NEW YORK--(BUSINESS WIRE)--Nov. 12, 2009-- Centerline Holding Company (OTC:CLNH) (“Centerline” or the “Company”), the parent company of Centerline Capital Group, a provider of real estate financial and asset management services, today announced financial results for the third quarter and nine months ended September 30, 2009.

Third Quarter 2009 Highlights:

• For the three months ended September 30, 2009, the Company reported a net loss attributable to Centerline shareholders⁽¹⁾ of ($5.38) per share, as compared to a net loss of ($3.03) per share for the three months ended September 30, 2008; earnings per share (“EPS”)⁽¹⁾, excluding certain items (primarily non cash), was ($0.08) for the three months ended September 30, 2009, as compared to EPS, excluding certain items (primarily non cash) of ($0.17), for the three months ended September 30, 2008;
• Net loss was driven primarily by: (i) lower business volume and lower interest income in the third quarter 2009, as compared to the same period in 2008; (ii) asset impairments in the Commercial Mortgage-Backed Securities (“CMBS”) and High-Yield Debt Funds Centerline manages; (iii) asset impairments on the Series B Freddie Mac Certificates and stabilization escrow; (iv) write-off of goodwill and intangible assets; (v) the loss reserve associated with Affordable Housing transactions; and (vi) a reserve against the remaining carrying value of Centerline's loan to American Mortgage Acceptance Company ("AMAC");
• Centerline paid down the outstanding balance of its senior credit facility debt by $68.7 million to $228.2 million, from 2008 year-end levels of $296.9 million and repaid $8.7 million of the $13.8 million CMBS term loan balance outstanding as of December 31, 2008. Since September 30, 2009 through the date of this press release, Centerline has paid down an additional $5.0 million of its senior credit facility debt;
• Centerline had direct assets under management (“AUM”)⁽²⁾ of $13.4 billion as of September 30, 2009;
• Centerline originated $104.5 million of multifamily loans on behalf of Fannie Mae and Freddie Mac in the third quarter of 2009, and raised nearly $3.8 million of capital for Affordable Housing tax-credit funds; In October 2009, Centerline originated $73.7 million of additional multifamily loans and closed an additional $22.2 million of multifamily loans awaiting settlement on behalf of Fannie Mae and Freddie Mac, and raised over $14.4 million of capital for Affordable Housing tax-credit funds;
• As of September 30, 2009, the Company’s Fannie Mae servicing portfolio had nine delinquent loans, with an outstanding balance of $47.3 million, representing 0.5% of its $8.8 billion agency servicing portfolio; in addition, as of September 30, 2009, there were three loans in Fannie Mae Real Estate Owned properties with a combined outstanding balance of $15.8 million that were formerly in the Centerline portfolio, subject to final resolution and loss sharing settlement;
• As of September 30, 2009, Centerline was the named special servicer on a portfolio of $109.7 billion. At that date, $3.8 billion (or 3.46% of the portfolio) was delinquent, compared to an industry average of 4.23%, as reported by Trepp;
• Centerline launched a new business initiative through its Agency Lending Products Group: the multifamily small loan program; and
• The Company continues discussions with Island Capital Group LLC, and others, to accomplish a recapitalization of Centerline.

(1) See “Selected Financial Data” for a reconciliation of GAAP net income (loss) attributable to Centerline Holding Company shareholders to EPS (excluding certain items (primarily non cash)).

(2) See AUM table and footnotes.

Financial Results

The table below summarizes Centerline’s financial results for the three and nine months ended September 30, 2009:

During the third quarter of 2009, Centerline’s operating results were impacted negatively by: (i) lower business volume and lower interest income compared to the same period in 2008; (ii) asset impairments in the CMBS and High-Yield Debt Funds Centerline manages (Centerline’s share of the impairments is $59.9 million and $82.7 million for the third quarter and nine months ended September 30, 2009, respectively); (iii) a $30.5 million asset impairment on Series B Freddie Mac Certificates due to projected buy downs in the collateral of the Freddie Mac Securitization which will negatively impact the residual interest received by the Series B Freddie Mac certificates causing an impairment to the investment; (iv) a $42.0 million asset impairment on stabilization escrow due to the Company’s expectation that most of the escrow funds will be used to restructure non-stabilized bonds in the re-securitization portfolio and that Centerline will, therefore, not receive the cash via escrow releases; (v) a $100.0 million write-off of goodwill; (vi) a $90.0 million loss reserve associated with Affordable Housing transactions; and (vii) a $5.0 million reserve against the remaining carrying value of Centerline's loan to AMAC, a publicly-traded REIT Centerline manages but which is developing a plan of liquidation.

