,195
|
|||||
Interest
from commercial mortgage loans
|
22,674
|
20,494
|
69,506
|
49,942
|
|||||||||
Interest
from commercial mortgage loan pools
|
12,779
|
12,985
|
38,445
|
39,119
|
|||||||||
Earnings
from equity investments
|
3,067
|
6,611
|
2,510
|
28,982
|
|||||||||
Interest
from cash and cash equivalents
|
558
|
1,784
|
2,540
|
3,648
|
|||||||||
Total
income
|
92,465
|
91,434
|
269,262
|
268,886
|
|||||||||
Expenses:
|
|||||||||||||
Interest
|
56,652
|
62,525
|
164,189
|
178,450
|
|||||||||
Management
and incentive fees
|
3,432
|
3,970
|
22,591
|
18,652
|
|||||||||
General
and administrative expense
|
2,025
|
1,624
|
5,706
|
4,448
|
|||||||||
Total
expenses
|
62,109
|
68,119
|
192,486
|
201,550
|
|||||||||
Other
gains (losses):
|
|||||||||||||
Realized
loss on securities and swaps held-for-trading, net
|
(5,005
|
)
|
(4,435
|
)
|
(14,840
|
)
|
(4,063
|
)
|
|||||
Unrealized
loss on securities held-for-trading
|
(247,348
|
)
|
-
|
(572,675
|
)
|
-
|
|||||||
Unrealized
loss on swaps classified as held-for-trading
|
(5,859
|
)
|
-
|
(811
|
)
|
-
|
|||||||
Unrealized
gain on liabilities
|
261,723
|
-
|
667,980
|
-
|
|||||||||
Gain
(loss) on sale of securities available-for-sale, net
|
-
|
(1,331
|
)
|
-
|
5,576
|
||||||||
Dedesignation
of derivative instruments
|
(7,084
|
)
|
-
|
(7,084
|
)
|
-
|
|||||||
Provision
for loan losses
|
(18,752
|
)
|
-
|
(43,942
|
)
|
-
|
|||||||
Foreign
currency gain (loss)
|
7,273
|
775
|
(2,913
|
)
|
3,631
|
||||||||
Loss
on impairment of assets
|
-
|
(2,938
|
)
|
-
|
(7,036
|
)
|
|||||||
Total
other gains (losses)
|
(15,052
|
)
|
(7,929
|
)
|
25,715
|
(1,892
|
)
|
||||||
Net
income
|
15,304
|
15,386
|
102,491
|
65,444
|
|||||||||
Dividends
on preferred stock
|
4,529
|
3,127
|
12,738
|
8,530
|
|||||||||
Net
income available to common stockholders
|
$
|
10,775
|
$
|
12,259
|
$
|
89,753
|
$
|
56,914
|
|||||
Net
income per common share, basic:
|
$
|
0.14
|
$
|
0.19
|
$
|
1.30
|
$
|
0.94
|
|||||
Net
income per common share, diluted:
|
$
|
0.14
|
$
|
0.19
|
$
|
1.23
|
$
|
0.94
|
|||||
Weighted
average number of shares outstanding:
|
|||||||||||||
Basic
|
74,365,259
|
63,861,985
|
69,099,689
|
60,450,020
|
|||||||||
Diluted
|
74,748,560
|
64,178,519
|
81,724,651
|
60,662,477
|
|||||||||
Dividend
declared per share of common stock
|
$
|
0.31
|
$
|
0.30
|
$
|
0.92
|
$
|
0.89
|
|
|
Series
|
|
Series
|
|
|
|
Retained
Earnings
|
|
Accumulated
|
|
|
|
|
|
||||||||||
|
|
Common
|
|
C
|
|
D
|
|
Additional
|
|
(Distributions
|
|
Other
|
|
|
|
Total
|
|
||||||||
|
|
Stock,
|
|
Preferred
|
|
Preferred
|
|
Paid-In
|
|
in Excess
|
|
Comprehensive
|
|
Comprehensive
|
|
Stockholders'
|
|
||||||||
|
|
Par Value
|
|
Stock
|
|
Stock
|
|
Capital
|
|
of Earnings)
|
|
Loss
|
|
Income
|
|
Equity
|
|
||||||||
Balance at January 1, 2008
|
$
|
63
|
$
|
55,435
|
$
|
83,259
|
$
|
691,071
|
$
|
(122,738
|
)
|
$
|
(255,719
|
)
|
$
|
451,371
|
|||||||||
Cumulative effect of
adjustment from adoption of SFAS No. 159
|
122,988
|
227,635
|
350,623
|
||||||||||||||||||||||
Net
income
|
102,491
|
$
|
102,
491
|
102,
491
|
|||||||||||||||||||||
Unrealized
loss on cash flow hedges
|
(6,219
|
)
|
(6,219
|
)
|
(6,219
|
)
|
|||||||||||||||||||
Reclassification
adjustments from cash flow hedges included in net income
|
4,577
|
4,577
|
4,577
|
||||||||||||||||||||||
Dedesigation
of cash flow hedges
|
7,084
|
7,084
|
7,084
|
||||||||||||||||||||||
Foreign
currency translation
|
(8,010
|
)
|
(8,010
|
)
|
(8,010
|
)
|
|||||||||||||||||||
Other
comprehensive income
|
(2,568
|
)
|
|||||||||||||||||||||||
Comprehensive
income
|
99,923
|
||||||||||||||||||||||||
Dividends
declared-common stock
|
(65,930
|
)
|
(65,930
|
)
|
|||||||||||||||||||||
Dividends
on preferred stock
|
(12,738
|
)
|
(12,738
|
)
|
|||||||||||||||||||||
Issuance
of common stock
|
14
|
91,859
|
91,873
|
||||||||||||||||||||||
Balance
at September 30, 2008
|
$
|
77
|
$
|
55,435
|
$
|
83,259
|
$
|
782,930
|
$
|
24,073
|
$
|
(30,652
|
)
|
$
|
915,122
|
For the Nine Months Ended
September 30, 2008
|
For the Nine Months Ended
September 30, 2007
|
||||||
Cash flows from operating activities:
|
|||||||
Net
income
|
102,491
|
$
|
65,444
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Net
decrease in trading securities
|
118
|
6,709
|
|||||
Sale
of trading securities
|
-
|
166,932
|
|||||
Purchase
of securities held-for-trading
|
(53,515
|
)
|
(42,668
|
)
|
|||
Unrealized
loss on securities held-for-trading
|
572,675
|
-
|
|||||
Unrealized
loss on swaps classified as held-for-trading
|
811
|
-
|
|||||
Realized
loss (gain) on securities and swaps held-for-trading, net
|
3,236
|
(1,513
|
)
|
||||
Unrealized
gain on liabilities
|
(667,980
|
)
|
-
|
||||
Earnings
from subsidiary trust
|
(317
|
)
|
(316
|
)
|
|||
Distributions
from subsidiary trust
|
316
|
316
|
|||||
Earnings
from equity investments
|
(2,510
|
)
|
(28,982
|
)
|
|||
Distributions
of earnings from equity investments
|
3,599
|
11,948
|
|||||
Provision
for loan loss
|
43,942
|
-
|
|||||
Discount
accretion, net
|
(14,362
|
)
|
(9,010
|
)
|
|||
Amortization
of finance costs
|
2,505
|
4,351
|
|||||
Loss
on impairment of assets
|
-
|
7,036
|
|||||
Unrealized
net foreign currency loss (gain)
|
28,528
|
(41,796
|
)
|
||||
Non-cash
management and incentive fees
|
11,934
|
3,838
|
|||||
(Disbursements)
proceeds from termination of interest rate swap agreements
|
(17,101
|
)
|
17,737
|
||||
Amortization
of terminated interest rate swaps from OCI
|
4,577
|
928
|
|||||
Dedesignation
of cash flow hedges
|
7,084
|
-
|
|||||
Increase
in other assets
|
(8,910
|
)
|
(11,074
|
)
|
|||
(Decrease)
increase in other liabilities
|
(6,287
|
)
|
6,903
|
||||
Net
cash provided by operating activities
|
10,834
|
156,783
|
|||||
Cash
flows from investing activities:
|
|||||||
Purchase
of securities
|
-
|
(505,119
|
)
|
||||
Proceeds
from sale of securities
|
74,272
|
591,360
|
|||||
Principal
payments received on securities
|
56,968
|
58,857
|
|||||
Funding
of commercial mortgage loans
|
(2,286
|
)
|
(687,316
|
)
|
|||
Repayments
received from commercial mortgage loans
|
19,341
|
275,127
|
|||||
Repayments
received from commercial mortgage loan pools
|
7,639
|
14,835
|
|||||
Decrease
in restricted cash equivalents
|
16,086
|
29,254
|
|||||
Return
of capital from equity investments
|
-
|
25,000
|
|||||
Investment
in equity investments
|
(35,538
|
)
|
(38,555
|
)
|
|||
Net
cash provided by (used in) investing activities
|
136,482
|
(236,557
|
)
|
||||
Cash
flows from financing activities:
|
|||||||
(Decrease)
increase in borrowings under reverse repurchase agreements and
credit
facilities:
|
|||||||
Secured
by pledge of subordinated CMBS
|
(102,998
|
)
|
230,100
|
||||
Secured
by pledge of investment grade CMBS
|
(85,617
|
)
|
(480,927
|
)
|
|||
Secured
by pledge of commercial mortgage loans
|
(39,556
|
)
|
234,471
|
||||
Secured
by pledge of equity investments
|
30,000
|
-
|
|||||
Secured
by pledge of securities held-for-trading
|
-
|
(127,249
|
)
|
||||
Repayments
of borrowings secured by commercial mortgage loan pools
|
(9,157
|
)
|
(16,065
|
)
|
|||
Repayments
of collateralized debt obligations
|
(44,885
|
)
|
(50,018
|
)
|
|||
Issuance
of collateralized debt obligations
|
-
|
23,875
|
|||||
Issuance
costs for collateralized debt obligations
|
-
|
(1,537
|
)
|
||||
Issuance
of senior convertible debt
|
-
|
80,000
|
|||||
Issuance
costs of senior convertible debt
|
-
|
(2,419
|
)
|
||||
Issuance
of senior unsecured notes
|
-
|
87,500
|
|||||
Issuance
costs of senior unsecured notes
|
-
|
(2,456
|
)
|
||||
Issuance
of junior unsecured notes
|
-
|
68,557
|
|||||
Issuance
costs of junior unsecured notes
|
-
|
(2,113
|
)
|
||||
Dividends
paid on preferred stock
|
(11,805
|
)
|
(7,344
|
)
|
|||
Proceeds
from issuance of preferred stock, net of offering costs
|
69,839
|
83,267
|
|||||
Proceeds
from issuance of common stock, net of offering costs
|
59,327
|
66,624
|
|||||
Repurchase
of common stock
|
-
|
(12,000
|
)
|
||||
Dividends
paid on common stock
|
(61,141
|
)
|
(52,943
|
)
|
|||
Net
cash (used in) provided by financing activities
|
(195,993
|
)
|
119,323
|
||||
Effect
of exchange rate changes on cash and cash equivalents
|
2,940
|
16,248
|
|||||
Net
(decrease) increase in cash and cash equivalents
|
(45,737
|
)
|
55,797
|
||||
Cash
and cash equivalents, beginning of period
|
91,547
|
66,388
|
|||||
Cash
and cash equivalents, end of period
|
$
|
45,810
|
$
|
122,185
|
For the Nine Months Ended
September 30, 2008
|
For the Nine Months Ended
September 30, 2007
|
||||||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
paid for interest
|
$
|
167,624
|
$
|
168,889
|
|||
Series
E-3 preferred stock conversion
|
$
|
