Centerline Cuts Dividend, Outlook

The New York-based company said it "securitized" a $2.8 billion bond portfolio, meaning it sold bonds funneling payments from its portfolio to the investors who bought the bonds. This essentially transfers the risk in its portfolio from the company to investors.

The securitized bonds, which were issued by Freddie Mac, are secured by payments from 59,000 mortgages issued to real estate developers buying properties slated for affordable housing.

This deal pares down the risk in Centerline's portfolio, the company said. Centerline used the proceeds to pay off debt and slim down its balance sheet.

The securitization deal will lead to $45 million to $55 million in accounting charges in the fourth quarter because the company had to shut down certain financing deals and recognize losses on contracts tied to interest rates.

The company cut its forecast for profit in 2007 to $1.70 per share to $1.75 per share, compared with the previous expectation for profit of $1.89 per share.

Centerline also plans to slash its dividend to 60 cents from $1.68.

Centerline's stock sank 72 cents, or 7 percent, to $9.55 in morning trading Friday. The stock had never slipped below $10 until Friday. It closed Thursday down more than 50 percent for the year.

Advised by Morgan Stanley and Bear Stearns Cos., Centerline plans to transform its business from one that collects interest on investments to one that collects fees for managing investments.

The plan now is to grow the company's investments under management, which currently total $11.6 billion. Centerline plans to attract $3.3 billion to $4 billion of new money into its commercial real estate, affordable housing and stock funds next year.