The reduction in interest income resulted from: (i) lower rates of interest from Centerline’s escrow and collateral accounts due to declining market rates; (ii) reduced servicing portfolio and stabilization escrow balances; (iii) declining cash interest from our Series B Freddie Mac Certificates; (iv) non-accrual of interest for the Company’s loan to AMAC; and (v) varying levels of income from mortgage revenue bonds as many re-securitized bonds not initially accounted for as sold were deemed to be in 2008 and were no longer included in the Company’s operating results. Subsequently, however, certain defaulted and specially serviced bonds were re-recognized along with related interest income. Upon sale recognition of any bonds, Centerline recognizes additional interest income on the Freddie Mac certificates that it retained as part of the re-securitization transaction. Interest income also decreased as a result of the sale of $145.0 million face amount of certain Series A-1 Freddie Mac certificates in July 2009. The proceeds were used to redeem the corresponding preferred shares of Equity Issuer Trust I.

Fluctuations in fee income resulted from lower tax-credit fund origination volume and lower prepayment penalties and expense reimbursements in the third quarter and nine months ended September 30, 2009, compared to the same periods in 2008, and offset partially by increased collateral management and special servicing fees.

Salaries and benefits expense declined 23.0% and 25.8% in the third quarter and nine months ended September 30, 2009, respectively, as compared to the same periods in 2008. The decline is primarily attributable to: (i) reduced base salaries and benefits due to reduced headcount; (ii) lower share-based compensation expense for shares issued in connection with Centerline’s acquisition of ARCap (now Centerline Investors I LLC) in August 2006 as the awards vest or are forfeited; (iii) a reduction in bonus compensation; and (iv) a decrease in the third quarter and the year-to-date period in severance expense.

Other general and administrative expenses decreased in the third quarter and nine months ended September 30, 2009, compared to the same periods in 2008. The decrease is primarily attributable to the following items: (i) a decrease in professional fees, particularly audit and consulting costs; (ii) lower fund origination expenses associated with Centerline’s tax credit business that correspond with the lower level of fund origination activity; (iii) a decrease in broker commissions related to lower mortgage originations period over period; (iv) a reduction in overall expenses resulting from the reductions in personnel in April and November 2008 and other cost saving initiatives; and (v) a decrease in third quarter 2009 rent expense, primarily the result of rent accrued in 2008 in connection with office space Centerline no longer uses in operations.

Loss reserves increased in the third quarter and nine months ended September 30, 2009, compared to the same periods in 2008. The increase in both periods is primarily attributable to: (i) a $90.0 million loss reserve associated with Affordable Housing transactions; (ii) a $29.5 million lease termination restructuring charge Centerline recorded in June 2009 (applies only to the 2009 year-to-date period); and (iii) an increase of $4.1 million in the Company’s provision for mortgage banking loss sharing (applies only to the 2009 year-to-date period).

Interest expense decreased 20.1% and 21.3% for the third quarter and nine months ended September 30, 2009, as compared to the same periods in 2008. The decrease in both periods was due primarily to the following factors: (i) the lower amount of average corporate debt outstanding; and (ii) lower rates and borrowings for warehousing mortgage loans.

Adjusted Revenues

Centerline’s operating results include the results of Tax Credit Fund Partnerships consolidated pursuant to various accounting pronouncements, as well as other Tax Credit Fund and Property Partnerships Centerline controls but in which it has little or no equity interest. As Centerline has virtually no equity interest in these partnerships, the net losses they generated were allocated almost entirely to their investors. The consolidation, therefore, has an insignificant impact on net income (loss), although certain Centerline revenues are eliminated in consolidation, and revenues and expenses of the consolidated partnerships are reflected in the income statement.

Centerline also consolidates a number of funds it manages that invest in CMBS and ReREMIC certificates (“CMBS Fund Partnerships”) and a High-Yield Debt Investment Fund. Centerline maintains an equity interest in each of these funds (typically 5%) and participates in the profits or losses they generate. Adjusted equity income includes the Company’s proportionate share of the profits as well as other allocations for general partner services.

As many of the Company’s revenues are eliminated when consolidating these partnerships, the Company is presenting its revenues adjusted to exclude the impact of consolidation.

The adjusted figures presented are not in accordance with generally accepted accounting principles (“GAAP”) but are presented for the purpose of enhancing the understanding of the economics of our business, but may not be comparable to figures reported by other companies.