23,289
|
$
|
-
|
|||
Incentive
fees paid by the issuance of common stock
|
$
|
9,257
|
$
|
5,250
|
(1) |
all
securities which were previously accounted for as
available-for-sale;
|
(2) |
investments
in equity of subsidiary trusts;
|
(3) |
all
unsecured long-term liabilities, consisting of all senior unsecured
notes,
senior unsecured convertible notes,
junior unsecured notes and junior subordinated notes to subsidiary
trust
issuing preferred securities; and
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Numerator:
|
|||||||||||||
Numerator
for basic earnings per share
|
$
|
10,775
|
$
|
12,259
|
$
|
89,753
|
$
|
56,914
|
|||||
Interest
expense on convertible senior notes
|
-
|
-
|
7,066
|
-
|
|||||||||
Dividends
on Series E convertible preferred stock
|
-
|
-
|
3,343
|
-
|
|||||||||
Numerator
for diluted earnings per share
|
$
|
10,775
|
$
|
12,259
|
$
|
100,162
|
$
|
56,914
|
|||||
|
|||||||||||||
Denominator:
|
|||||||||||||
Denominator
for basic earnings per share—weighted average common shares
outstanding
|
74,365,259
|
63,861,985
|
69,099,689
|
60,450,020
|
|||||||||
Dilutive
effect of stock options
|
-
|
1,048
|
-
|
2,133
|
|||||||||
Assumed
conversion of convertible senior notes
|
-
|
-
|
7,416,680
|
-
|
|||||||||
Assumed
conversion of Series E convertible preferred stock
|
-
|
-
|
4,952,748
|
-
|
|||||||||
Dilutive
effect of stock based incentive fee
|
383,301
|
315,486
|
255,534
|
210,324
|
|||||||||
Denominator
for diluted earnings per share—weighted average common shares outstanding
and common stock equivalents outstanding
|
74,748,560
|
64,178,519
|
81,724,651
|
60,662,477
|
|||||||||
Basic
net income per weighted average common share:
|
$
|
0.14
|
$
|
0.19
|
$
|
1.30
|
$
|
0.94
|
|||||
Diluted
net income per weighted average common share and common share
equivalents:
|
$
|
0.14
|
$
|
0.19
|
$
|
1.23
|
$
|
0.94
|
Assets at Fair Value as of September 30, 2008
|
|||||||||||||
Level 1
|
Level
2
|
Level
3
|
Total
|
||||||||||
Subordinated
CMBS
|
$
|
-
|
$
|
-
|
$
|
607,864
|
$
|
607,864
|
|||||
Investment
grade CMBS
|
-
|
-
|
1,005,630
|
1,005,630
|
|||||||||
RMBS
|
-
|
-
|
840
|
840
|
|||||||||
Derivative
instruments
|
-
|
495,032
|
-
|
495,032
|
|||||||||
Investments
in equity of subsidiary trusts*
|
-
|
-
|
1,389
|
1,389
|
|||||||||
Total
|
$
|
-
|
$
|
495,032
|
$
|
1,615,723
|
$
|
2,110,755
|
Liabilities at Fair Value as of September 30, 2008
|
|||||||||||||
Level 1
|
Level
2
|
Level
3
|
Total
|
||||||||||
Senior
unsecured notes
|
$
|
-
|
$
|
-
|
$
|
47,305
|
$
|
47,305
|
|||||
Senior
unsecured convertible notes
|
-
|
-
|
58,744
|
58,744
|
|||||||||
Junior
unsecured notes
|
-
|
-
|
16,641
|
16,641
|
|||||||||
Junior
subordinated notes
|
-
|
-
|
37,056
|
37,056
|
|||||||||
CDOs
|
-
|
-
|
1,040,435
|
1,040,435
|
|||||||||
Derivative
instruments
|
-
|
523,898
|
-
|
523,898
|
|||||||||
Total
|
$
|
-
|
$
|
523,898
|
$
|
1,200,181
|
$
|
1,724,079
|
Subordinated
CMBS
|
Investment grade
CMBS
|
RMBS
|
Junior
subordinated
notes
|
||||||||||
Balance
at July 1, 2008
|
$
|
797,327
|
$
|
1,104,751
|
$
|
973
|
$
|
2,210
|
|||||
Net
purchases (sales)
|
(572
|
)
|
(483
|
)
|
(138
|
)
|
-
|
||||||
Net
transfers in (out)
|
-
|
-
|
-
|
-
|
|||||||||
Gains
(losses) included in earnings
|
(177,242
|
)
|
(93,790
|
)
|
5
|
(821
|
)
|
||||||
Losses
included in OCI
(1)
|
(11,649
|
)
|
(4,848
|
)
|
-
|
-
|
|||||||
Balance
at September 30, 2008
|
$
|
607,864
|
$
|
1,005,630
|
$
|
840
|
$
|
1,389
|
|||||
Amount
of total gains (losses) for the period included in earnings attributable
to the change in unrealized gains or losses relating to assets still
held
at September
30, 2008 (2)
|
$
|
(161,636
|
)
|
$
|
(88,145
|
)
|
$
|
(51
|
)
|
$
|
(821
|
)
|
|
Amount
of total gains (losses) for the period included in earnings attributable
to the change in unrealized gains or losses relating to assets still
held
at September
30, 2008 (3)
|
$
|
(15,561
|
)
|
$
|
(8,063
|
)
|
$
|
-
|
$
|
-
|
Subordinated
CMBS
|
Investment
grade
CMBS
|
RMBS
|
Junior
subordinated
notes
|
||||||||||
Balance
at January 1, 2008
|
$
|
1,028,153
|
$
|
1,245,998
|
$
|
10,183
|
$
|
3,135
|
|||||
Net
purchases (sales)
|
382
|
(68,804
|
)
|
(9,420
|
)
|
-
|
|||||||
Net
transfers in (out)
|
-
|
-
|
-
|
-
|
|||||||||
Gains
(losses) included in earnings
|
(416,750
|
)
|
(170,043
|
)
|
77
|
(1,746
|
)
|
||||||
Losses
included in OCI
(1)
|
(3,921
|
)
|
(1,521
|
)
|
-
|
-
|
|||||||
Balance
at September 30, 2008
|
$
|
607,864
|
$
|
1,005,630
|
$
|
840
|
$
|
1,389
|
|||||
Amount
of total gains (losses) for the period included in earnings attributable
to the change in unrealized gains or losses relating to assets still
held
at September
30, 2008 (2)
|
$
|
(407,017
|
)
|
$
|
(167,694
|
)
|
$
|
21
|
$
|
(1,746
|
)
|
||
Amount
of total gains for the period included in earnings attributable to
the
change in unrealized gains or losses relating to assets still held
at
September
30, 2008 (3)
|
$
|
(9,689
|
)
|
$
|
(4,767
|
)
|
$
|
-
|
$
|
-
|
CDOs
|
Senior
unsecured
notes
|
Senior
unsecured
convertible
notes
|
Junior
unsecured
notes
|
Junior
subordinated
notes
|
||||||||||||
Balance
at July 1, 2008
|
$
|
1,252,224
|
$
|
85,204
|
$
|
71,160
|
$
|
35,611
|
$
|
72,829
|
||||||
Paydowns
|
(1,282
|
)
|
-
|
-
|
-
|
-
|
||||||||||
Net
transfers in (out)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
Gains
included in earnings
|
(165,475
|
)
|
(37,899
|
)
|
(12,416
|
)
|
(18,970
|
)
|
(35,773
|
)
|
||||||
Gains
included in OCI (1)
|
(45,032
|
)
|
-
|
-
|
-
|
-
|
||||||||||
Balance
at September 30, 2008
|
$
|
1,040,435
|
$
|
47,305
|
$
|
58,744
|
$
|
16,641
|
$
|
37,056
|
||||||
Amount
of total losses for the period included in earnings attributable
to the
change in unrealized gains relating to liabilities still held at
September
30, 2008 (2)
|
$
|
(165,717
|
)
|
$
|
(37,899
|
)
|
$
|
(12,416
|
)
|
$
|
(10,725
|
)
|
$
|
(35,773
|
)
|
|
Amount
of total gains (losses) for the period included in earnings attributable
to the change in unrealized gains or losses relating to liabilities
still
held at September 30, 2008 (3)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(8,245
|
)
|
$
|
-
|
CDOs
|
Senior
unsecured
notes
|
Senior
unsecured
convertible
notes
|
Junior
unsecured
notes
|
Junior
subordinated
notes
|
||||||||||||
Balance
at January 1, 2008
|
$
|
1,598,502
|
$
|
114,473
|
$
|
70,186
|
$
|
44,833
|
$
|
103,312
|
||||||
Paydowns
|
(44,885
|
)
|
-
|
-
|
-
|
-
|
||||||||||
Net
transfers in (out)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
Gains
included in earnings
|
(498,057
|
)
|
(67,168
|
)
|
(11,442
|
)
|
(28,192
|
)
|
(66,256
|
)
|
||||||
Gains
included in OCI (1)
|
(15,125
|
)
|
-
|
-
|
-
|
-
|
||||||||||
Balance
at September 30, 2008
|
$
|
1,040,435
|
$
|
47,305
|
$
|
58,744
|
$
|
16,641
|
$
|
37,056
|
||||||
Amount
of total losses for the period included in earnings attributable
to the
change in unrealized gains or losses relating to liabilities still
held at
September 30, 2008 (2)
|
(498,299
|
)
|
(67,168
|
)
|
(11,442
|
)
|
(25,322
|
)
|
(66,256
|
)
|
||||||
Amount
of total gains (losses) for the period included in earnings attributable
to the change in unrealized gains or losses relating to liabilities
still
held at September 30, 2008 (3)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
(2,870
|
)
|
$
|
-
|
Level 1
|
Level 2
|
Level 3
|
Carrying
Value
|
||||||||||
Commercial
mortgage loans(1)
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
45,997
|
|||||
Total
assets at fair value on a nonrecurring basis
|
-
|
-
|
-
|
45,997
|
(1)
|
The
Company recorded a provision for loan loss in the amount of $43,942
for
the nine months ended September 30, 2008. This provision relates
to three
loans with a principal balance of $90,580 and accrued interest of
$190.
|
Carrying Value
at January 1,
2008
|
Transition
Adjustment to
Retained Earnings
(Distributions in
Excess of Earnings)
|
Carrying Value at
January 1, 2008 (After
Adoption of FAS 159)
|
||||||||
Securities
held-for-trading (1)
|
$
|
2,284,334
|
$
|
(227,635
|
)
|
$
|
2,284,334
|
|||
Liability
issuance costs
|
35,137
|
(35,137
|
)
|
-
|
||||||
Senior
unsecured notes
|
(162,500
|
)
|
48,027
|
(114,473
|
)
|
|||||
Senior
unsecured convertible notes
|
(80,000
|
)
|
9,814
|
(70,186
|
)
|
|||||
Junior
unsecured notes
|
(73,103
|
)
|
28,269
|
(44,834
|
)
|
|||||
Investments
in equity of subsidiary trusts
|
5,477
|
(2,342
|
)
|
3,135
|
||||||
Junior
subordinated notes
|
(180,477
|
)
|
77,165
|
(103,312
|
)
|
|||||
CDOs
|
(1,823,328
|
)
|
224,827
|
(1,598,501
|
)
|
|||||
Cumulative
effect of the adoption of the fair value option
|
$
|
122,988
|
Security
Description
|
Estimated
Fair
Value
|
|||
U.S.
