UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
-----------------------------------------------
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): MAY 7, 1998
OCWEN ASSET INVESTMENT CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 000-22389 65-0736120
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
THE FORUM, SUITE 1000
1675 PALM BEACH LAKES BOULEVARD, WEST PALM BEACH, FLORIDA 33401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(561) 681-8000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
PAGE 1 OF 10
EXHIBIT INDEX ON PAGE 4
<PAGE>
ITEM 5. OTHER EVENTS
The news release of Ocwen Asset Investment Corp. dated May 7, 1998, regarding
its sale of IO portfolio, additional capital investment and quarterly results
for the period ended March 31, 1998, are attached and filed herewith as Exhibit
99.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
The following exhibit is filed as part of this report:
(99) News release of Ocwen Asset Investment Corp. dated
May 7, 1998.
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
OCWEN ASSET INVESTMENT CORP.
(Registrant)
By: /s/ MARK S. ZEIDMAN
-----------------------------------------
Mark S. Zeidman
Senior Vice President and
Chief Financial Officer
Date: May 12, 1998
3
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INDEX TO EXHIBIT
Exhibit No. Description Page
----------- ----------- ----
99 News release of Ocwen Asset Investment Corp. 5
dated May 7, 1998, regarding its sale of IO
portfolio, additional capital investment and
quarterly results for the period ended March
31, 1998.
4
================================================================================
Ocwen Asset Investment Corp. EXHIBIT 99
1675 Palm Beach Lakes Boulevard
West Palm Beach, FL 33401
NYSE Symbol: OAC
================================================================================
NEWS RELEASE: IMMEDIATE MAY 7, 1998
OCWEN ASSET INVESTMENT CORP. REPORTS SALE OF IO PORTFOLIO, ADDITIONAL CAPITAL
INVESTMENT AND QUARTERLY RESULTS
West Palm Beach, FL - Ocwen Asset Investment Corp. (NYSE: OAC) (the "Company")
today announced that it had sold its entire portfolio of interest-only and
inverse interest-only securities (together, "IOs") at amortized cost for cash in
the amount of $54.6 million to William C. Erbey, Chairman and Chief Executive
Officer of OAC, and Barry N. Wish, a director of Ocwen Financial Corporation
(NYSE: OCN). The amortized cost of the IO portfolio at April 30, 1998, exceeded
the market value by approximately $14.0 million. OAC also reported that it has
nearly fully invested its capital, having closed transactions totaling
approximately $733.3 million to date. In a related announcement, OAC stated that
its operating partnership will be issuing additional partnership units to OCN in
exchange for a capital contribution of $24.9 million.
OAC today reported funds from operations ("FFO") of $0.19 per share for the
quarter ended March 31, 1998, as compared to $0.28 per share for the quarter
ended December 31, 1997. OAC incurred a net loss for the quarter ended March 31,
1998, of $10.5 million as compared to net income of $5.4 million for the prior
quarter. The loss for the first quarter was attributable to a mark-to-market
loss of approximately $14.0 million on OAC's portfolio of IOs in addition to
write-downs on the IOs totaling $3.1 million for the quarter. Because the IOs
are being sold to a principal shareholder and another related party, the amount
by which amortized cost exceeds market value has been recorded as a charge to
earnings on March 31, 1998, in accordance with generally accepted accounting
principles. The cash received in excess of market value will be reflected on
OAC's books as a capital contribution, effectively reestablishing OAC's equity
position. The charge with respect to the IO portfolio in the month of April will
impact FFO and earnings by approximately $0.01 to $0.03 per share. The sale of
the IO portfolio is expected to generate a capital loss for tax purposes that
will be deductible in future periods against long-term capital gains. Mr. Erbey
stated, "While we believe that the investment in the IOs is a sound long-term
investment, the management and the Board of Directors of OAC believe that
selling the IOs for amortized cost is in the best interest of OAC's shareholders
because it will reduce volatility of earnings."
OAC also announced today that for the month of March 1998 it had closed
transactions totaling $100.3 million, all of which had been funded. This
activity brings OAC's total closed transactions since its initial public
offering, net of repayments to date, to $511.0 million as of March 31, 1998. Of
this amount, $432.1 million has been funded and $78.9 million is to be funded
over the construction and renovation periods, which range from 6 to 30 months.
