Business Context and Reporting Period
Company: Care Investment Trust Inc. (Note: Metadata listed "TIPTREE INC." but the filing is for Care Investment Trust Inc.)
Period: Fiscal year ended December 31, 2009
Business Model: Externally managed Real Estate Investment Trust (REIT) focused on healthcare-related real estate and mortgage debt. The company shifted strategy in 2008 from a mortgage REIT to an equity REIT, divesting loans to focus on direct property ownership.
Portfolio Composition (Dec 31, 2009): $101.5 million in wholly owned real estate, $56.1 million in unconsolidated joint ventures, and $25.3 million in mortgage loans held at lower of cost or market (LOCOM).
Key Financial Metrics
| Metric | 2009 | 2008 |
|---|---|---|
| Total Revenues | $20.0 million | $22.3 million |
| Net Loss | $(2.8) million | $(30.8) million |
| Net Loss Per Share (Basic/Diluted) | $(0.14) | $(1.47) |
| Funds from Operations (FFO) | $10.2 million | $(19.8) million |
| Adjusted Funds from Operations (AFFO) | $6.2 million | $4.6 million |
| Cash and Cash Equivalents | $122.5 million | $31.8 million |
| Total Assets | $315.4 million | $370.9 million |
| Total Liabilities | $88.6 million | $129.8 million |
| Stockholders' Equity | $226.8 million | $241.1 million |
Dividends: Cash dividends paid per share were $0.68 in 2009, consistent with 2008.
Material Changes vs. Prior Period
- Net Loss Improvement: Net loss decreased significantly from $30.8 million in 2008 to $2.8 million in 2009. This improvement was primarily driven by a $33.3 million favorable change in the valuation allowance on loans held at LOCOM (a $29.3 million charge in 2008 vs. a $4.0 million benefit in 2009).
- Revenue Shift: Rental revenue increased to $12.7 million (from $6.2 million in 2008) due to full-year recognition of the Bickford senior living portfolio. Conversely, income from loan investments dropped to $7.1 million (from $15.8 million) due to lower outstanding principal and decreased LIBOR rates.
- Liquidity: Cash and cash equivalents increased by $90.7 million to $122.5 million, fueled by $136.0 million in net cash provided by investing activities (loan sales and repayments).
- Debt: The company repaid and terminated its $37.8 million warehouse line of credit in March 2009. Mortgage notes payable remained relatively stable at $81.9 million.
Guidance, Outlook, and Material Events
- Sale of Control (Tiptree Transaction): On March 16, 2010, the company entered a definitive agreement to sell control to Tiptree Financial Partners, L.P. This involves a cash tender offer to shareholders at $9.00 per share and the issuance of new stock to Tiptree. This transaction is expected to result in a change of control.
- Liquidation Plan: Shareholders approved a plan of liquidation on January 28, 2010. However, the company intends to seek shareholder approval to abandon this plan in favor of the Tiptree transaction. If the Tiptree deal fails, the company may proceed with liquidation, with an estimated equity value range of $8.05 to $8.90 per share.
- Legal Proceedings:
- Class Action: Ongoing litigation regarding the 2007 IPO registration statement (warehouse financing disclosure). No provision for loss accrued.
- Cambridge Dispute: Litigation with joint venture partner Cambridge Holdings regarding transfer rights and liquidating distributions. Counterclaims seek damages of $100 million or more.
- Management Agreement: An amended agreement effective January 2010 reduced the base management fee and established a $7.5 million buyout fee payable to the manager (CIT Healthcare) upon termination.
Investor Verification Checklist
- Tender Offer Status: Verify the outcome of the $9.00 per share tender offer and whether the Tiptree transaction conditions (including stockholder approval to abandon liquidation) are met.
- Liquidation Basis Accounting: Confirm if the company proceeds with liquidation, requiring a restatement of assets to net realizable value, which could materially alter the reported equity value.
- Cambridge Litigation: Monitor the resolution of the dispute with Cambridge Holdings, as a loss could restrict asset transfers or reduce liquidation proceeds.
- Loan Portfolio Valuation: Review the remaining $25.3 million loan portfolio (held at LOCOM) for potential further valuation adjustments or sales proceeds.
- REIT Qualification: Ensure the company maintains its REIT status during the transition period to avoid corporate-level taxation.