Oct 30, 2012 (Marketwire via COMTEX) --Resource Capital Corp. (NYSE: RSO)

Highlights

 

• Adjusted Funds from Operations ("AFFO") of $0.26 and $0.75 per share-diluted.
• GAAP net income to common shares of $0.20 and $0.57 per share-diluted.
• Common stock cash dividend of $0.20 and $0.60 per share.
• Book value per share of $5.51 at September 30, 2012 as compared to $5.38 at December 31, 2011.
• Total revenues increased by $3.0 million, or 13% and $11.7 million, or 18% as compared to the three and nine months ended September 30, 2011.
• Cash on hand of $169.5 million at September 30, 2012.

Resource Capital Corp. (NYSE: RSO) ("RSO" or the "Company"), a real estate investment trust, or REIT, whose investment strategy focuses on commercial real estate ("CRE") assets, commercial mortgage-backed securities ("CMBS"), commercial finance assets and other investments, reported results for the three and nine months ended September 30, 2012.

 

• AFFO for the three and nine months ended September 30, 2012 was $23.0 million, or $0.26 per share-diluted and $63.8 million, or $0.75 per share-diluted, respectively. A reconciliation of GAAP net income to AFFO is set forth in Schedule I of this release.
• GAAP net income to common shares for the three and nine months ended September 30, 2012 was $18.2 million, or $0.20 per share-diluted and $49.1 million, or $0.57 per share-diluted, respectively as compared to $14.9 million, or $0.20 per share-diluted and $37.3 million, or $0.54 per share-diluted for the three and nine months ended September 30, 2011, respectively.

Jonathan Cohen, CEO and President of Resource Capital Corp., commented, "We continue to source new investments across all of the asset classes in which we participate. With growing revenues, good liquidity and good dividend coverage, we are in good shape. We look forward to investing proceeds from our common and preferred share offerings and substantially enlarging our real estate mortgage portfolio."

Additional highlights:

Commercial Real Estate

 

• CRE loan portfolio is comprised of approximately 87% senior whole loans as of September 30, 2012, as compared to 83% a year ago.
• RSO closed $152.6 million of new whole loans in the last twelve months with a weighted average yield of 6.9%, including origination fees. In addition, RSO funded $4.2 million of previous loan commitments on existing loans.

The following table summarizes RSO's CRE loan activities and fundings of previous commitments, at par, for the three and nine months ended September 30, 2012 (in millions, except percentages):

CMBS Securities

 

• During the nine months ended September 30, 2012, RSO acquired $48.3 million of CMBS. These 2012 CMBS purchases were financed by RSO's Wells Fargo repurchase facility and were AAA rated by at least one rating agency. Also, on an unlevered basis, during the nine months ended September 30, 2012, RSO acquired $24.0 million, par value, of CMBS at a weighted average price of 90.95%.

Commercial Finance - Syndicated Bank Loans

 

• RSO's bank loan portfolio, including asset-backed securities ("ABS") and certain loans held for sale, at the end of the third quarter of 2012 was $1.1 billion, at amortized cost, with a weighted-average spread of a weighted-average of one-month and three-month LIBOR plus 3.49% at September 30, 2012. RSO's bank loan portfolio is 100% match-funded through four collateralized loan obligation ("CLO") issuances.
• During the three and nine months ended September 30, 2012, RSO bought bank loans through its CLOs with a par value of $108.1 million and $369.8 million, respectively, at a net discount of $1.7 million and $5.9 million, respectively. These purchased loans have an aggregate weighted average unlevered annual yield of approximately 4.6% and 4.3%, respectively.
• RSO, through its subsidiary Resource Capital Asset Management, earned $5.4 million of net fees during the nine months ended September 30, 2012.

Corporate

 

• RSO issued a follow-on common stock offering, including over-allotment exercise for a total of 9.8 million shares during September 2012, at a net price of $5.69 per share, after underwriting commissions for net proceeds of $55.6 million.
• RSO issued 1.0 million shares of its 8.25% Series B Cumulative Redeemable Preferred Stock, at a price of $24.2125 per share with a liquidation preference of $25.00 per share for net proceeds of $24.2 million which were received on October 2, 2012.
• RSO also sold 411,000 shares of its 8.50% Series A cumulative Preferred Stock at a weighted average price of $24.25 for net proceeds of $9.8 million through September 30, 2012 through an at-the-market program.

Book Value

As of September 30, 2012, RSO's book value per common share was $5.51, an increase from $5.38 per common share at December 31, 2011. Total stockholders' equity was $587.5 million as of September 30, 2012 as compared to $429.7 million as of December 31, 2011. Total common shares outstanding were 99,482,787 as of September 30, 2012 as compared to 79,877,516 as of December 31, 2011. 

Investment Portfolio

The table below summarizes the amortized cost and net carrying amount of RSO's investment portfolio as of September 30, 2012, classified by interest rate and by asset type. The following table includes both (i) the amortized cost of RSO's investment portfolio and the related dollar price, which is computed by dividing amortized cost by par amount, and (ii) the net carrying amount of RSO's investment portfolio and the related dollar price, which is computed by dividing the net carrying amount by par amount (in thousands, except percentages):

Liquidity

At October 26, 2012, after paying RSO's third quarter common stock dividend, RSO's liquidity is provided by two primary sources:

 

• unrestricted cash and cash equivalents of $98.9 million, restricted cash of $500,000 in margin call accounts and $1.4 million in the form of real estate escrows, reserves and deposits; and
• capital available for reinvestment in its six CDO entities of $23.3 million, of which $775,000 is designated to finance future funding commitments on CRE loans, loan principal repayments that will pay down outstanding CLO notes of $41.2 million and $8.7 million in interest collections.