Dollar Denominated:
|
||||
CMBS:
|
||||
Investment
grade CMBS
|
$
|
638,163
|
||
Non-investment
grade rated subordinated CMBS
|
359,360
|
|||
Non-rated
subordinated CMBS
|
70,329
|
|||
CMBS
interest only securities (“IOs”)
|
4,424
|
|||
Credit
tenant leases
|
22,203
|
|||
Investment
grade REIT debt
|
201,735
|
|||
Multifamily
agency securities
|
354
|
|||
CDO
investments - investment grade
|
2,600
|
|||
CDO
investments - non-investment grade
|
27,187
|
|||
Total
CMBS
|
1,326,355
|
|||
RMBS:
|
||||
Residential
CMOs
|
428
|
|||
Hybrid
adjustable rate mortgages (“ARMs”)
|
412
|
|||
Total
RMBS
|
840
|
|||
Total
U.S. dollar denominated
|
1,327,195
|
|||
Non-U.S.
Dollar Denominated:
|
||||
Investment
grade CMBS
|
136,151
|
|||
Non-investment
grade rated subordinated CMBS
|
124,531
|
|||
Non-rated
subordinated CMBS
|
26,457
|
|||
Total
non-U.S. dollar denominated
|
287,139
|
|||
Total
securities held-for-trading
|
$
|
1,614,334
|
Loan Outstanding
|
|
Weighted
|
|||||||||||||||||
September 30, 2008
|
December 31, 2007
|
Average Yield
|
|||||||||||||||||
Property Type
|
Amount
|
%
|
Amount
|
%
|
2008
|
2007
|
|||||||||||||
U.S.
|
|||||||||||||||||||
Retail
|
$
|
52,533
|
5.9
|
%
|
$
|
52,209
|
5.3
|
%
|
9.6
|
%
|
9.6
|
%
|
|||||||
Office
|
45,393
|
5.1
|
45,640
|
4.6
|
10.3
|
10.3
|
|||||||||||||
Multifamily(1)
|
170,463
|
19.0
|
174,873
|
17.8
|
9.9
|
9.7
|
|||||||||||||
Storage
|
32,080
|
3.6
|
32,307
|
3.3
|
9.1
|
9.1
|
|||||||||||||
Land(2)
|
-
|
-
|
25,000
|
2.5
|
-
|
9.6
|
|||||||||||||
Hotel
|
12,387
|
1.4
|
12,208
|
1.2
|
13.0
|
10.9
|
|||||||||||||
Other
Mixed Use
|
3,996
|
0.4
|
3,983
|
0.5
|
8.5
|
8.5
|
|||||||||||||
Total
U.S.
|
316,852
|
35.4
|
346,220
|
35.2
|
9.9
|
9.7
|
|||||||||||||
Non-U.S.
|
|||||||||||||||||||
Retail
|
259,983
|
29.0
|
278,669
|
28.3
|
9.0
|
8.9
|
|||||||||||||
Office(3)
|
212,950
|
23.6
|
238,691
|
24.3
|
9.2
|
8.8
|
|||||||||||||
Multifamily
|
39,145
|
4.3
|
41,403
|
4.2
|
8.8
|
8.6
|
|||||||||||||
Storage
|
45,974
|
5.1
|
51,272
|
5.2
|
9.2
|
9.5
|
|||||||||||||
Industrial
|
15,340
|
1.7
|
17,274
|
1.8
|
10.3
|
10.6
|
|||||||||||||
Hotel
|
3,407
|
0.4
|
5,016
|
0.5
|
10.7
|
10.1
|
|||||||||||||
Other
Mixed Use
|
4,304
|
0.5
|
4,842
|
0.5
|
10.3
|
9.0
|
|||||||||||||
Total
Non-U.S.
|
581,103
|
64.6
|
637,167
|
64.8
|
9.1
|
8.9
|
|||||||||||||
Total
|
$
|
897,955
|
100.00
|
%
|
$
|
983,387
|
100.00
|
%
|
9.4
|
%
|
9.2
|
%
|
Year of initial
maturity *
|
|
Number of
loans maturing
|
Current
carrying value
|
% of total
|
||||||
2008
|
1
|
$
|
32,000
|
3.6
|
%
|
|||||
2009
|
-
|
-
|
-
|
|||||||
2010
|
3
|
24,818
|
2.8
|
|||||||
2011
|
15
|
279,476
|
31.1
|
|||||||
2012
|
17
|
228,218
|
25.4
|
|||||||
Thereafter
|
23
|
333,443
|
37.1
|
|||||||
Total
|
59
|
$
|
897,955
|
100.0
|
%
|
|||||
*
Does not include potential extension options.
|
Book Value
|
||||
Balance
at December 31, 2007
|
$
|
983,387
|
||
Investments
in commercial mortgage loans
|
2,286
|
|||
Proceeds
from repayment of mortgage loans
|
(19,341
|
)
|
||
Provision
for loan loss
|
(43,752
|
)
|
||
Foreign
currency translation
|
(30,239
|
)
|
||
Discount
accretion, net
|
5,614
|
|||
Balance
at September 30, 2008
|
$
|
897,955
|
Provision
for possible loan losses, December 31, 2007
|
$
|
-
|
||
Provision
for loan losses
|
43,942
|
|||
Reserve
for possible loan losses, September 30, 2008
|
$
|
43,942
|
Carbon I
|
Carbon II
|
Dynamic India
Fund IV *
|
AHR JV
|
AHR Int’l
JV
|
Total
|
||||||||||||||
Balance
at December 31, 2007
|
$
|
1,636
|
$
|
97,762
|
$
|
9,350
|
$
|
-
|
$
|
-
|
$
|
108,748
|
|||||||
Contributions
to investments
|
-
|
-
|
-
|
1,351
|
30,886
|
32,237
|
|||||||||||||
Equity
earnings
|
75
|
1,372
|
-
|
(367
|
)
|
1,430
|
2,510
|
||||||||||||
Foreign
currency translation
|
-
|
-
|
-
|
-
|
(3,351
|
)
|
(3,351
|
)
|
|||||||||||
Distributions
of earnings
|
-
|
(3,206
|
)
|
-
|
-
|
(393
|
)
|
(3,599
|
)
|
||||||||||
Balance
at September 30, 2008
|
$
|
1,711
|
$
|
95,928
|
$
|
9,350
|
$
|
984
|
$
|
28,572
|
$
|
136,545
|
Borrowing Type
|
Market Value
|
Adjusted
Issuance
Price
|
Weighted
Average
Borrowing
Rate
|
Weighted Average
Remaining
Maturity
|
Estimated Fair
Value of
Assets Pledged
|
|||||||||||
Credit
facilities (1)
|
$
|
546,704
|
$
|
546,704
|
5.55
|
%
|
1.17
years
|
$
|
902,291
|
|||||||
Commercial
mortgage loan pools
|
1,201,019
|
1,201,019
|
4.00
|
%
|
4.18
years
|
1,223,630
|
||||||||||
CDOs
(2)
|
1,040,435
|
1,764,303
|
4.67
|
%
|
5.19
years
|
1,896,427
|
||||||||||
Senior
unsecured notes (2)
|
47,305
|
162,500
|
7.59
|
%
|
8.82
years
|
Unsecured
|
||||||||||
Junior
unsecured notes (2)
|
16,641
|
70,233
|
6.56
|
%
|
13.84 years
|
Unsecured
|
||||||||||
Senior
unsecured convertible notes (2)
|
58,744
|
80,000
|
11.75
|
%
|
19.18
years
|
Unsecured
|
||||||||||
Junior
subordinated notes (2)
|
37,056
|
180,477
|
7.64
|
%
|
27.61
years
|
Unsecured
|
||||||||||
Total
Borrowings
|
$
|
2,947,904
|
$
|
4,005,236
|
5.03
|
%
|
5.78
years
|
|
Borrowing Type
|
Within
30 days
|
31 to 59
days
|
60 days
to less
than 1
year
|
1 year to
3 years
|
3 years
to 5
years
|
Over 5
years
|
Total
|
|||||||||||||||
Credit
facilities (1)
|
$
|
0
|
$
|
-
|
$
|
257,405
|
$
|
289,299
|
$
|
-
|
$
|
-
|
$
|
546,704
|
||||||||
Commercial
mortgage loan pools(2)
|
6,054
|
5,866
|
333,448
|
102,892
|
43,396
|
709,363
|
$
|
1,201,019
|
||||||||||||||
CDOs(2)
|
829
|
319
|
52,075
|
222,710
|
775,967
|
712,403
|
1,764,303
|
|||||||||||||||
Senior
unsecured notes
|
-
|
-
|
-
|
-
|
-
|
162,500
|
$
|
162,500
|
||||||||||||||
Junior
unsecured notes
|
-
|
-
|
-
|
-
|
-
|
70,233
|
$
|
70,233
|
||||||||||||||
Senior
unsecured convertible notes
|
-
|
-
|
-
|
-
|
-
|
80,000
|
80,000
|
|||||||||||||||
Junior
subordinated notes
|
-
|
-
|
-
|
-
|
-
|
180,477
|
$
|
180,477
|
||||||||||||||
Total
Borrowings
|
$
|
6,883
|
$
|
6,185
|
$
|
642,928
|
$
|
614,901
|
$
|
819,363
|
$
|
1,914,976
|
$
|
4,005,236
|
(1)
|
Includes
$4,610 of borrowings under facilities related to commercial mortgage
loan
pools.
