NEW YORK--(BUSINESS WIRE)--Nov. 6, 2006--Resource Capital Corp. (NYSE: RSO) (the "Company" or "RCC"), a real estate investment trust focused on originating and investing in commercial real estate secured loans, whole loans, B-notes, mezzanine loans, mortgage-related securities and other real estate related assets and, to a lesser extent, higher-yielding commercial finance assets and asset-backed securities, reported estimated REIT taxable income of $9.2 million or $0.52 per diluted share for the quarter ended September 30, 2006, as compared to $4.6 million or $0.30 per diluted share for the quarter ended September 30, 2005 an increase of $4.6 million (101%) and $0.22 (73%) per diluted share, respectively. A reconciliation of estimated REIT taxable income to the Company's GAAP net income accompanies this release. As previously reported, on September 28, 2006 the Company sold the remainder of its agency residential mortgage backed securities ("RMBS") portfolio and terminated the related interest rate swap contract in order to redeploy its invested capital into higher earning asset classes. Consequently, included in the Company's operating results for the quarter ended and nine months ended September 30, 2006 is a net loss of $8.3 million and $8.8 million, respectively, incurred as a result of this sale.
Including this transaction, the Company reported a net loss of $2.4 million or ($0.14) per diluted share for the quarter ended September 30, 2006 as compared to net income of $3.8 million or $0.24 per diluted share for the quarter ended September 30, 2005 a decrease of $6.2 million (164%) and $0.38 (158%) per diluted share, respectively. Net income for the nine months ended September 30, 2006 was $8.8 million, or $0.51 per diluted share, as compared to net income for the period ended September 30, 2005 of $6.0 million, or $0.39 per diluted share, an increase of $2.8 million (47%) and $0.12 (31%) per diluted share, respectively.
Pro-forma net income from on-going operations excludes the net realized loss from the agency RMBS sale. Pro-forma net income from on-going operations was $5.9 million for the quarter ended September 30, 2006 as compared to $3.8 million for the quarter ended September 30, 2005, an increase of $2.1 million. Pro-forma net income was $17.6 million for the nine month period ended September 30, 2006 as compared to $6.0 million for the period ended September 30, 2005 an increase of $11.6 million. The following table reconciles net income to pro-forma income from on-going operations for all periods:
Nine Months
Three Months Ended Ended Period Ended
September 30, September 30, September 30,
-------------------- ------------- -------------
2006 2005 2006 2005
------------ ------- ------------- -------------
(unaudited, in thousands, except per share data)
Net (loss) income $ (2,401) $3,776 $ 8,814 $ 6,008
Plus:
Net realized loss
from sale of
Agency RMBS
portfolio 8,301 - 8,768 -
------------ ------- ------------- -------------
Pro-forma income from
on-going operations $ 5,900 $3,776 $ 17,582 $ 6,008
============ ======= ============= =============
Pro-forma income from
on-going operations
per share diluted
(1) $ 0.33 $ 0.24 $ 1.01 $ 0.39
============ ======= ============= =============
(1) For the three months ended September 30, 2006, the weighted
average number of shares used in calculating the net loss per share-
diluted is the same as the basic weighted average number of shares as
a result of a net loss available to common shareholders for the
period. Diluted shares used in the pro-forma per share-diluted
computation are 17,720,590.
Pro-forma income from on-going operations is not a measure of financial performance under GAAP and accordingly, should not be considered as a substitute for net (loss) income.
Highlights for the third quarter and recent developments include:
-- The Company paid a quarterly dividend of $0.37 per common
share for the third quarter of 2006, an increase of $0.01 per
common share or 3% from the dividend paid for the second
quarter of 2006. This distribution was paid on October 13,
2006 to all shareholders of record as of September 29, 2006.
-- The Company's net interest income increased by $2.3 million or
(38%) to $8.3 million for the quarter ended September 30, 2006
as compared to $6.0 million for the same period in 2005.
Commercial Real Estate
-- The Company continued to increase its investment in commercial
real estate loans. The portfolio of loans (net of repayments)
grew by $147.1 million to $439.7 million at September 30, 2006
from $292.6 million at June 30, 2006. As of November 3, 2006,
the Company had closed an additional $53.4 million of loans
and is currently in the closing process for seven additional
commercial real estate investment opportunities in excess of
$147.0 million. In addition, RCC received a repayment in July
2006 on one loan of $27.5 million.
-- On July 3, 2006, the Company added a direct loan origination
team based in Los Angeles, led by Kyle Geoghegan and Darryl
Myrose.
