NEW YORK, NY -- (Marketwired) -- 02/25/14 -- Resource Capital Corp. (NYSE: RSO)

Highlights

• Adjusted Funds from Operations ("AFFO") of $0.14 and $0.74 per share-diluted (see Schedule I).
   
• Closed $307.8 million commercial real estate ("CRE") securitization on December 23, 2013 and retained subordinated notes and equity of $46.9 million and expect to earn a return on invested equity of 20%.
   
• CRE loan originations of $97.4 million and $344.3 million.
   
• Completed $115.0 million 6.0% convertible senior notes offering on October 17, 2013 and received net proceeds of approximately $111.1 million after payment of offering costs.
   
• GAAP net income allocable to common shares of $(0.01) and $0.33 per share-diluted.
   
• Common stock cash dividend of $0.20 and $0.80 per share.
   

Resource Capital Corp. (NYSE: RSO) ("RSO" or the "Company"), a real estate investment trust, or REIT, whose investment strategy focuses on commercial real estate assets, commercial mortgage-backed securities ("CMBS"), commercial finance assets and other investments, reported results for the three months and year ended December 31, 2013.

• AFFO for the three months and year ended December 31, 2013 was $17.2 million, or $0.14 per share-diluted, and $88.6 million, or $0.74 per share-diluted, respectively. A reconciliation of GAAP net income to AFFO is set forth in Schedule I of this release.
   
• GAAP net loss allocable to common shares for the three months was $948,000, or $(0.01) per share-diluted and GAAP net income allocable to common shares for the year ended December 31, 2013 was $39.2 million, or $0.33 per share-diluted, as compared to net income of $14.1 million, or $0.14 per share-diluted and $63.2 million, or $0.71 per share-diluted for the three months and year ended December 31, 2012, respectively. Included in net (loss) income for the three months and year ended December 31, 2013, was the combined effect of liquidation and deconsolidation of Whitney CLO I and Apidos CLO VIII, respectively. We incurred non-cash charges of approximately $16.0 million from accelerated amortization of notes issued at discounts and deferred costs for the three months ended December 31, 2013 and $18.5 million for these same accelerated items for the year ended December 31, 2013.
   

Jonathan Cohen, CEO and President of Resource Capital Corp., commented, "Our overall 2013 performance was negatively impacted by the faster than anticipated paydown of our corporate loan portfolio. However, we are already putting cash to work in new investments and expect to further increase our investments in commercial real estate loans, middle market corporate loans and other investments. As we do so, we expect Adjusted Funds from Operations to increase throughout 2014. We have a very strong balance sheet, excellent liquidity and access to capital and growing origination platforms that are generating high quality investments with attractive returns."

Additional highlights:

Commercial Real Estate

• CRE loan portfolio is comprised of approximately 90% senior whole loans as of December 31, 2013, as compared to 85% a year ago.
• RSO closed $324.8 million of new whole loans in the last 12 months with a weighted average yield of 6.51%, including origination fees. In addition, RSO funded $19.5 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 months and year ended December 31, 2013 (in millions, except percentages):

CMBS

• During the year ended December 31, 2013, RSO acquired $42.6 million, par value, of CMBS, which were financed by RSO's Wells Fargo repurchase facility and were AAA rated by at least one rating agency. In addition, RSO acquired $48.8 million, par value, of CMBS which were partially financed by alternate 30-day repurchase contracts with a repurchase value of $33.7 million. Also, during the year ended December 31, 2013, RSO acquired $43.9 million, par value, of CMBS, which were not financed with debt.

Commercial Finance - Syndicated Bank Loans

• RSO's bank loan portfolio, including asset-backed securities ("ABS"), corporate bonds and certain loans held for sale, at the end of the fourth quarter of 2013 was $580.0 million, at amortized cost, with a weighted-average spread of one-month and three-month LIBOR plus 3.12% at December 31, 2013. RSO's bank loan portfolio was nearly 100% match-funded through three collateralized loan obligation ("CLO") issuances.
   
• During the year ended December 31, 2013, RSO bought bank loans, primarily through reinvestment of its existing CLOs, with a par value of $393.2 million, at a net discount of $3.3 million. These purchased loans have an aggregate weighted average unlevered annual yield of approximately 4.2%.
   
• RSO, through its subsidiary Resource Capital Asset Management, earned $5.3 million of net fees during the year ended December 31, 2013.
   