Additionally, OAC reported that it had closed an additional $262.9 million of
transactions through May 1, 1998, all of which had been funded. This brings
OAC's total closed transactions to $733.3, net of the IO portfolio.
Christine A. Reich, President of OAC, stated, "The additional capital generated
from the sale of the IO portfolio and by the sale of additional limited
partnership units to OCN will permit OAC to continue the rapid pace at which it
has been acquiring assets. We have closed transactions totaling approximately
$733.3 million within twelve months of the date of our initial public offering,
six months ahead of plan. We are close to being fully invested and may consider
seeking additional sources of equity as we continue to see assets that meet our
risk-return parameters."
5
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<TABLE>
<CAPTION>
QUARTERLY HIGHLIGHTS
For the Quarter Ended
-------------------------------------------------
March 31, 1998 December 31,1997
- ---------------------------------------------------- --------------------- ---------------------
Dollars in thousands, except per share data Amount Per Share Amount Per Share
- ---------------------------------------------------- -------- --------- --------- ---------
<S> <C> <C>
Operating results:
Revenues....................................... $ 5,157 $ 6,894
Expenses....................................... 1,703 1,513
Loss on securities held for trading........... (13,958) --
Net income (loss).............................. (10,504) $(0.54) 5,381 $0.28
Funds from operations.......................... 3,740 0.19 5,536 0.28
Dividends...................................... 0.25 0.39
Summary of financial condition:
Cash and cash equivalents...................... $ 7,610 $ 48,677
Securities held for trading.................... 42,545 --
Securities available for sale.................. 157,992 146,027
Loan portfolio, net............................ 144,604 15,831
Discount loans, net............................ 27,108 26,979
Investment in real estate, net................. 58,866 45,430
Securities sold under agreements to repurchase. 85,274 --
Obligation outstanding under line of credit.... 81,890 --
Total shareholders' equity..................... 264,357 271,258
</TABLE>
(1) Per share amounts are based on diluted weighted average common shares
outstanding.
<TABLE>
<CAPTION>
For the Quarter Ended
-------------------------------
March 31, December 31,
------------ ------------
1998 1997
------------ ------------
<S> <C> <C>
Annualized yields
Repurchase agreements and interest-bearing deposits........ 5.71% 5.41%
Securities held for trading............................... (19.82) --
Securities available for sale.............................. 14.14 11.25
Loan portfolio, net........................................ 10.55 11.76
Discount loans, net........................................ 17.62 13.52
Total...................................................... 6.54% 9.05%
Annualized rates
Securities sold under agreements to repurchase............. 6.81% --%
Obligation outstanding under line of credit................ 6.36 --
Total...................................................... 6.79% --%
Net interest margin........................................... 5.34% 9.05%
</TABLE>
6
<PAGE>
REVIEW OF MARCH 1998 TRANSACTIONS
RESIDUAL INVESTMENT. On March 23, 1998, OAC closed the purchase of $8.5 million
of residual securities issued from a securitization of subprime residential
mortgages. Ocwen Federal Bank FSB, a wholly owned subsidiary of OCN, will be the
subservicer for the loans.
RESIDENTIAL WHOLE LOANS. During March 1998, OAC closed the purchase of three
pools of residential whole loans comprised of 923 loans with unpaid principal
balances totaling $91.8 million. The loans have a weighted average coupon of
8.91%. OAC intends to accumulate residential loans and execute a securitization
and retain a subordinate interest.
REVIEW OF SUBSEQUENT TRANSACTIONS
OAC's common stock began trading on the New York Stock Exchange under the symbol
"OAC" on Friday, May 1, 1998. OAC has traded on the NASDAQ National Market
System under the symbol "OAIC" since May, 1997. William C. Erbey, Chairman and
Chief Executive Officer of OAC, said, "The listing of OAC's common stock on the
world's premier exchange is a significant milestone for OAC. We believe listing
on the New York Stock Exchange will increase our potential investor base,
provide greater liquidity for our stock and reduce trading volatility, thereby
further enhancing shareholder investment."