-- On August 10, 2006, the Company closed Resource Real Estate
Funding CDO 2006-1, Ltd. ("RREF CDO-1") a collateralized debt
obligation ("CDO"), that will provide long-term financing for
a $345.0 million portfolio of commercial real estate loans.
The Company retained approximately $79.4 million of equity in
this financing. The notes issued by RREF CDO-1 bear interest
at a weighted-average interest rate of LIBOR plus 0.82%. At
September 30, 2006, the weighted average rate on all notes was
6.13%.
-- On August 11, 2006, the Company closed on a new $300.0 million
repurchase agreement facility with Column Financial, Inc., a
subsidiary of Credit Suisse Securities (USA) LLC, to finance
the purchase of commercial real estate loans. At September 30,
2006, the Company had borrowed $43.0 million under the
facility with a weighted average interest rate of LIBOR plus
1.17% (6.50% at September 30, 2006).
Commercial Finance
-- RCC continued to increase the size of its bank loan portfolio
and ended the quarter with a total of $614.9 million of these
loans, at cost, with a weighted-average spread of LIBOR plus
2.36% and a fair value of $613.9 million. The Company's loan
portfolio is match-funded through two CDO's with a
weighted-average cost of LIBOR plus 0.45%.
-- RCC's commercial finance subsidiary acquired an additional
$68.6 million in direct financing leases and notes, net of
sales and principal paydowns, since December 31, 2005,
including $13.9 million since June 30, 2006.
Corporate Matters
-- The Company issued a $25.8 unsecured junior subordinated
debenture that bears interest at LIBOR plus 3.95% related to a
trust preferred security ("Trups") on September 29, 2006. RCC
received net proceeds of $24.2 million from the issuance.
Balance Sheet Summary
At September 30, 2006, excluding the Company's Agency RMBS portfolio, RCC's investment portfolio totaled $1.6 billion and included the following: $467.0 million of commercial real estate-related investments, $368.5 million of asset backed securities, $614.9 million of bank loans, $91.9 million of direct financing leases and notes and $42.6 million of temporary cash investments. At September 30, 2006, RCC's investment portfolio (excluding the financing related to the Company's agency RMBS portfolio) was financed with $1.4 billion of total indebtedness and included the following: $1.2 billion of senior notes issued by CDOs secured primarily by commercial real estate related investments, mortgage-backed securities, syndicated bank loans and other asset-backed securities; $87.1 million outstanding under a term facility secured by equipment leases and notes and $51.5 million of unsecured junior subordinated debentures. The Agency RMBS repurchase agreement debt of $716.5 million was paid down on October 2, 2006 upon settlement of the trade and receipt of proceeds from the broker.
Book Value
The Company's book value per common share at September 30, 2006 was $12.91 as compared to $12.46 at December 31, 2005, a 3.6% increase. Total stockholders' equity was $230.0 million at September 30, 2006 and $195.3 million at December 31, 2005. Total common shares outstanding were 17,821,434 and 15,682,334 at September 30, 2006 and December 31, 2005, respectively.
Investment Portfolio
The table below summarizes the amortized cost and estimated fair value of RCC's investment portfolio as of September 30, 2006, classified by interest rate type. The table below includes both (i) the amortized cost of RCC's investment portfolio and the related dollar price, which is computed by dividing amortized cost by par amount, and (ii) the estimated fair value of RCC's investment portfolio and the related dollar price, which is computed by dividing the estimated fair value by par amount (in thousands, except percentages):
September 30, 2006
---------------------------------------------------------
Estimated
fair
value
less
Amortized Dollar Estimated Dollar amortized Dollar
cost price fair value price cost price
----------- ------- ----------- ------- ---------- ------
Floating
rate
------------
Non-agency
RMBS $ 340,988 99.19% $ 341,225 99.26% $ 236 0.07%
CMBS 415 100.00% 420 101.20% 5 1.20%
Other ABS 18,317 98.95% 18,419 99.50% 103 0.55%
Whole loans 75,821 99.19% 75,821 99.19% - 0.00%
A notes 42,517 100.04% 42,517 100.04% - 0.00%
B notes 120,251 99.98% 120,251 99.98% - 0.00%
Mezzanine
loans 78,631 99.97% 78,631 99.97% - 0.00%
Syndicated
bank loans 614,699 100.16% 613,636 99.98% (1,063) -0.18%
----------- ----------- ----------
Total
floating
rate $1,291,639 99.80% $1,290,920 99.74% $ (719) -0.06%
=========== =========== ==========
Fixed rate
------------
Non-agency
RMBS $ 6,000 100.00% $ 5,853 97.55% $ (147) -2.45%
CMBS 27,539 98.73% 26,968 96.68% (571) -2.05%
Other ABS 3,135 99.97% 2,999 95.63% (136) -4.34%
B notes 41,920 99.81% 41,920 99.81% - 0.00%
Mezzanine
loans 80,515 93.52% 80,515 93.52% - 0.00%
Syndicated
bank loans 248 99.60% 248 99.60% - 0.00%
Equipment
leases and
notes 91,909 100.00% 91,909 100.00% - 0.00%
----------- ----------- ----------
Total
fixed
rate $ 251,266 97.66% $ 250,412 97.33% $ (854) -0.33%
=========== =========== ----------
Grand
total $1,542,905 99.44% $1,541,332 99.34% $ (1,573) -0.10%
=========== =========== ==========
About Resource Capital Corp.