|
(2)
|
Commercial
mortgage loan pools and CDOs are non-recourse borrowings and payments
for
these borrowings are supported solely by the cash flows from the
assets in
these structures.
|
September 30, 2008
|
December 31, 2007
|
|||||||||||||||||||||
Maturity
Date
|
Facility
Amount
|
Total
Borrowings
|
Unused
Borrowing
Capacity
|
Facility
Amount
|
Total
Borrowings
|
Unused
Borrowing
Capacity
|
||||||||||||||||
Bank
of America, N.A. (1) (5)
|
9/18/10
|
$
|
275,000
|
$
|
141,694
|
$
|
133,306
|
$
|
275,000
|
$
|
211,088
|
$
|
63,912
|
|||||||||
Deutsche
Bank AG, Cayman Islands Branch (2)
|
7/08/10
|
92,166
|
92,166
|
-
|
200,000
|
174,186
|
25,814
|
|||||||||||||||
Bank
of America, N.A.(3)
|
9/18/10
|
100,000
|
55,439
|
44,561
|
100,000
|
87,706
|
12,294
|
|||||||||||||||
Morgan
Stanley Bank (3) (4)
|
2/07/09
|
300,000
|
227,405
|
72,595
|
300,000
|
198,621
|
101,379
|
|||||||||||||||
BlackRock
HoldCo 2, Inc. (1)
|
3/06/09
|
53,624
|
30,000
|
23,624
|
-
|
-
|
-
|
|||||||||||||||
$
|
820,790
|
$
|
546,704
|
$
|
274,086
|
$
|
875,000
|
$
|
671,601
|
$
|
203,399
|
Shares
|
Net
Proceeds
|
||||||
Dividend
Reinvestment and Stock Purchase Plan
|
152,332
|
$
|
1,071
|
||||
Sales
agency agreement
|
5,226,800
|
35,012
|
|||||
Management
and incentive fees*
|
1,065,818
|
7,013
|
|||||
Incentive
fee – stock based*
|
316,320
|
2,116
|
|||||
Series
E-3 preferred stock conversion
|
3,119,661
|
23,289
|
|||||
Private
transaction (see details below)
|
3,494,021
|
23,244
|
|||||
Director
compensation
|
21,256
|
128
|
|||||
Total
|
13,396,208
|
$
|
91,873
|
For the Three Months Ended
|
For the Nine Months Ended
|
||||||||||||
September 30,
|
September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Management
fee
|
$
|
3,050
|
$
|
3,473
|
$
|
9,286
|
$
|
10,862
|
|||||
Incentive
fee
|
-
|
-
|
11,879
|
5,645
|
|||||||||
Incentive
fee - stock based
|
382
|
497
|
1,426
|
2,145
|
|||||||||
Total
management and incentive fees
|
$
|
3,432
|
$
|
3,970
|
$
|
22,591
|
$
|
18,652
|
Estimated Fair
Value
|
Unamortized
Cost
|
Weighted Average
Remaining Term
|
||||||||
Currency
swaps
|
$
|
(15,474
|
)
|
$
|
-
|
7.7
years
|
||||
CDO
currency swaps
|
$
|
13,437
|
$
|
-
|
9.1
years
|
|||||
Forwards
|
$
|
2,770
|
$
|
-
|
49
days
|
For the Three Months
Ended September 30,
|
For the Nine Months
Ended September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Interest
Income:
|
|||||||||||||
Interest
from securities
|
$
|
53,387
|
$
|
49,560
|
$
|
156,261
|
$
|
147,195
|
|||||
Interest
from commercial mortgage loans
|
22,674
|
20,494
|
69,506
|
49,942
|
|||||||||
Interest
from commercial mortgage loan pools
|
12,779
|
12,985
|
38,445
|
39,119
|
|||||||||
Interest
from cash and cash equivalents
|
558
|
1,784
|
2,540
|
3,648
|
|||||||||
Total
interest income
|
89,398
|
84,823
|
266,752
|
239,904
|
|||||||||
Interest
Expense:
|
|||||||||||||
Interest
– securities
|
56,652
|
62,525
|
164,189
|
178,450
|
|||||||||
Total
interest expense
|
56,652
|
62,525
|
164,189
|
178,450
|
|||||||||
Net
interest income
|
$
|
32,746
|
$
|
22,298
|
$
|
102,563
|
$
|
61,454
|
1)
|
The
Company will be successful in renewing the facility with Morgan Stanley
Bank prior to January 23, 2009 and will have no amortization payments
under the terms of the renewal.
|
2)
|
The
Company will have sufficient available cash to meet its periodic
loan
amortization payments to Deutsche Bank and Bank of America, N.A.
|
3)
|
The
Company does not receive any significant margin calls from its
lenders.
|
4)
|
The
Company will be successful in renewing the facility with HoldCo 2
prior to
March 6, 2009 and will not have any required paydowns under the terms
of
the renewal.
|
1) |
Commercial
Real Estate Debt Securities
|
2) |
Commercial
Real Estate Loans
|
3) |
Commercial
Real Estate Equity
|
4) |
RMBS
|
Carrying Value at
|
|||||||||||||
September 30, 2008
|
December 31, 2007
|
||||||||||||
|
Amount
|
%
|
Amount
|
%
|
|||||||||
Commercial
real estate securities(1)
|
$
|
1,614,478
|
41.7
|
%
|
$
|
2,274,151
|
49.3
|
%
|
|||||
Commercial
real estate loans(2)
|
1,024,166
|
26.4
|
1,082,785
|
23.5
|
|||||||||
Commercial
mortgage loan pools(3)
|
1,223,630
|
31.6
|
1,240,793
|
26.9
|
|||||||||
Commercial
real estate equity(4)
|
9,350
|
0.3
|
9,350
|
0.2
|
|||||||||
Total
commercial real estate assets
|
3,871,624
|
100.0
|
4,607,079
|
99.9
|
|||||||||
Residential
mortgage-backed securities
|
840
|
-
|
10,183
|
0.1
|
|||||||||
Total
|
$
|
3,872,464
|
100.0
|
%
|
$
|
4,617,262
|
100.0
|
%
|
(1)
|
Includes
equity investment in AHR JV.
|
(2)
|
Includes
equity investments in the Carbon Capital funds and AHR International
JV.
|
(3)
|
Represents
a Controlling Class CMBS that is consolidated for accounting purposes.
See
Note 6 of the consolidated financial
statements.
|
(4)
|
Represents
equity investment in Dynamic India Fund
IV.
|
Commercial
Real Estate
Securities(2)
|
Commercial
Real Estate
Loans (1)
|
Commercial
Real Estate
Equity
|
Commercial
Mortgage Loan
Pools
|
Total
Commercial
Real Estate
Assets
|
Total
Commercial
Real Estate
Assets (USD)
|
% of
Total
|
||||||||||||||||
USD
|
$
|
1,327,339
|
$
|
414,490
|
-
|
$
|
1,223,630
|
$
|
2,965,459
|
$
|
2,965,459
|
76.6
|
%
|
|||||||||
GBP
|
£ |
22,824
|
£ |
43,975
|
-
|
-
|
£ |
66,799
|
119,066
|
3.1
|
%
|
|||||||||||
EURO
|
€ |
97,724
|
€ |
358,813
|
-
|
-
|
€ |
456,537
|
641,273
|
16.6
|
%
|
|||||||||||
Canadian
Dollars
|
C$77,045
|
C$6,281
|
-
|
-
|
C$83,326
|
78,373
|
2.0
|
%
|
||||||||||||||
Japanese
Yen
|
¥ |
3,898,669
|
-
|
-
|
-
|
¥
|
3,898,669
|
36,723
|
0.9
|
%
|
||||||||||||
Swiss
Francs
|
-
|
CHF
23,972
|
-
|
-
|
CHF
23,972
|
21,380
|
0.6
|
%
|
||||||||||||||
Indian
Rupees
|
-
|
-
|
Rs
434,308
|
-
|
Rs
434,308
|
9,350
|
0.2
|
%
|
||||||||||||||
Total
USD Equivalent
|
$
|
1,614,478
|
$
|
1,024,166
|
$
|
9,350
|
$
|
1,223,630
|
$
|
3,871,624
|
$
|
3,871,624
|
100.0
|
%
|
(1)
|
Includes
the Company’s investments in the Carbon Capital Funds of $97,639 and AHR
International JV of $28,572 at September 30,
2008.
|
(2)
|
Includes
the Company’s investment in AHR JV of $984 at September 30,
2008.