Centerline Holding Company Equity and Adjusted Centerline Holding Company Equity

The Company reported a deficit allocable to Centerline Holding Company shareholders at September 30, 2009 of $1.1 billion. The deficit was due primarily to the declining fair values of investments in the funds Centerline manages and consolidates. Prior to 2009, Centerline’s equity absorbed any of these losses that would reduce the carrying amount of the third-party investors’ interests below zero. As of December 31, 2008, these unrealized losses totaled $894.7 million. Following the adoption of SFAS No. 160, as of January 1, 2009, any further declines in the asset values will reduce the third-party investors’ interests and the Company’s equity will be reduced only by its proportionate share based on its co-investment percentage. However, the $894.7 million previously recognized, will remain in the Company’s deficit balance.

Similar to the presentation described for Adjusted Revenues, Centerline also presents its Centerline Holding Company equity adjusted to exclude the impact of consolidated partnerships (see “Selected Financial Data”). The substantial difference between the “as reported” and “as adjusted” amounts reflects the unrealized losses in the Company’s consolidated partnerships, as described above. If the losses were to be realized, Centerline would absorb only the portion corresponding to its co-investment (typically 5%) in earnings. The “as adjusted” amount excludes the unrealized losses in excess of Centerline’s proportionate share.

The table below shows the difference between the total Centerline Holding Company Deficit “as reported” and “as adjusted” at September 30, 2009:

At September 30, 2009, Centerline’s Commercial Real Estate Group’s AUM was $4.2 billion.

Portfolio Management

As of September 30, 2009, Centerline provided primary servicing for a $21.4 billion loan portfolio, an increase of 2.9% from the level at June 30, 2009.

In addition, Centerline is the named special servicer on a portfolio of $109.7 billion of CMBS as of September 30, 2009, a decrease of 1.3% from the level as of June 30, 2009. The decline primarily was due to loan payoffs and losses.

Direct Assets Under Management

As of September 30, 2009 and December 31, 2008, Centerline’s direct AUM consisted of the following:

(in millions)

Supplemental Financial Information

For more detailed financial information, please access the Supplemental Financial Package, accessible via the Investor Relations section of the Centerline website at www.centerline.com.

Please contact Centerline’s Investor Relations department at (800) 831-4826 with any questions regarding the Company’s third quarter financial results for the period ended September 30, 2009.

Risk Factors

Please refer to the last page of this press release for a brief discussion regarding the forward-looking nature of the contents of this press release and a summary of risks involved in investing in our Company. These risk factors are more fully detailed in our filing on Form 10-K for the year ended December 31, 2008, and significant updates are detailed in our filing on Form 10-Q for the quarter ended September 30, 2009.

About the Company

Centerline Capital Group, a subsidiary of Centerline Holding Company (OTC: CLNH), provides real estate financial and asset management services, including institutional debt and equity fund management, mortgage banking and primary and special loan servicing. As of September 30, 2009, Centerline had more than $13.4 billion of assets under management. Centerline is headquartered in New York, New York and has eight offices throughout the United States. For more information, please visit Centerline's website at http://www.centerline.com or contact the Investor Relations Department directly at (800) 831-4826.

Certain statements in this document may constitute forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Other risks and uncertainties are detailed in Centerline Holding Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, and include, among others, business limitations caused by adverse changes in real estate and credit markets and general economic and business conditions; our ability to repay or restructure our debt and the associated risks surrounding our contemplated recapitalization; business limitations caused by adverse changes in real estate and credit markets and general economic and business conditions; risks related to the form and structure of our financing arrangements; our ability to generate new income sources, raise capital for investment funds and maintain business relationships with providers and users of capital; changes in applicable laws and regulations; our tax treatment, the tax treatment of our subsidiaries and the tax treatment of our investments; competition with other companies; risk of loss from direct and indirect investments in commercial mortgage-backed securities (“CMBS”) and collateralized debt obligations (“CDOs”) and mortgage revenue bonds; risk of loss under mortgage banking loss sharing agreements; risks associated with providing credit intermediation; and risks associated with enforcement by our creditors of any rights or remedies which they may possess. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates" and similar expressions are intended to identify forward-looking statements. Such forward-looking statements speak only as of the date of this document. Centerline Holding Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Centerline Holding Company's expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based.

Source: Centerline Holding Company

Centerline Holding Company
Hande Tuney, Investor Relations, 800-831-4826