Resource Capital Corp. is a specialty finance company that began operations in March 2005 and has elected and intends to continue to qualify as a real estate investment trust for federal income tax purposes. RCC's investment strategy focuses on real estate-related assets, and, to a lesser extent, higher-yielding commercial finance assets with a concentration on the following asset classes: commercial real estate-related assets such as whole loans, B-notes, mezzanine loans and mortgage-related securities and commercial finance assets such as other asset-backed securities, syndicated bank loans, equipment leases and notes, trust preferred securities and private equity investments principally issued by financial institutions. RCC is externally managed by Resource Capital Manager, Inc., an indirect wholly owned subsidiary of Resource America, Inc. (Nasdaq: REXI), a specialized asset management company that uses industry specific expertise to generate and administer investment opportunities for its own account and for outside investors in the financial fund management, real estate, and equipment finance sectors. As of June 30, 2006, Resource America, Inc. managed approximately $10.5 billion of assets in these sectors.
For more information, please visit our website at www.resourcecapitalcorp.com or contact investors relations at pschreiber@resourceamerica.com
Safe Harbor Statement
Statements made in this release include forward-looking statements, which involve substantial risks and uncertainties. The Company's actual results, performance or achievements could differ materially from those expressed or implied in this release. For information pertaining to risks related to these forward-looking statements, see Item 1A, under the caption "Risk Factors" contained in Item 1 of the Company's Annual Report on Form 10-K.
The remainder of this release contains the Company's consolidated balance sheets, consolidated statements of operations and a reconciliation of the Company's estimated REIT taxable income.
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
September 30, December 31,
2006 2005
------------- ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 13,505 $ 17,729
Restricted cash 29,054 23,592
Due from broker 753,195 525
Available-for-sale securities, pledged as
collateral, at fair value 395,884 1,362,392
Available-for-sale securities, at fair
value - 28,285
Loans 1,054,602 569,873
Direct financing leases and notes, net of
unearned income 91,909 23,317
Investments in unconsolidated trusts 1,548 -
Derivatives, at fair value - 3,006
Interest receivable 11,369 9,337
Accounts receivable 503 183
Principal paydown receivables 14,668 5,805
Other assets 3,142 1,503
------------- ------------
Total assets $ 2,369,379 $ 2,045,547
============= ============
LIABILITIES
Repurchase agreements, including accrued
interest of $1,012 and $2,104 $ 770,167 $ 1,068,277
Collateralized debt obligations ("CDOs")
(net of debt issuance costs of $18,730
and $10,093) 1,206,751 687,407
Warehouse agreement - 62,961
Secured term facility 87,080 -
Unsecured revolving credit facility - 15,000
Distribution payable 6,594 5,646
Accrued interest expense 11,357 9,514
Unsecured junior subordinated debentures
held by unconsolidated trusts that issued
trust preferred securities 51,548 -
Management and incentive fee payable -
related party 614 896
Derivatives, at fair value 3,094 -
Security deposits 868 -
Accounts payable and accrued liabilities 1,319 513
------------- ------------
Total liabilities 2,139,392 1,850,214
------------- ------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.001:
100,000,000 shares authorized; no shares
issued and outstanding - -
Common stock, par value $0.001:
500,000,000 shares authorized; 17,821,434
and 15,682,334 shares issued and
outstanding (including 234,224 and
349,000 restricted shares) 18 16
Additional paid-in capital 247,934 220,161
Deferred equity compensation (1,364) (2,684)
Accumulated other comprehensive loss (3,951) (19,581)
Distributions in excess of earnings (12,650) (2,579)
------------- ------------
Total stockholders' equity 229,987 195,333
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,369,379 $ 2,045,547
============= ============
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)
Period from
March 8,
2005
(Date
Operations
Nine Months Commenced)
Ended to
Three Months Ended September September
September 30, 30, 30,
-------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
REVENUES
Net interest
income:
Interest income
from securities
available-for-
sale $ 16,248 $ 16,248 $ 48,673 $ 26,741
Interest income