|
Commercial
Real Estate
Securities
|
Commercial
Real Estate
Loans (1)
|
Commercial
Real Estate
Equity
|
Commercial
Mortgage
Loan Pools
|
Total
Commercial
Real Estate
Assets
|
Total
Commercial
Real Estate
Assets (USD)
|
% of
Total
|
||||||||||||||||
USD
|
$
|
1,881,328
|
$
|
445,618
|
$
|
-
|
$
|
1,240,793
|
$
|
3,567,739
|
$
|
3,567,739
|
77.4
|
%
|
||||||||
GBP
|
£
|
35,247
|
£
|
45,944
|
-
|
-
|
£81,191
|
161,618
|
3.5
|
%
|
||||||||||||
Euro
|
€
|
131,645
|
€
|
354,458
|
-
|
-
|
€486,103
|
710,707
|
15.4
|
%
|
||||||||||||
Canadian
Dollars
|
C$89,805
|
C$6,249
|
-
|
-
|
C$96,054
|
97,324
|
2.1
|
%
|
||||||||||||||
Japanese
Yen
|
¥
|
4,378,759
|
-
|
-
|
-
|
¥4,378,759
|
39,196
|
0.9
|
%
|
|||||||||||||
Swiss
Francs
|
-
|
CHF23,939
|
-
|
-
|
CHF23,939
|
21,145
|
0.5
|
%
|
||||||||||||||
Indian
Rupees
|
-
|
-
|
Rs 368,483
|
-
|
Rs 368,483
|
9,350
|
0.2
|
%
|
||||||||||||||
Total
USD Equivalent
|
$
|
2,274,151
|
$
|
1,082,785
|
$
|
9,350
|
$
|
1,240,793
|
$
|
4,607,079
|
$
|
4,607,079
|
100.0
|
%
|
Commercial
real estate securities outside CDOs
|
Par
|
Carrying
Value
|
Dollar
Price
|
Adjusted
Purchase
Price
|
Dollar
Price
|
Expected
Yield
|
|||||||||||||
Investment
grade CMBS
|
$
|
205,776
|
$
|
127,026
|
$
|
61.73
|
$
|
174,342
|
$
|
84.72
|
7.54
|
%
|
|||||||
Investment
grade REIT debt
|
121
|
116
|
95.51
|
123
|
101.41
|
5.27
|
|||||||||||||
CMBS
rated BB+ to B
|
551,008
|
161,252
|
29.26
|
220,319
|
39.98
|
9.60
|
|||||||||||||
CMBS
rated B- or lower
|
512,802
|
94,106
|
18.16
|
109,385
|
21.07
|
14.00
|
|||||||||||||
CDO
Investments
|
329,718
|
27,186
|
8.25
|
17,384
|
5.41
|
66.62
|
|||||||||||||
CMBS
Interest Only securities (“IOs”)
|
88,686
|
4,425
|
4.99
|
1,873
|
2.11
|
22.45
|
|||||||||||||
Multifamily
agency securities
|
347
|
354
|
102.00
|
516
|
148.66
|
6.75
|
|||||||||||||
Total
commercial real estate assets outside CDOs
|
1,688,458
|
414,465
|
24.49
|
524,392
|
30.98
|
11.81
|
|||||||||||||
Commercial
real estate loans and equity outside CDOs
|
|||||||||||||||||||
Commercial
real estate loans
|
588,652
|
577,957
|
579,789
|
||||||||||||||||
Commercial
mortgage loan pools
|
1,189,528
|
1,223,630
|
102.87
|
1,223,630
|
102.87
|
4.15
|
|||||||||||||
Commercial
real estate
|
9,350
|
9,350
|
9,350
|
||||||||||||||||
Total
commercial real estate loans and equity outside CDOs
|
1,787,530
|
1,810,937
|
102.87
|
1,812,769
|
102.87
|
||||||||||||||
Commercial
real estate assets included in CDOs
|
|||||||||||||||||||
Investment
grade CMBS
|
797,569
|
647,288
|
81.16
|
734,888
|
92.14
|
7.58
|
|||||||||||||
Investment
grade REIT debt
|
210,624
|
201,619
|
95.72
|
211,697
|
100.51
|
5.48
|
|||||||||||||
CMBS
rated BB+ to B
|
583,464
|
290,222
|
49.72
|
384,578
|
65.91
|
11.18
|
|||||||||||||
CMBS
rated B- or lower
|
199,962
|
36,080
|
18.04
|
45,439
|
22.72
|
17.56
|
|||||||||||||
CDO
Investments
|
4,000
|
2,600
|
65.00
|
2,600
|
65.00
|
7.81
|
|||||||||||||
Credit
tenant lease
|
22,795
|
22,203
|
97.40
|
23,406
|
102.68
|
5.66
|
|||||||||||||
Commercial
real estate loans
|
457,745
|
446,210
|
97.48
|
430,885
|
92.12
|
8.97
|
|||||||||||||
Total
commercial real estate assets included in CDOs
|
2,276,159
|
1,646,222
|
72.32
|
1,833,493
|
80.15
|
8.63
|
%
|
||||||||||||
Total
commercial real estate assets
|
$
|
5,752,147
|
$
|
3,871,624
|
$
|
2,947,024
|
Commercial
real estate securities outside CDOs
|
Par
|
Carrying
Value
|
Dollar
Price
|
Adjusted
Purchase
Price
|
Dollar
Price
|
Expected
Yield
|
|||||||||||||
Investment
grade CMBS
|
$
|
179,638
|
$
|
149,856
|
$
|
83.42
|
$
|
158,216
|
$
|
88.07
|
6.56
|
%
|
|||||||
Investment
grade REIT debt
|
23,121
|
20,034
|
86.65
|
22,995
|
99.45
|
5.49
|
|||||||||||||
CMBS
rated BB+ to B
|
546,299
|
316,210
|
57.88
|
417,204
|
76.37
|
8.71
|
|||||||||||||
CMBS
rated B- or lower
|
513,189
|
144,797
|
28.21
|
166,381
|
32.42
|
10.73
|
|||||||||||||
CDO
Investments
|
347,807
|
46,241
|
13.30
|
63,987
|
18.40
|
20.56
|
|||||||||||||
CMBS
IOs
|
818,670
|
15,915
|
1.94
|
14,725
|
1.80
|
8.80
|
|||||||||||||
Multifamily
agency securities
|
35,955
|
37,123
|
103.25
|
36,815
|
102.39
|
5.37
|
|||||||||||||
Total
commercial real estate assets outside CDOs
|
2,464,679
|
730,176
|
29.61
|
880,323
|
35.70
|
9.34
|
|||||||||||||
Commercial
real estate loans and equity outside CDOs
|
|||||||||||||||||||
Commercial
real estate loans
|
531,516
|
618,328
|
601,144
|
||||||||||||||||
Commercial
mortgage loan pools
|
1,174,659
|
1,240,793
|
105.63
|
1,240,793
|
105.63
|
4.15
|
|||||||||||||
Commercial
real estate
|
9,350
|
9,350
|
9,350
|
||||||||||||||||
Total
commercial real estate loans and equity outside CDOs
|
1,715,525
|
1,868,471
|
105.63
|
1,851,287
|
105.63
|
4.15
|
|||||||||||||
Commercial
real estate assets included in CDOs
|
|||||||||||||||||||
Investment
grade CMBS
|
801,748
|
768,671
|
95.87
|
759,524
|
94.73
|
7.09
|
|||||||||||||
Investment
grade REIT debt
|
223,324
|
226,060
|
101.23
|
224,608
|
100.57
|
5.85
|
|||||||||||||
CMBS
rated BB+ to B
|
627,550
|
466,564
|
74.35
|
486,162
|
77.47
|
10.01
|
|||||||||||||
CMBS
rated B- or lower
|
193,155
|
54,342
|
28.13
|
68,693
|
35.56
|
14.98
|
|||||||||||||
CDO
Investments
|
4,000
|
3,390
|
84.75
|
3,483
|
87.07
|
7.79
|
|||||||||||||
Credit
tenant lease
|
23,235
|
24,949
|
107.38
|
23,867
|
102.72
|
5.66
|
|||||||||||||
Commercial
real estate loans
|
476,782
|
464,456
|
97.41
|
434,364
|
91.10
|
8.73
|
|||||||||||||
Total
commercial real estate assets included in CDOs
|
2,349,794
|
2,008,432
|
85.47
|
2,000,701
|
85.14
|
8.28
|
%
|
||||||||||||
Total
commercial real estate assets
|
$
|
6,529,998
|
$
|
4,607,079
|
$
|
4,732,311
|
Collateral at September 30, 2008
|
Debt at September 30, 2008
|
|||||||||||||||
Adjusted
Purchase Price
|
Loss
Adjusted Yield
|
Adjusted Issue
Price
|
Weighted
Average Cost
of Funds *
|
Net
Spread
|
||||||||||||
CDO
I
|
$
|
446,067
|
8.44
|
%
|
$
|
384,579
|
7.71
|
%
|
0.73
|
%
|
||||||
CDO
II
|
294,145
|
8.17
|
%
|
262,111
|
6.00
|
%
|
2.17
|
%
|
||||||||
CDO
III
|
368,956
|
7.32
|
%
|
375,162
|
4.76
|
%
|
2.56
|
%
|
||||||||
CDO
HY3
|
320,853
|
11.11
|
%
|
372,325
|
5.91
|
%
|
5.20
|
%
|
||||||||
Euro
CDO
|
413,322
|
8.55
|
%
|
370,126
|
5.84
|
%
|
2.71
|
%
|
||||||||
Total
**
|
$
|
1,843,343
|
8.66
|
%
|
$
|
1,764,303
|
6.06
|
%
|
2.60
|
%
|
Par
|
Estimated
Fair
Value
|
Dollar
Price
|
Adjusted
Purchase
Price
|
Dollar
Price
|
Weighted
Average
Subordination
Level
|
||||||||||||||
BB+
|
$
|
249,067
|
$
|
96,773
|
$
|
38.86
|
$
|
112,014
|
$
|
45.33
|
4.31
|
%
|
|||||||
BB
|
182,788
|
62,053
|
33.80
|
81,930
|
44.82
|
3.39
|
%
|
||||||||||||
BB-
|
182,768
|
75,941
|
41.45
|
88,945
|
48.67
|
5.15
|
%
|
||||||||||||
B+
|
98,967
|
28,337
|
28.47
|
35,835
|
36.21
|
2.33
|
%
|
||||||||||||
B
|
124,438
|
37,496
|
30.02
|
44,292
|
35.59
|
1.99
|
%
|
||||||||||||
B-
|
110,861
|
25,000
|
22.37
|
31,636
|
28.54
|
1.41
|
%
|
||||||||||||
CCC+
|
37,594
|
7,443
|
19.80
|
9,811
|
26.10
|
1.02
|
%
|
||||||||||||
CCC
|
39,806
|
8,576
|
21.54
|
12,105
|
30.41
|
0.81
|
%
|
||||||||||||
NR
|
531,684
|
76,152
|
14.26
|
90,932
|
17.10
|
n/a
|
|||||||||||||
Total
|
$
|
1,557,973
|
$
|
417,771
|
$
|
26.69
|
$
|
507,500
|
$
|
32.59
|
Par
|
Estimated Fair
Value
|
Dollar
Price
|
Adjusted
Purchase Price
|
Dollar
Price
|
Weighted
Average
Subordination
Level
|
||||||||||||||
BB+
|
$
|
277,946
|
$
|
189,351
|
$
|
68.13
|
$
|
228,054
|
$
|
82.05
|
3.59
|
%
|
|||||||
BB
|
191,808
|
117,702
|
61.36
|
154,916
|
80.77
|
2.55
|
%
|
||||||||||||
BB-
|
192,875
|
121,665
|
63.08
|
137,092
|
71.08
|
4.33
|
%
|
||||||||||||
B+
|
103,352
|
55,664
|
53.86
|
67,214
|
65.03
|
2.15
|
%
|
||||||||||||
B
|
140,275
|
71,947
|
51.29
|
83,949
|
59.85
|
1.76
|
%
|
||||||||||||
B-
|
123,683
|
49,817
|
40.28
|
63,282
|
51.17
|
1.29
|
%
|
||||||||||||
CCC
|
22,313
|
6,293
|
28.21
|
7,814
|
35.01
|
0.88
|
%
|
||||||||||||
NR
|
533,920
|
118,473
|
22.19
|
139,714
|
26.17
|
n/a
|
|||||||||||||
Total
|
$
|
1,586,172
|
$
|
730,912
|
$
|
46.08
|
$
|
882,035
|
$
|
55.61
|
Vintage
Year
|
Underlying
Collateral
|
Delinquencies
Outstanding
|
Barclays Capital
Conduit Guide
|
|||||||
1998
|
$
|
1,235,068
|
5.23
|
%
|
5.39
|
%
|
||||
1999
|
491,250
|
2.84
|
%
|
0.92
|
%
|
|||||
2001
|
808,996
|
1.68
|
%
|
1.32
|
%
|
|||||
2002
|
917,122
|
0.62
|
%
|
0.72
|
%
|
|||||
2003
|
1,720,895
|
1.92
|
%
|
0.61
|
%
|
|||||
2004
|
6,202,813
|
0.65
|
%
|
0.51
|
%
|
|||||
2005
|
11,799,815
|
1.11
|
%
|
0.61
|
%
|
|||||
2006
|
13,638,598
|
1.04
|
%
|
0.65
|
%
|
|||||
2007
|
20,854,193
|
0.62
|
%
|
0.42
|
%
|
|||||
Total
|
$
|
57,668,750
|
0.99
|
%
|
0.66
|
%*
|
September 30, 2008
|
||||||||||
Principal
|
Number
of
Loans
|
% of
Collateral
|
||||||||
Past
due 30 days to 59 days
|
$
|
238,007
|
18
|
0.41
|
%
|
|||||
Past
due 60 days to 89 days
|
12,247
|
5
|
0.02
|
%
|
||||||
Past
due 90 days or more
|
221,614
|
38
|
0.39
|
%
|
||||||
Real
Estate owned
|
52,945
|
12
|
0.08
|
%
|
||||||
Foreclosure
|
48,044
|
2
|
0.09
|
%
|
||||||
Total
Delinquent
|
572,857
|
75
|
0.99
|
%
|
||||||
Total
Collateral Balance
|
$
|
57,668,750
|
4,487
|
September 30, 2008
Exposure
|
|||||||
Property
Type
|
Collateral
Balance
|
% of
Total
|
|||||
Office
|
$
|
19,699,645
|
34.16
|
%
|
|||
Retail
|
16,400,992
|
28.44
|
%
|
||||
Multifamily
|
12,335,346
|
21.39
|
%
|
||||
Industrial
|
4,394,359
|
7.62
|
%
|
||||
Lodging
|
4,031,046
|
6.99
|
%
|
||||
Healthcare
|
322,945
|
0.56
|
%
|
||||
Other
|
484,417
|
0.84
|
%
|
||||
Total
|
$
|
57,668,750
|
100.0
|
%
|
September 30,
2008
|
December 31,
2007
|
||||||
Carbon
I
|
$
|
1,711
|
$
|
1,636
|
|||
Carbon
II
|
95,928
|
97,762
|
|||||
$
|
97,639
|
$
|
99,398
|
For the three months ended
September 30,
|
Variance
|
||||||||||||
2008
|
2007
|
Amount
|
%
|
||||||||||
U.S.