On April 1, 1998, OAC purchased a $32.8 million subordinate investment in the
"BB", "B" and unrated classes of a commercial mortgage-backed security issued in
1995. Ocwen Federal Bank FSB is the special servicer of any loans which are 60
days or more delinquent.
On April 8, 1998, OAC acquired the former Chevron world headquarters building at
225 Bush Street, located in San Francisco's financial district. The $100.2
million acquisition of the 22-story, 536,000 square foot office building marks
the fourth purchase by OAC in the central business district of San Francisco,
expanding its portfolio to over 850,000 square feet. Gregory Breskin, Vice
President of OAC's Real Estate Acquisitions group, said "The purchase of 225
Bush Street reflects our disciplined approach to investing in markets where
there are significant barriers to entry, limited new supply and an opportunity
to create value. 225 Bush Street enjoys a desirable location in a strong market.
OAC anticipates benefiting from enhancements which it intends to make to the
property as well as the synergy's available from multiple holdings within a
single market, including economies of scale from the management side and tenant
flexibility on the revenue side." Current contract rents at the building average
$18.30 per square foot versus current market levels which OAC estimates to be
approximately $32 to $35 per square foot. With the ability to re-let
approximately 60% of the renewable area over the first two years, OAC believes
the property presents a significant value creation opportunity as that turnover
occurs. In addition, San Francisco's central business district vacancy rate is
currently less than 2%, with rental rates increasing over 15% for the past two
years and no significant new supply anticipated in the market over the next
three years. Jordan Paul, Senior Vice President of OAC, added, "We are very
pleased with the latest addition to our portfolio and excited about the
opportunities it presents. With a purchase price of $186 per square foot, this
acquisition is a good example of OAC's targeting of acquisitions at significant
discounts to replacement cost. Along with our investments in several multifamily
projects through our participating lending program, we are gratified with our
success in penetrating the very desirable market that the San Francisco Bay area
embodies."
As previously announced, on April 24, 1998, OAC acquired securitized mortgage
loan residuals for (pound)33.7 million (approximately $56.9 million), from
Cityscape Financial Corp. In addition, OAC and OCN entered into an agreement for
Ocwen Federal Bank FSB, to service the securitized mortgage loan residuals.
On April 30, 1998, OAC purchased a $59.7 million investment in a residual
security supported by a pool of 6,946 subprime mortgage loans. Ocwen Federal
Bank FSB is the master servicer of the loans.
On May 1, 1998, OAC purchased a $13.25 million investment in a subordinate
security supported by a pool of 7,474 single-family residential mortgages. Ocwen
Federal Bank FSB is the master servicer of the loans.
7
<PAGE>
REVIEW OF SELECT COMMITMENTS
As previously noted in a prior press release, OAC has an ongoing commitment to
acquire two residual securities for an aggregate purchase price of $80.4 million
which are detailed as follows:
o The acquisition of $69.0 million residual securities issued from ten
securitizations having an unpaid principal balance aggregating $1.21
billion. The underlying mortgage loans were originated from 1994 to 1997.
OAC expects to close this transaction during the month of May, at which
time the servicing will transfer to Ocwen Federal Bank FSB.
o The acquisition of $11.4 million residual securities from a Wall Street
firm that will acquire approximately $277 million of recently originated
subprime residential mortgage loans on a servicing-released basis from a
loan originator. The firm expects to securitize the loans and sell the
residual to OAC. An affiliate of the Wall Street firm will provide primary
servicing for the loans and Ocwen Federal Bank FSB will assume
responsibility for the special servicing of any loans in the pool which
are 61 days or more delinquent.
As previously disclosed in the same prior press release, OAC also has an ongoing
commitment to acquire a commercial real estate loan for $34.6 million to
construct a nine story 369 room 3 star hotel with an initial funding amount of
$4.5 million.
OAC had previously reported on a commercial real estate loan in the amount of
$23.1 million that had been deferred as negotiations continue. The loan is no
longer expected to close.
Each of these commitments is subject to various closing conditions including,
but not limited to, completion of satisfactory due diligence efforts, the
negotiation of definitive purchase and sales agreements and/or conditions the
borrowers or sellers must satisfy prior to OAC funding the transactions.