Corporate

• RSO also sold 256,000 and 2.4 million shares of its 8.25% Series B cumulative Preferred Stock at a weighted average price of $22.61 and $24.56, with a liquidation preference of $25.00, per share, for net proceeds of $5.7 million and $56.7 million for the three months and year ended December 31, 2013, respectively, pursuant to an at-the-market program.

Investment Portfolio

The table below summarizes the amortized cost and net carrying amount of RSO's investment portfolio as of December 31, 2013, 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 January 31, 2014, after paying RSO's fourth quarter 2013 common and preferred stock dividends, RSO's liquidity is derived from three primary sources:

• unrestricted cash and cash equivalents of $199.2 million, restricted cash of $500,000 in margin call accounts and $998,000 in the form of real estate escrows, reserves and deposits;
   
• capital available for reinvestment in its eight securitizations of $40.5 million, of which $6.4 million is designated to finance future funding commitments on CRE loans; and
   
• loan principal repayments that will pay down outstanding CLO notes of $18.9 million and $5.0 million in interest collections.
   

In addition, RSO has funds available through three term financing facilities to finance the origination of CRE loans of $207.6 million and $200.0 million, respectively, and to finance the purchase of CMBS of $45.7 million.

Capital Allocation

As of December 31, 2013, RSO had allocated its invested equity capital among its targeted asset classes as follows: 83% in CRE assets, 15% in commercial finance assets and 2% in other investments.

Supplemental Information

The following schedules of reconciliations or supplemental information as of December 31, 2013 are included at the end of this release:

• Schedule I - Reconciliation of GAAP Net Income to Funds from Operations ("FFO") and AFFO.
• Schedule II - Book Value Allocable to Common Shareholders Rollforward.
• Schedule III - Securitizations - Distributions and Coverage Test Summary.
• Supplemental Information regarding loan investment statistics, CRE loans and bank loans.

About Resource Capital Corp.

RSO is a real estate investment trust that is primarily focused on originating, holding and managing commercial mortgage loans and other commercial real estate-related debt and equity investments. The Company also makes other commercial finance investments.

RSO is externally managed by Resource Capital Manager, Inc., an indirect wholly-owned subsidiary of Resource America, Inc. (NASDAQ: REXI), an asset management company that specializes in real estate and credit investments. The Company's objective is to be best in class among asset managers in the real estate and credit sectors as measured by returns to investors and the quality of the funds and businesses it manages. Resource America's investments emphasize consistent value and long-term returns with an income orientation.

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, Book value allocable to common shareholders rollforward, summary of CDO and CLO performance statistics and supplemental information regarding RSO's CRE loan and bank loan portfolios.

 

(a) Assets of each of the consolidated VIEs may only be used to settle the obligations of each respective VIE.
(b) The creditors of the Company's VIEs have no recourse to the general credit of the Company.

SCHEDULE I

Funds from Operations

We evaluate our performance based on several performance measures, including funds from operations, or FFO, and adjusted funds from operations, or AFFO, in addition to net income. We compute 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. We calculate AFFO by adding or subtracting from FFO the non-cash impacts of the following: non-cash impairment losses resulting from fair value adjustments on financial instruments, provision for loan losses, equity investment gains and losses, straight-line rental effects, share based compensation, amortization of various deferred items and intangible assets, gains on sales of property that are wholly owned or through a joint venture in addition to the cash impact of capital expenditures that are related to our real estate owned. In addition, we calculate AFFO by adding and subtracting from FFO the cash impacts of the following: extinguishment of debt, sales of property and capital expenditures.

Management believes that FFO and AFFO are appropriate measures of our 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 our operating performance, and believes they are also useful to investors, because they facilitate an understanding of our 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 our operating performance between periods.

While our calculations of AFFO may differ from the methodology used for calculating AFFO by other REITs and our AFFO may not be comparable to AFFO reported by other REITs, we also believe that FFO and AFFO may provide us and our investors with an additional useful measure to compare our 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 GAAP net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

The following table reconciles GAAP net income to FFO and AFFO for the periods presented (unaudited) (in thousands, except per share data):

SCHEDULE II

SCHEDULE III

Securitizations - Distributions and Coverage Test Summary

The following table sets forth the distributions made and coverage test summaries for each of RSO's securitizations for the periods presented (in thousands):

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 December 31, 2013 (based on par value):

The following table presents bank loan portfolio statistics by industry as of December 31, 2013 (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

Source: Resource Capital Corp.