NEW YORK, NY — (Marketwired) — 05/07/13 — (NYSE: RSO)
(NYSE: RSO) , 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 months ended March 31, 2013.
AFFO for the three months ended March 31, 2013 was $21.0 million, or $0.20 per share-diluted as compared to $18.6 million, or $0.23 per share diluted for the three months ended March 31, 2012. A reconciliation of GAAP net income to AFFO is set forth in Schedule I of this release.
GAAP net income allocable to common shares for the three months ended March 31, 2013 was $11.5 million, or $0.11 per share-diluted as compared to $14.5 million, or $0.18 per share-diluted for the three months ended March 31, 2012, respectively.
Jonathan Cohen, CEO and President of Resource Capital Corp., commented, “Resource Capital Corp. had a very good first quarter, in which we had new loan production of $61 million and a strong pipeline, including the $44 million loan which we announced last week and several more in the works. This quarter we sold a legacy loan portfolio for $34 million, and we have a normalized run rate of adding $60 – $100 million of loans per quarter. Our bank loan portfolio continues to perform extremely well. As of April 30, 2013, we have over $162 million of unrestricted cash and we recently increased and extended our commercial real estate loan warehouse facility. We expect loan production to increase and our growing capital base lets us take advantage of larger and more diverse opportunities.”
Commercial Real Estate
CRE loan portfolio is comprised of approximately 85% senior whole loans as of March 31, 2013, as compared to 87% a year ago.
RSO closed $201.3 million of new whole loans in the last twelve months with a weighted average yield of 6.54%, including origination fees. In addition, RSO funded $6.5 million of previous loan commitments on existing loans for total production of $207.8 million. RSO also acquired $15.2 million of loans with a weighted average yield of 20.0%.
The following table summarizes RSO-s CRE loan activities and fundings of previous commitments, at par, for the three and 12 months ended March 31, 2013 (in millions, except percentages):
CMBS
During the three months ended March 31, 2013, RSO acquired $8.2 million, par value, of CMBS. These 2013 CMBS purchases were in part financed by RSO-s Wells Fargo repurchase facility and were AAA rated by at least one rating agency. In addition, RSO acquired $32.8 million, par value, of CMBS which were also partially financed by 30-day repurchase contracts with a repurchase value of $23.6 million. Also, during the three months ended March 31, 2013, RSO acquired $21.2 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 first quarter of 2013 was $1.2 billion, at amortized cost, with a weighted-average spread of one-month and three-month LIBOR plus 3.39% at March 31, 2013. RSO-s bank loan portfolio is 100% match-funded through five collateralized loan obligation (“CLO”) issuances.
During the three months ended March 31, 2013, RSO bought bank loans through its CLOs with a par value of $86.5 million, at a net discount of $1.2 million. These purchased loans have an aggregate weighted average unlevered annual yield of approximately 4.5%.
RSO, through its subsidiary, Resource Capital Asset Management, earned $1.4 million of net fees during the three months ended March 31, 2013.
Corporate
RSO issued 2.9 million shares of its common stock through a dividend reinvestment plan, at a net price of $6.20 per share for net proceeds of $18.0 million during the three months ended March 31, 2013.
RSO also sold 1.1 million shares of its 8.25% Series B cumulative Preferred Stock at a weighted average price of $24.82 with a liquidation preference of $25.00 per share for net proceeds of $26.9 million for the three months ended March 31, 2013 pursuant to an at-the-market program.
The table below summarizes the amortized cost and net carrying amount of RSO-s investment portfolio as of March 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):
At April 30, 2013, after paying RSO-s first quarter 2013 common and preferred stock dividends, RSO-s liquidity is derived from two primary sources:
unrestricted cash and cash equivalents of $162.8 million, restricted cash of $500,000 in margin call accounts and $4.3 million in the form of real estate escrows, reserves and deposits; and
capital available for reinvestment in one of its collateralized debt obligation (“CDO”) and two CLO entities of $30.6 million, of which $710,000 is designated to finance future funding commitments on CRE loans, loan principal repayments that will pay down outstanding CLO notes of $74.5 million and $11.4 million in interest collections.
In addition, RSO has funds available through two CRE term facilities to finance the purchase of CMBS and the origination of commercial real estate loans of $43.7 million and $185.6 million, respectively.
As of March 31, 2013, RSO had allocated its invested equity capital among its targeted asset classes as follows: 75% in CRE assets, 14% in commercial finance assets and 11% in other investments.
The following schedules of reconciliations or supplemental information as of March 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 shares rollforward.
Schedule III – Summary of CDO and CLO Performance Statistics.
Supplemental Information regarding loan investment statistics, CRE loans and bank loans.
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 assets, and, to a lesser extent, commercial finance assets and other investments. 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, corporate bonds, 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 or contact investor relations at .
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, a reconciliation of GAAP net income to FFO and AFFO, a book value allocable to common shares rollforward, a summary of CDO and CLO performance statistics and supplemental information regarding RSO-s CRE loan and bank loan portfolios.
(in thousands, except per share data)
(unaudited)
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, non-economic income related to VIE accounting, gains on the extinguishment of debt, 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 through a joint venture in addition to the cash impact of capital expenditures that are related to our real estate owned.
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 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 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 (in thousands):
(in thousands)
(unaudited)
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:
(in thousands, except percentages)
The following table presents information on RSO-s impaired loans and related allowances for the periods indicated (based on amortized cost):
(unaudited)
The following table presents commercial real estate loan portfolio statistics as of March 31, 2013 (based on par value):
(unaudited)
The following table presents bank loan portfolio statistics by industry as of March 31, 2013 (based on par value):