dollar denominated income
|
|||||||||||||
Commercial
real estate securities
|
$
|
43,809
|
$
|
43,016
|
$
|
793
|
1.9
|
%
|
|||||
Commercial
real estate loans
|
8,267
|
8,933
|
(666
|
)
|
(7.5
|
)
|
|||||||
Commercial
mortgage loan pools
|
12,779
|
12,985
|
(206
|
)
|
(1.6
|
)
|
|||||||
Residential
mortgage-backed securities
|
13
|
128
|
(115
|
)
|
(90.1
|
)
|
|||||||
Cash
and cash equivalents
|
195
|
1,242
|
(1,047
|
)
|
(84.3
|
)
|
|||||||
Total
U.S. interest income
|
65,063
|
66,304
|
(1,241
|
)
|
(1.9
|
)
|
|||||||
Non-U.S
dollar denominated income
|
|||||||||||||
Commercial
real estate securities
|
9,564
|
6,415
|
3,149
|
49.1
|
|||||||||
Commercial
real estate loans
|
14,408
|
11,562
|
2,846
|
24.6
|
|||||||||
Cash
and cash equivalents
|
363
|
542
|
(179
|
)
|
(33.0
|
)
|
|||||||
Total
non-U.S. dollar denominated interest income
|
24,335
|
18,519
|
5,816
|
31.4
|
|||||||||
Total
Interest Income
|
$
|
89,398
|
$
|
84,823
|
$
|
4,575
|
5.4
|
%
|
For the nine months ended
September 30,
|
Variance
|
||||||||||||
2008
|
2007
|
Amount
|
%
|
||||||||||
U.S.
dollar denominated income
|
|||||||||||||
Commercial
real estate securities
|
$
|
128,529
|
$
|
128,999
|
$
|
(470
|
)
|
(0.4
|
)%
|
||||
Commercial
real estate loans
|
24,635
|
22,530
|
2,105
|
9.3
|
|||||||||
Commercial
mortgage loan pools
|
38,445
|
39,119
|
(674
|
)
|
(1.7
|
)
|
|||||||
Residential
mortgage-backed securities
|
88
|
3,868
|
(3,780
|
)
|
(97.7
|
)
|
|||||||
Cash
and cash equivalents
|
1,581
|
2,316
|
(735
|
)
|
(31.7
|
)
|
|||||||
Total
U.S. interest income
|
193,278
|
196,833
|
(3,555
|
)
|
(1.8
|
)
|
|||||||
Non-U.S
dollar denominated income
|
|||||||||||||
Commercial
real estate securities
|
27,644
|
14,326
|
13,318
|
93.0
|
|||||||||
Commercial
real estate loans
|
44,871
|
27,413
|
17,458
|
63.7
|
|||||||||
Cash
and cash equivalents
|
959
|
1,332
|
(373
|
)
|
(28.0
|
)
|
|||||||
Total
non-U.S. dollar denominated interest income
|
73,474
|
43,071
|
30,397
|
70.6
|
|||||||||
Total
Interest Income
|
$
|
266,752
|
$
|
239,904
|
$
|
26,848
|
11.2
|
%
|
For the three months ended
September 30,
|
Variance
|
||||||||||||
2008
|
2007
|
Amount
|
%
|
||||||||||
Interest
Income
|
$
|
89,398
|
$
|
84,823
|
$
|
4,575
|
5.4
|
%
|
|||||
Earnings
from JVs
|
1,095
|
-
|
1,095
|
n/a
|
|||||||||
Earnings
from Carbon II
|
1,972
|
2,268
|
(296
|
)
|
(13.1
|
)
|
|||||||
Earnings
from Carbon I
|
-
|
(47
|
)
|
47
|
100.0
|
||||||||
Earnings
from BlackRock
Diamond
Property Fund, Inc.
|
-
|
4,390
|
(4,390
|
)
|
(100.0
|
)
|
|||||||
Total
Income
|
$
|
92,465
|
$
|
91,434
|
$
|
1,031
|
1.1
|
%
|
For the nine months ended
September 30,
|
Variance
|
||||||||||||
2008
|
2007
|
Amount
|
%
|
||||||||||
Interest
Income
|
$
|
266,752
|
$
|
239,904
|
26,848
|
11.2
|
%
|
||||||
Earnings
from JVs
|
1,063
|
-
|
1,063
|
n/a
|
|||||||||
Earnings
from Carbon II
|
1,372
|
9,380
|
(8,008
|
)
|
(85.4
|
)
|
|||||||
Earnings
from Carbon I
|
75
|
812
|
(737
|
)
|
(90.8
|
)
|
|||||||
Earnings
from BlackRock
Diamond
Property Fund, Inc.
|
-
|
18,790
|
(18,790
|
)
|
(100.0
|
)
|
|||||||
Total
Income
|
$
|
269,262
|
$
|
268,886
|
376
|
0.1
|
%
|
For the three months ended
September 30,
|
Variance
|
||||||||||||
2008
|
2007
|
Amount
|
%
|
||||||||||
U.S.
dollar denominated interest expense
|
|||||||||||||
Collateralized
debt obligations
|
$
|
18,109
|
$
|
22,905
|
$
|
(4,796
|
)
|
(20.9
|
)%
|
||||
Commercial
real estate securities
|
2,727
|
6,021
|
(3,294
|
)
|
(54.7
|
)
|
|||||||
Commercial
real estate loans
|
929
|
1,625
|
(696
|
)
|
(42.8
|
)
|
|||||||
Commercial
mortgage loan pools
|
12,089
|
12,353
|
(264
|
)
|
(2.1
|
)
|
|||||||
Residential
mortgage-backed securities
|
-
|
778
|
(778
|
)
|
(100.0
|
)
|
|||||||
Senior
unsecured convertible notes
|
2,383
|
794
|
1,589
|
200.0
|
|||||||||
Senior
unsecured notes
|
3,072
|
3,226
|
(154
|
)
|
(4.8
|
)
|
|||||||
Junior
subordinated notes
|
3,354
|
3,396
|
(42
|
)
|
(1.2
|
)
|
|||||||
Equity
investments
|
287
|
331
|
(44
|
)
|
(13.3
|
)
|
|||||||
Cash
flow hedges
|
276
|
(181
|
)
|
457
|
(252.5
|
)
|
|||||||
Hedge
ineffectiveness*
|
770
|
106
|
664
|
626.4
|
|||||||||
Total
U.S. Interest Expense
|
|
43,996
|
|
51,354
|
|
(7,358
|
)
|
(14.3
|
)
|
||||
Non-U.S.
dollar denominated interest expense
|
|||||||||||||
Euro
CDO
|
|
5,880
|
|
4,950
|
|
930
|
18.8
|
|
|||||
Commercial
real estate securities
|
3,082
|
1,971
|
1,111
|
56.4
|
|||||||||
Commercial
real estate loans
|
2,260
|
3,055
|
(795
|
)
|
(26.0
|
)
|
|||||||
Junior
subordinated notes
|
1,434
|
1,195
|
239
|
20.0
|
|||||||||
Total
Non- U.S. Interest Expense
|
|
12,656
|
|
11,171
|
|
1,485
|
13.3
|
|
|||||
Total
Interest Expense
|
$
|
56,652
|
$
|
62,525
|
$
|
(5,873
|
)
|
(9.4
|
)%
|
For the nine months ended
September 30,
|
Variance
|
||||||||||||
2008
|
2007
|
Amount
|
%
|
||||||||||
U.S.
dollar denominated interest expense
|
|||||||||||||
Collateralized
debt obligations
|
$
|
51,830
|
$
|
68,238
|
$
|
(16,408
|
)
|
(24.1
|
)%
|
||||
Commercial
real estate securities
|
8,453
|
22,983
|
(14,530
|
)
|
(63.2
|
)
|
|||||||
Commercial
real estate loans
|
3,203
|
3,636
|
(433
|
)
|
(11.9
|
)
|
|||||||
Commercial
mortgage loan pools
|
36,480
|
37,233
|
(753
|
)
|
(2.0
|
)
|
|||||||
Residential
mortgage-backed securities
|
45
|
5,841
|
(5,796
|
)
|
(99.2
|
)
|
|||||||
Senior
unsecured convertible notes
|
7,066
|
794
|
6,272
|
789.9
|
|||||||||
Senior
unsecured notes
|
9,147
|
6,432
|
2,715
|
42.2
|
|||||||||
Junior
subordinated notes
|
9,949
|
10,115
|
(166
|
)
|
(1.6
|
)
|
|||||||
Equity
investments
|
500
|
331
|
169
|
51.1
|
|||||||||
Cash
flow hedges
|
1,159
|
(1,040
|
)
|
2,199
|
(211.4
|
)
|
|||||||
Hedge
ineffectiveness*
|
(534
|
)
|
163
|
(697
|
)
|
(427.6
|
)
|
||||||
Total
U.S. Interest Expense
|
|
127,298
|
|
154,726
|
|
(27,428
|
)
|
17.7
|
|
||||
Non-U.S.