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT BASED ON HISTORICAL FACTS AND ARE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES ACT OF 1934, AS
AMENDED. THESE FORWARD-LOOKING STATEMENTS, WHICH ARE BASED ON VARIOUS
ASSUMPTIONS (SOME OF WHICH ARE BEYOND THE COMPANY'S CONTROL), MAY BE IDENTIFIED
BY REFERENCE TO A FUTURE PERIOD(S) OR BY THE USE OF FORWARD-LOOKING TERMINOLOGY
SUCH AS "ANTICIPATE," "BELIEVE," "COMMITMENT," "CONSIDER," "CONTINUE," "COULD,"
"ENCOURAGE," "ESTIMATE," "EXPECT," "INTEND," "MAY," "PLAN," "PRESENT,"
"PROPOSE," "PROSPECT," "WILL," FUTURE OR CONDITIONAL VERB TENSES, SIMILAR TERMS,
VARIATIONS ON SUCH TERMS OR NEGATIVES OF SUCH TERMS. ALTHOUGH THE COMPANY
BELIEVES THE ANTICIPATED RESULTS OR OTHER EXPECTATIONS REFLECTED IN SUCH FORWARD
LOOKING STATEMENTS ARE BASED ON REASONABLE ASSUMPTIONS, IT CAN GIVE NO ASSURANCE
THAT THOSE RESULTS OR EXPECTATIONS WILL BE ATTAINED. ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE INDICATED IN SUCH STATEMENTS DUE TO RISKS, UNCERTAINTIES
AND CHANGES WITH RESPECT TO A VARIETY OF FACTORS, INCLUDING, BUT NOT LIMITED TO,
INTERNATIONAL, NATIONAL, REGIONAL, OR LOCAL ECONOMIC ENVIRONMENTS, GOVERNMENT
FISCAL AND MONETARY POLICIES, PREVAILING INTEREST OR CURRENCY EXCHANGE RATES,
GOVERNMENT REGULATIONS AFFECTING REAL ESTATE INVESTMENTS TRUSTS, COMPETITIVE
PRODUCTS AND PRICING, CREDIT, PREPAYMENT, BASIS AND ASSET/LIABILITY RISKS, LOAN
SERVICING EFFECTIVENESS, INTEGRATION OF ACQUIRED ASSETS AND BUSINESSES, SOFTWARE
INTEGRATION, DEVELOPMENT AND LICENSING, THE FINANCIAL AND SECURITIES MARKETS,
THE AVAILABILITY OF AND COSTS ASSOCIATED WITH OBTAINING ADEQUATE AND TIMELY
SOURCES OF LIQUIDITY, DEPENDENCE ON EXISTING SOURCES OF FUNDING, AVAILABILITY OF
DISCOUNT LOANS FOR PURCHASE, THE SIZE AND NATURE OF THE SECONDARY MARKET FOR
MORTGAGE LOANS AND THE MARKET FOR SECURITIZATIONS, GEOGRAPHIC CONCENTRATIONS OF
ASSETS (TEMPORARY OR OTHERWISE), OTHER FACTORS GENERALLY UNDERSTOOD TO AFFECT
THE REAL ESTATE ACQUISITION, MORTGAGE AND LEASING MARKETS AND SECURITIES
INVESTMENTS, AND OTHER RISKS DETAILED FROM TIME TO TIME IN THE COMPANY'S SEC
REPORTS AND FILINGS, INCLUDING ITS REGISTRATION STATEMENT ON FORM S-11 AND
PERIODIC REPORTS ON FORM 10-Q, FORM 8-K AND FORM 10-K. THE COMPANY DOES NOT
UNDERTAKE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION, TO PUBLICLY RELEASE THE
RESULT OF ANY REVISIONS WHICH MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO
REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS OR CIRCUMSTANCES
AFTER THE DATE OF SUCH STATEMENTS.
ATTACHED ARE THE CONSOLIDATED FINANCIAL STATEMENTS.