from loans 19,905 4,864 46,625 6,322
Interest income
- other 2,995 484 8,179 1,627
------------ ------------ ------------ ------------
Total interest
income 39,148 21,596 103,477 34,690
Interest expense 30,855 15,595 78,576 23,736
------------ ------------ ------------ ------------
Net interest
income 8,293 6,001 24,901 10,954
------------ ------------ ------------ ------------
OTHER REVENUE
Net realized
(losses) gains
on investments (8,314) 192 (8,853) 178
Other income 384 - 391 -
------------ ------------ ------------ ------------
Total other
revenue (7,930) 192 (8,462) 178
------------ ------------ ------------ ------------
EXPENSES
Management fees
- related party 917 822 3,147 1,839
Equity
compensation -
related party 798 836 1,620 1,873
Professional
services 480 222 1,266 344
Insurance 126 122 372 273
General and
administrative 443 415 1,220 795
------------ ------------ ------------ ------------
Total expenses 2,764 2,417 7,625 5,124
------------ ------------ ------------ ------------
NET (LOSS) INCOME $ (2,401) $ 3,776 $ 8,814 $ 6,008
============ ============ ============ ============
NET (LOSS) INCOME
PER SHARE - BASIC $ (0.14) $ 0.25 $ 0.51 $ 0.39
============ ============ ============ ============
NET (LOSS) INCOME
PER SHARE -
DILUTED $ (0.14) $ 0.24 $ 0.51 $ 0.39
============ ============ ============ ============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING -
BASIC 17,585,171 15,333,334 17,261,091 15,333,334
============ ============ ============ ============
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING -
DILUTED 17,585,171 15,458,133 17,388,566 15,458,133
============ ============ ============ ============
DIVIDENDS DECLARED
PER SHARE $ 0.37 $ 0.20 $ 1.06 $ 0.20
============ ============ ============ ============
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME (LOSS) TO ESTIMATED REIT TAXABLE
INCOME
(Unaudited)
Estimated REIT Taxable Income
The Company calculates estimated REIT taxable income, which is a non-
GAAP financial measure, according to the requirements of the Internal
Revenue Code. The following table reconciles its net income to
estimated REIT taxable income for the periods presented (in
thousands):
Three Months Ended Nine Months Ended Period Ended
September 30, September 30, September 30,
-------------------
2006 2005 2006 2005
----------- ------- ----------------- -------------
Net (loss) income $ (2,401) $3,776 $ 8,814 $ 6,008
Additions:
Share-based
compensation to
related parties 798 836 1,620 1,873
Incentive
management fee
expense to
related party
paid in shares - - 108 -
Capital losses
from the sale
of available-
for- sale
securities 10,875 - 12,286 -
Accrued and/or
prepaid
expenses - - 89 -
Net book to tax
adjustment for
the inclusion
of the
Company's
taxable foreign
REIT
subsidiaries (1) 20 764 20
Amortization of
Deferred Debt
Issuance Costs
on CDO
financings (48) (40) (140) (40)
----------- ------- ----------------- -------------
Estimated REIT
taxable income $ 9,223 $4,592 $ 23,541 $ 7,861
=========== ======= ================= =============
The Company believes that a presentation of estimated REIT taxable income provides useful information to investors regarding its financial condition and results of operations as this measurement is used to determine the amount of dividends that RCC is required to declare to our stockholders in order to maintain its status as a REIT for federal income tax purposes. Since RCC, as a REIT, expects to make distributions based on taxable earnings, RCC expects that its distributions may at times be more or less than its reported earnings. Total taxable income is the aggregate amount of taxable income generated by RCC and by its domestic and foreign taxable REIT subsidiaries. Estimated REIT taxable income excludes the undistributed taxable income of RCC's domestic taxable REIT subsidiary, if any such income exists, which is not included in REIT taxable income until distributed by RCC. There is no requirement that RCC's domestic taxable REIT subsidiary distribute its earnings to the Company. Estimated REIT taxable income, however, includes the taxable income of RCC's foreign taxable REIT subsidiaries because the Company will generally be required to recognize and report its taxable income on a current basis. RCC uses estimated REIT taxable income for this purpose. Because not all companies use identical calculations, this presentation of estimated REIT taxable income may not be comparable to other similarly-titled measures of other companies.
CONTACT: Resource Capital Corp.
David J. Bryant, 215-546-5005
Fax: 215-546-5388
SOURCE: Resource Capital Corp.