dollar denominated interest expense
|
|||||||||||||
Euro
CDO
|
16,578
|
|
13,041
|
3,537
|
27.1
|
||||||||
Commercial
real estate securities
|
9,271
|
2,857
|
6,414
|
224.5
|
|||||||||
Commercial
real estate loans
|
6,838
|
5,684
|
1,154
|
20.3
|
|||||||||
Junior
subordinated notes
|
4,204
|
2,142
|
2,062
|
96.3
|
|||||||||
Total
Non- U.S. Interest Expense
|
|
36,891
|
|
23,724
|
|
13,167
|
55.5
|
|
|||||
Total
Interest Expense
|
$
|
164,189
|
$
|
178,450
|
$
|
(14,261
|
)
|
(8.0
|
)%
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Interest
income
|
$
|
89,398
|
$
|
84,823
|
$
|
266,752
|
$
|
239,904
|
|||||
Interest
expense related to the consolidation of commercial mortgage loan
pools
|
(12,089
|
)
|
(12,353
|
)
|
(36,480
|
)
|
(37,233
|
)
|
|||||
Short
term interest expense related to commercial
mortgage
loan pools
|
33
|
94
|
153
|
266
|
|||||||||
Adjusted
interest income
|
|
77,342
|
$
|
72,564
|
|
230,425
|
$
|
202,937
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Interest expense
|
$
|
56,652
|
$
|
62,525
|
$
|
164,189
|
$
|
178,450
|
|||||
Interest
expense related to the consolidation of commercial mortgage loan
pools
|
(12,089
|
)
|
(12,353
|
)
|
(36,480
|
)
|
(37,233
|
)
|
|||||
Short
term interest expense related to commercial
mortgage
loan pools
|
33
|
94
|
153
|
266
|
|||||||||
Hedge
ineffectiveness
|
(770
|
)
|
(106
|
)
|
534
|
(163
|
)
|
||||||
Adjusted
interest expense
|
$
|
43,826
|
$
|
50,160
|
$
|
128,396
|
$
|
141,320
|
For the three months
ended September 30,
|
For the nine months
ended September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Adjusted
interest income
|
$
|
77,342
|
$
|
72,564
|
$
|
230,425
|
$
|
202,937
|
|||||
Adjusted
interest expense
|
$
|
43,826
|
$
|
50,160
|
$
|
128,396
|
$
|
141,320
|
|||||
Adjusted
net interest income ratios
|
|||||||||||||
Net
interest margin
|
4.7
|
%
|
2.5
|
%
|
4.6
|
%
|
2.4
|
%
|
|||||
Average
yield
|
10.9
|
%
|
8.2
|
%
|
10.3
|
%
|
7.8
|
%
|
|||||
Cost
of funds
|
6.1
|
%
|
6.1
|
%
|
5.8
|
%
|
6.0
|
%
|
|||||
Net
interest spread
|
4.8
|
%
|
2.1
|
%
|
4.5
|
%
|
1.8
|
%
|
|||||
Ratios
including income from equity investments
|
|||||||||||||
Net
interest margin
|
4.9
|
%
|
3.1
|
%
|
4.5
|
%
|
3.3
|
%
|
|||||
Average
yield
|
10.9
|
%
|
8.5
|
%
|
10.0
|
%
|
8.5
|
%
|
|||||
Cost
of funds
|
6.1
|
%
|
6.1
|
%
|
5.8
|
%
|
6.0
|
%
|
|||||
Net
interest spread
|
4.8
|
%
|
2.5
|
%
|
4.1
|
%
|
2.4
|
%
|
For the three months
ended September 30,
|
Variance
|
||||||||||||
2008
|
2007
|
Amount
|
%
|
||||||||||
Management fee
|
$
|
3,050
|
$
|
3,473
|
$
|
(423
|
)
|
(12.1
|
)%
|
||||
Incentive
fee – stock based
|
382
|
497
|
(115
|
)
|
(23.1
|
)
|
|||||||
General
and administrative expense
|
2,025
|
1,624
|
401
|
24.7
|
|||||||||
Total
other expenses
|
$
|
5,457
|
$
|
5,594
|
$
|
(137
|
)
|
(2.4
|
)%
|
For the nine months
ended September 30,
|
Variance
|
||||||||||||
2008
|
2007
|
Amount
|
%
|
||||||||||
Management
fee
|
$
|
9,286
|
$
|
10,862
|
$
|
(1,576
|
)
|
(14.5
|
)%
|
||||
Incentive
fee
|
11,879
|
5,645
|
6,234
|
110.4
|
|||||||||
Incentive
fee – stock based
|
1,426
|
2,145
|
(719
|
)
|
(33.5
|
)
|
|||||||
General
and administrative expense
|
5,706
|
4,448
|
1,258
|
28.3
|
|||||||||
Total
other expenses
|
$
|
28,297
|
$
|
23,100
|
$
|
5,197
|
22.5
|
%
|
U.S. dollar denominated securities
|
September
30, 2008
Estimated
Fair
Value
|
Percentage
|
December
31, 2007
Estimated
Fair
Value (1)
|
Percentage
|
|||||||||
Commercial mortgage-backed
securities:
|
|||||||||||||
CMBS
IOs
|
$
|
4,424
|
0.3
|
%
|
$
|
15,915
|
0.7
|
%
|
|||||
Investment
grade CMBS
|
638,163
|
39.6
|
766,996
|
33.6
|
|||||||||
Non-investment
grade rated subordinated securities
|
359,360
|
22.2
|
630,139
|
27.6
|
|||||||||
Non-rated
subordinated securities
|
70,329
|
4.4
|
110,481
|
4.8
|
|||||||||
Credit
tenant lease
|
22,203
|
1.4
|
24,949
|
1.1
|
|||||||||
Investment
grade REIT debt
|
201,735
|
12.5
|
246,095
|
10.8
|
|||||||||
Multifamily
agency securities
|
354
|
-
|
37,123
|
1.6
|
|||||||||
CDO
investments
|
29,787
|
1.8
|
49,630
|
2.2
|
|||||||||
Total
CMBS
|
1,326,355
|
82.1
|
1,881,328
|
82.4
|
|||||||||
Residential
mortgage-backed securities:
|
|||||||||||||
Agency
adjustable rate securities
|
-
|
-
|
1,193
|
0.1
|
|||||||||
Residential
CMOs
|
428
|
-
|
627
|
-
|
|||||||||
Hybrid
adjustable rate mortgages (“ARMs”)
|
412
|
-
|
8,363
|
0.4
|
|||||||||
Total
RMBS
|
840
|
0.1
|
10,183
|
0.5
|
|||||||||
Total
U.S. dollar denominated securities
|
|
1,327,195
|
82.2
|
|
1,891,511
|
82.9
|
Non-U.S. dollar denominated securities
|
|||||||||||||
Commercial
mortgage-backed securities:
|
|||||||||||||
Investment
grade CMBS
|
136,151
|
8.4
|
|
151,532
|
6.6
|
||||||||
Non-investment
grade rated subordinated securities
|
124,531
|
7.7
|
|
212,433
|
9.3
|
||||||||
Non-rated
subordinated securities
|
26,457
|
1.6
|
|
28,858
|
1.2
|
||||||||
Total
Non-U.S. dollar denominated securities
|
287,139
|
17.8
|
|
392,823
|
17.1
|
||||||||
Total
securities
|
$
|
1,614,334
|
100.0
|
%
|
$
|
2,284,334
|
100.0
|
%
|
(1)
|
Includes
securities available-for-sale at December 31, 2007, reclassified
to
securities held-for-trading in the first quarter of
2008.
|
September 30, 2008
|
|||||||||||||
Market
Value
|
Adjusted
Issuance Price
|
Maximum
Balance
|
Range of
Maturities
|
||||||||||
CDO debt*
|
$
|
1,040,435
|
$
|
1,764,303
|
$
|
1,803,315
|
3.3
to 6.5 years
|
||||||
Commercial
mortgage loan pools
|
1,201,019
|
1,201,019
|
1,201,019
|
0.3 to 10.2 years
|
|||||||||
Credit
facilities
|
546,704
|
546,704
|
613,570
|
0.4
to 2.2 years
|
|||||||||
Senior
unsecured convertible notes
|
58,744
|
80,000
|
80,000
|
19.18
years
|
|||||||||
Senior
unsecured notes**
|
47,305
|
162,500
|
162,500
|
8.82
years
|
|||||||||
Junior
unsecured notes
|
16,641
|
70,233
|
70,233
|
13.59
years
|
|||||||||
Junior
subordinated notes***
|
37,056
|
180,477
|
180,477
|
27.36
years
|
|||||||||
Total
|
$
|
2,947,904
|
$
|
4,005,236
|
Lines
of Credit
|
Collateralized
Debt
Obligations
|
Commercial
Mortgage
Loan Pools |
Junior
Subordinated
Notes
|
Senior
Unsecured
Notes
|
Junior
Unsecured
Notes
|
Convertible
Debt
|
Total
Borrowings
|
||||||||||||||||||
Weighted
average yield
|
5.55
|
%
|
5.71
|
%
|
4.00
|
%
|
7.64
|
%
|
7.59
|
%
|
6.56
|
%
|
11.75
|
%
|
5.48
|
%
|
|||||||||
Interest
Rate
|
|||||||||||||||||||||||||
Fixed
|
-
|
%
|
6.79
|
%
|
4.00
|
%
|
7.64
|
%
|
7.59
|
%
|
6.56
|
%
|
11.75
|
%
|
6.16
|
%
|
|||||||||
Floating
|
5.55
|
%
|
3.86
|
%
|
-
|
%
|
-
|
%
|
-
|
%
|
-
|
%
|
-
|
%
|
4.26
|
%
|
|||||||||
Effective
Yield
|
|||||||||||||||||||||||||
Fixed
|
-
|
%
|
7.23
|
%
|
4.00
|
%
|
7.64
|
%
|
7.59
|
%
|
6.56
|
%
|
11.75
|
%
|
6.43
|
%
|
|||||||||
Floating
|
5.55
|
%
|
3.86
|
%
|
-
|
%
|
-
|
%
|
-
|
%
|
-
|
%
|
-
|
%
|
4.26
|
%
|
At September 30, 2008
|
|||||||||||||
Notional Value
|
Estimated Fair
Value
|
Unamortized
Cost
|
Weighted Average
Remaining Term
(years)
|
||||||||||
Cash flow
hedges
|
$
|
88,493
|
$
|
(78
|
)
|
$
|
(1,612
|
)
|
3.2
|
||||
Trading
swaps
|
76,187
|
(395
|
)
|
-
|
3.0
|
||||||||
CDO
trading swaps
|
1,133.544
|
(29,403
|
)
|
-
|
5.1
|
||||||||
CDO
LIBOR cap
|
85,000
|
277
|
1,407
|
4.6
|
At December 31, 2007
|
|||||||||||||
Notional Value
|
Estimated Fair
Value
|
Unamortized
Cost
|
Weighted Average
Remaining Term
(years)
|
||||||||||
Cash
flow hedges
|
$
|
231,500
|
$
|
(12,646
|
)
|
$
|
(1,612
|
)
|
6.7
|
||||
CDO
cash flow hedges
|
875,548
|
(25,410
|
)
|
-
|
6.2
|
||||||||
Trading
swaps
|
1,218,619
|
(1,296
|
)
|
-
|
4.2
|
||||||||
CDO
trading swaps
|
279,527
|
5
|
-
|
4.7
|
|||||||||
CDO
LIBOR cap
|
85,000
|
195
|
1,407
|
5.4
|
At September 30, 2008
|
||||||||||
Estimated Fair
Value
|
Unamortized
Cost
|
Weighted Average
Remaining Term
|
||||||||
Currency
swaps
|
$
|
(15,474
|
)
|
$
|
-
|
7.7
years
|
||||
CDO
currency swaps
|
13,437
|
-
|
9.1
years
|
|||||||
Forwards
|
2,770
|
-
|
49
days
|
At December 31, 2007
|
||||||||||
Estimated Fair
Value
|
Unamortized
Cost
|
Weighted Average
Remaining Term
|
||||||||
Currency swaps
|
$
|
(12,060
|
)
|
$
|
-
|
8.6 years
|
||||
CDO
currency swaps
|
9,967
|
-
|
9.9
years
|
|||||||
Forwards
|
4,041
|
-
|
23
days
|
1)
|
The
Company will be successful in renewing the facility with Morgan Stanley
Bank prior to January 23, 2009 and will have no amortization payments
under the terms of the renewal.