In addition, RSO has funds available through two CRE term facilities to finance the purchase of CMBS securities and origination of commercial real estate loans of $42.0 million and $121.1 million, respectively.

Capital Allocation

As of September 30, 2012, RSO had allocated its invested equity capital among its targeted asset classes as follows: 70% in CRE assets, 28% in commercial finance assets and 2% in other investments.

Supplemental Information

The following schedules of reconciliations or supplemental information as of September 30, 2012 are included at the end of this release:

 

• Schedule I - Reconciliation of GAAP Net Income to Funds from Operations ("FFO") and AFFO.
• Schedule II - Summary of CDO and CLO Performance Statistics.
• Supplemental Information regarding loan investment statistics, CRE loans and bank loans.

About Resource Capital Corp.

RSO is a diversified real estate finance company that is organized and conducts its operations to qualify as a REIT for federal income tax purposes. RSO's investment strategy focuses on CRE and CRE-related assets, and, to a lesser extent, commercial finance assets. RSO invests in the following asset classes: CRE-related assets such as commercial real estate property, whole loans, A-notes, B-notes, mezzanine loans, CMBS and investments in real estate joint ventures as well as commercial finance assets such as bank loans, lease receivables, other asset-backed securities, trust preferred securities, debt tranches of CDOs, structured note investments, and private equity investments principally issued by financial institutions. 

RSO 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 real estate, financial fund management and commercial finance sectors. 

For more information, please visit RSO's website at www.resourcecapitalcorp.com or contact investor relations at pkamdar@resourceamerica.com.

Safe Harbor Statement
Statements made in this release may include forward-looking statements, which involve substantial risks and uncertainties. RSO's actual results, performance or achievements could differ materially from those expressed or implied in this release. The risks and uncertainties associated with forward-looking statements contained in this release include those related to:

 

• fluctuations in interest rates and related hedging activities;
• the availability of debt and equity capital to acquire and finance investments;
• defaults or bankruptcies by borrowers on RSO's loans or on loans underlying its investments;
• adverse market trends which have affected and may continue to affect the value of real estate and other assets underlying RSO's investments;
• increases in financing or administrative costs; and
• general business and economic conditions that have impaired and may continue to impair the credit quality of borrowers and RSO's ability to originate loans.

For further information concerning these and other risks pertaining to the forward-looking statements contained in this release, and to the general risks to which RSO is subject, see Item 1A, "Risk Factors" included in its Annual Report on Form 10-K and the risks expressed in other of its public filings with the Securities and Exchange Commission.

RSO cautions you not to place undue reliance on any forward-looking statements contained in this release, which speak only as of the date of this release. All subsequent written and oral forward-looking statements attributable to RSO or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this release. Except to the extent required by applicable law or regulation, RSO undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events.

The remainder of this release contains RSO's unaudited consolidated balance sheets, unaudited consolidated statements of income, reconciliation of GAAP net income to FFO and AFFO and a summary of CDO and CLO performance statistics and supplemental information regarding RSO's CRE loan and bank loan portfolios.

RSO currently evaluates its performance based on several performance measures, including FFO and AFFO (both non-GAAP measures), in addition to net income. RSO computes FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts as net income (computed in accordance with GAAP), excluding gains or losses on the sale of depreciable real estate, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization, and after adjustments for unconsolidated/uncombined partnerships and joint ventures.

AFFO is a computation made by analysts and investors to measure a real estate company's cash flow generated by operations. RSO calculates AFFO by adding or subtracting from FFO: non-cash impairment losses resulting from fair value adjustments on financial instruments, non-cash impacts of the following: provision for loan losses, gains on the extinguishment of debt, equity investment losses, straight-line rental effects, share based compensation, amortization of various deferred items and intangible assets, gains on sales of property through a joint venture and cash impact of capital expenditures that are related to RSO's real estate owned. 

Management believes that FFO and AFFO are appropriate measures of RSO's operating performance in that they are frequently used by analysts, investors and other parties in the evaluation of REITs. Management uses FFO and AFFO as measures of RSO's operating performance, and believes they are also useful to investors, because they facilitate an understanding of RSO's operating performance after adjustment for certain non-cash items, such as real estate depreciation, share-based compensation and various other items required by GAAP, and capital expenditures, that may not necessarily be indicative of current operating performance and that may not accurately compare RSO's operating performance between periods. 

While RSO's calculation of AFFO may differ from the methodology used for calculating AFFO by other REITs and its AFFO may not be comparable to AFFO reported by other REITs, RSO also believes that FFO and AFFO may provide it and its investors with an additional useful measure to compare its performance with some other REITs. Neither FFO nor AFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and AFFO do not represent amounts available for management's discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor AFFO should be considered as an alternative to net income as an indicator of RSO's operating performance or as an alternative to cash flow from operating activities as a measure of its liquidity.

SCHEDULE II

Collateralized Debt Obligations - Distributions and Coverage Test Summary

The following table sets forth cash distributions from RSO's CDO investments and a summary of coverage test compliance for the CDO issuers for the periods presented:

Loan Investment Statistics

The following table presents information on RSO's impaired loans and related allowances for the periods indicated (based on amortized cost):

The following table presents commercial real estate loan portfolio statistics as of September 30, 2012 (based on par value):

CONTACT:
        DAVID J. BRYANT
        CHIEF FINANCIAL OFFICER
        RESOURCE CAPITAL CORP.
        712 Fifth Ave, 12TH Floor
        New York, NY 10019
        212-506-3870