8
<PAGE>
OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
(Unaudited) (Audited)
------------- -------------
<S> <C> <C>
ASSETS
Cash and amounts due from depository institutions ................. $ 373,097 $ 331,047
Interest bearing deposits ......................................... 7,236,506 48,346,076
Securities held for trading ....................................... 42,545,318 --
Securities available for sale, at market value .................... 157,991,828 146,026,907
Loan portfolio, net ............................................... 144,604,936 15,831,479
Discount loan portfolio, net ...................................... 27,108,120 26,978,888
Investment in real estate, net .................................... 58,865,764 45,430,039
Principal and interest receivable ................................. 5,082,838 2,518,272
Deposits on pending asset acquisitions ............................ 3,003,500 1,000,000
Other assets ...................................................... 913,363 1,540,633
------------ ------------
$447,725,270 $288,003,341
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Securities sold under agreements to repurchase ................ $ 85,274,000 $ --
Obligation outstanding under line of credit ................... 81,890,207 --
Dividends and distributions payable ........................... 4,825,000 7,458,750
Accrued expenses, payables and other liabilities .............. 5,624,848 6,344,783
------------ ------------
177,614,055 13,803,533
------------ ------------
Minority interest ................................................. 5,753,797 2,941,541
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 25,000,000 shares authorized;
0 shares issued and outstanding ............................ -- --
Common Stock, $.01 par value; 200,000,000 shares authorized;
19,125,000 shares issued (18,965,000 shares outstanding)
at March 31, 1998 and December 31, 1997 ................... 191,250 191,250
Additional paid-in capital .................................... 283,496,750 283,496,750
Distributions in excess of earnings ........................... (17,352,824) (2,107,331)
Unrealized gain (loss) on securities available for sale ....... 1,016,754 (7,327,890)
Treasury stock at cost (160,000 shares) ...................... (2,994,512) (2,994,512)
------------ ------------
Total stockholders' equity ................................. 264,357,418 271,258,267
------------ ------------
$447,725,270 $288,003,341
============ ============
</TABLE>
9
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<TABLE>
<CAPTION>
OCWEN ASSET INVESTMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
March 31, December 31,
1998 1997
- --------------------------------------------------------------- ------------ ------------
(Unaudited) (Audited)
Interest income:
<S> <C> <C>
Repurchase agreements and interest bearing deposits ....... $ 198,138 $1,388,089
Securities held for trading ............................... (2,637,259) --
Securities available for sale ............................. 4,648,582 2,865,553
Loans ..................................................... 1,240,807 305,592
Discount loans ............................................ 902,777 907,737
------------ ----------
4,353,045 5,466,971
------------ ----------
Interest expense:
Securities sold under agreements to repurchase ............ 655,001 --
Obligation outstanding under line of credit ............... 28,548 --
Other ..................................................... 10,268 --
------------ ----------
693,817 --
------------ ----------
Net interest income before provision for loan losses ...... 3,659,228 5,466,971
Provision for loan losses ..................................... 105,073 --
------------ ----------
Net interest income after provision for loan losses ....... 3,554,155 5,466,971
------------ ----------
Operating income:
Real estate investments, net .............................. 796,104 1,424,390
Other ..................................................... 7,857 2,870
------------ ----------
803,961 1,427,260
------------ ----------
Operating expenses:
Management fees ........................................... 828,881 735,397
Due diligence expenses .................................... 192,689 40,213
Foreign currency (gain) loss .............................. (116,953) 568,565
Other ..................................................... 189,655 159,604
------------ ----------
1,094,272 1,503,779
------------ ----------
Loss on securities held for trading ........................... (13,957,628) --
------------ ----------
(Loss) income before minority interest ........................ (10,693,784) 5,390,452
Minority interest in net loss (income) of operating partnership 189,542 (9,430)
------------ ----------
Net (loss) income ......................................... $(10,504,242) $5,381,022
============ ==========
Earnings per share:
Basic ..................................................... $ (0.55) $ 0.28
============ ==========
Diluted ................................................... $ (0.54) $ 0.28
============ ==========
Weighted average common shares outstanding:
Basic ..................................................... 18,965,000 19,085,000
============ ==========
Diluted ................................................... 19,280,848 19,477,532
============ ==========
</TABLE>
10