|
2)
|
The
Company will have sufficient available cash to meet its periodic
loan
amortization payments to Deutsche Bank and Bank of America, N.A.
|
3)
|
The
Company does not receive any significant margin calls from its
lenders.
|
4)
|
The
Company will be successful in renewing the facility with HoldCo 2
prior to
March 6, 2009 and will not have any required paydowns under the terms
of
the renewal.
|
Borrowing Type
|
Within
30 days
|
31 to 59
days
|
60 days
to less
than 1
year
|
1 year to
3 years
|
3 years
to 5
years
|
Over 5
years
|
Total
|
|||||||||||||||
Credit
facilities
|
$
|
-
|
$
|
-
|
$
|
257,405
|
$
|
289,299
|
$
|
-
|
$
|
-
|
$
|
546,704
|
||||||||
Commercial
mortgage loan pools(1)
|
6,054
|
5,866
|
333,448
|
102,892
|
43,396
|
709,363
|
1,201,019
|
|||||||||||||||
CDOs(1)
|
829
|
319
|
52,075
|
222,710
|
775,967
|
712,403
|
1,764,303
|
|||||||||||||||
Senior
unsecured notes
|
-
|
-
|
-
|
-
|
-
|
162,500
|
162.500
|
|||||||||||||||
Junior
unsecured notes
|
-
|
-
|
-
|
-
|
-
|
70,233
|
70,233
|
|||||||||||||||
Senior
unsecured convertible notes
|
-
|
-
|
-
|
-
|
-
|
80,000
|
80,000
|
|||||||||||||||
Junior
subordinated notes
|
-
|
-
|
-
|
-
|
-
|
180,477
|
180,477
|
|||||||||||||||
Total
Borrowings
|
$
|
6,883
|
$
|
6,185
|
$
|
642,928
|
$
|
614,901
|
$
|
819,363
|
$
|
1,914,976
|
$
|
4,005,236
|
Shares
|
Net Proceeds
|
||||||
Dividend
Reinvestment and Stock Purchase Plan
|
152,332
|
$
|
1,071
|
||||
Sales
agency agreement
|
5,226,800
|
35,012
|
|||||
Management
and incentive fees*
|
1,065,818
|
7,013
|
|||||
Incentive
fee – stock based*
|
316,320
|
2,116
|
|||||
Series
E-3 preferred stock conversion
|
3,119,661
|
23,289
|
|||||
Private
transaction (see details below)
|
3,494,021
|
23,244
|
|||||
Director
compensation
|
21,256
|
128
|
|||||
Total
|
13,396,208
|
$
|
91,873
|
For the Three Months
Ended September 30,
|
For the Nine Months
Ended September 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Management
fee
|
$
|
3,050
|
$
|
3,473
|
$
|
9,286
|
$
|
10,862
|
|||||
Incentive
fee
|
-
|
-
|
11,879
|
5,645
|
|||||||||
Incentive
fee – stock based
|
382
|
497
|
1,426
|
2,145
|
|||||||||
Total
management and incentive fees
|
$
|
3,432
|
$
|
3,970
|
$
|
22,591
|
$
|
18,652
|
Projected Percentage Change In Net
Interest Income Per Share Given LIBOR
Movements
|
||||
Change in LIBOR,
+/- Basis Points
|
Projected Change
in Earnings per
Share
|
|||
-200
|
$
|
0.02
|
||
-100
|
$
|
0.01
|
||
-50
|
$
|
0.01
|
||
Base
Case
|
||||
+50
|
$
|
(0.01
|
)
|
|
+100
|
$
|
(0.01
|
)
|
|
+200
|
$
|
(0.02
|
)
|
ITEM 1. |
Legal
Proceedings
|
ITEM 1A. |
Risk
Factors
|
ITEM 2. |
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
·
|
On
March 28, 2008, 316,320 unregistered shares of Common Stock with an
aggregate value of $2,116 were issued to BlackRock Financial Management,
Inc., the manager of the Company (the "Manager"), under the Company's
2006
Stock Award and Incentive Plan (the "Plan") and pursuant to the provision
of the Amended and Restated Investment Advisory Agreement, dated
as of
March 15, 2007, between the Company and the Manager (the "2007 Management
Agreement") requiring the Company to grant to the Manager a number
of
shares of Common Stock equal to one-half of one percent (0.5%) of
the
total number of shares of Common Stock outstanding as of December 31
of each year in which the 2007 Management Agreement is in effect;
|
·
|
On
June 3, 2008, 424,425 unregistered shares of Common Stock with
an aggregate value of $3,163 were issued to the Manager under the
Anthracite Capital, Inc. 2008 Manager Equity Plan and pursuant to
the 2007
Management Agreement providing that 30% of the Manager's incentive
fees
earned under the 2007 Management Agreement shall be paid in shares
of the
Common Stock subject to certain provisions under the Management Agreement
and the Plan and pursuant to a consent of the Nominating and Corporate
Governance Committee; and
|
·
|
On
August 25, 2008, 641,393 unregistered shares of Common Stock with an
aggregate value of $3,854 were issued to the Manager under the Anthracite
Capital, Inc. 2008 Manager Equity Plan as quarterly payments in shares
of
Common Stock of the base management fee and incentive fee to the
Manager
under the Amended and Restated Investment Advisory Agreement, dated
as of
March 31, 2008, between the Company and the Manager (the "Management
Agreement"). For the full one-year term of the Management Agreement,
the
Manager has agreed that 100% of the base management fee and incentive
fee
earned shall be payable in shares of Common Stock.
|
·
|
On
August 25, 2008, 21,256 unregistered shares of Common Stock with an
aggregate value of $128 were issued to directors of the Company not
employed by the manager under the Plan as quarterly payment of an
annual
retainer.
|
Exhibit
No.
|
Description
|
|
10.1
|
Amendment
No. 2, dated as of July 8, 2008, to Guaranty, dated as of December
23,
2004 and amended as of February 27, 2007, between the Company, as
guarantor, and Deutsche Bank AG, Cayman Islands Branch, as buyer
(incorporated by reference to Exhibit 10.1 to the Company's Current
Report
on Form 8-K, filed on July 14, 2008)
|
|
10.2
|
Amendment
No. 2, dated as of July 8, 2008, to Master Repurchase Agreement and
Annex
I to Master Repurchase Agreement Supplemental Terms and Conditions,
dated
as of December 23, 2004, between Anthracite Funding, LLC, as seller,
and
Deutsche Bank AG, Cayman Islands Branch, as buyer (incorporated by
reference to Exhibit 10.2 to the Company's Current Report on Form
8-K,
filed on July 14, 2008)
|
|
10.3
|
Amendment,
Agreement and Waiver, dated as of August 7, 2008, in respect of the
Credit
Agreement, dated as of March 17, 2006, as amended, restated, supplemented
or otherwise modified, by and among AHR Capital BOFA Limited, as
a
borrower, each of the borrowers from time to time party thereto,
Anthracite Capital, Inc., as borrower agent, and Bank of America,
N.A., as
lender (incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2008,
filed
on August 11, 2008)
|
|
10.4
|
Amendment
and Agreement, dated as of August 7, 2008, in respect of the Master
Repurchase Agreement, dated as of July 20, 2007, as amended, restated,
supplemented or otherwise modified, by and among Anthracite Capital
BOFA
Funding LLC, as seller, Bank of America, N.A. and Bank of America
Mortgage
Capital Corporation, as buyers, and Bank of America, N.A., as agent
for
the buyers (incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 2008,
filed
on August 11, 2008)
|
|
10.5
|
Amended
and Restated Guaranty, dated as of August 7, 2008, by Anthracite
Capital,
Inc. for the benefit of Bank of America, N.A. and Bank of America
Mortgage
Capital Corporation (incorporated by reference to Exhibit 10.3 to
the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30,
2008, filed on August 11, 2008)
|
|
10.6
|
Amended
and Restated Parent Guaranty, dated as of August 7, 2008, by Anthracite
Capital, Inc. in favor of Bank of America, N.A. (incorporated by
reference
to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2008, filed on August 11,
2008)
|
|
10.7
|
First
Amendment, dated as of September 10, 2008, to Sales Agreement, dated
as of
June 4, 2008, among Brinson Patrick Securities Corporation, Anthracite
Capital, Inc. and BlackRock Financial Management, Inc. as to Sections
1.2
and 4.1(g) only (incorporated by reference to Exhibit 10.1 to the
Company's Current Report on Form 8-K, filed on September 16,
2008)
|
|
12
|
Computation
of Ratio of Earnings to Combined Fixed Charges and Preferred Stock
Dividends
|
|
31.1
|
Exchange
Act Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
|
|
31.2
|
Exchange
Act Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
|
|
32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
|
ANTHRACITE
CAPITAL, INC.
|
||
Dated:
November 10, 2008
|
By:
|
/s/
Christopher A. Milner
|
Name:
Christopher A. Milner
|
||
Title:
Chief Executive Officer
|
||
Dated:
November 10, 2008
|
By:
|
/s/
James J. Lillis
|
Name:
James J. Lillis
|
||
Title:
Chief Financial Officer
|