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Resource Capital Corp. Reports Results for First Quarter Ended March 31, 2007
NEW YORK, NY, May 07, 2007 (MARKET WIRE via COMTEX News Network) -- Resource Capital Corp. (NYSE: RSO) (the "Company" or "RCC"), a real estate investment trust whose investment strategy focuses on commercial real estate loan assets and, to a lesser extent, higher-yielding commercial finance assets, reported net income of $9.4 million or $0.38 per share-diluted (weighted-average shares of 24,837,709) for the first quarter ended March 31, 2007 as compared to net income of $5.2 million or $0.31 per share-diluted (weighted-average shares of 16,752,520) for the first quarter ended March 31, 2006, an increase of $4.2 million (81%) and $0.07 (23%) per share-diluted, respectively. The number of shares outstanding increased by over 37% primarily due to a follow-on offering completed December 15, 2006.

Highlights for the first quarter ended March 31, 2007 and recent developments include:

  • Recorded regular dividend distribution of $0.39 per share, an increase of 18% from the quarter ended March 31, 2006.
  • Priced third collateralized loan obligation ("CLO") with a weighted- average cost of liabilities of LIBOR plus 0.51%.
  • Acquisition of $486.3 million of total assets.
  • Over $225.0 million of commercial real estate loans and future funding obligations committed.

Estimated REIT taxable income for the first quarter ended March 31, 2007 was $9.7 million or $0.39 per share-diluted.

Jonathan Cohen, CEO and President of RCC, commented, "We continue to grow our commercial real estate and commercial loan businesses as evidenced by the $486 million of total assets originated, committed to and invested in during this quarter. We expect to originate between $450 and $500 million of commercial real estate deals, including future funding obligations, in the first two quarters of 2007. Our mix has truly changed as evidenced by in excess of 65% of our production being self-originated whole loans. Although credit spread widening affected a small portion of our equity investment portfolio, we expect our match-funding strategy and origination capability to produce stable and growing dividends. We continue to anticipate moving the dividend up substantially over the next three quarters as we invest the capital raised in the December 2006 offering."

Additional Highlights for the first quarter ended March 31, 2007 and recent developments include:

  • The Company paid a regular quarterly dividend of $0.39 per share on 24,995,217 common shares for the first quarter of 2007, an increase of $0.01 per share, or 3.0% from the regular dividend paid for the fourth quarter of 2006. This distribution was paid on April 16, 2007 to all shareholders of record on March 30, 2007.
  • The Company's net interest income increased by $5.0 million (61%) to $13.2 million for the quarter ended March 31, 2007 as compared to $8.2 million for the same period in 2006.
  • The Company's total assets grew by $325.1 million during the three months ended March 31, 2007, primarily in commercial real estate and commercial finance assets as detailed below.

Commercial Real Estate

  • The Company continued to increase its investment in commercial real estate loans. RCC produced new loans, on a gross basis, of $228.0 million during the first quarter ended March 31, 2007. The portfolio of loans (net of sales, repayments and discounts) also grew by $75.9 million to $732.0 million at March 31, 2007 from $656.1 million at December 31, 2006 not including future funding obligations of $51.9 million. The Company sold $41.2 million of its commercial real estate loans and $29.9 million of CMBS to diversify its potfolio.

The following table summarizes the Company's commercial real estate ("CRE") loan origination activities and future funding obligations, at par, for the three months, nine months and 12 months ended March 31, 2007 (in millions, except percentages):

                        Three      Nine
                        Months     Months    12 Months
                        Ended      Ended       Ended    Floating   Weighted
                       ---------  ---------  ---------  Weighted   Average
                       March 31,  March 31,  March 31,   Average    Fixed
                         2007       2007       2007      Spread     Rate
                       ---------  ---------  ---------  --------  --------
Whole loans            $   118.9  $   311.4  $   311.4      2.96%     7.32%
Whole loans, future
 funding obligations        51.9       51.9       51.9
A notes                        -       22.5       22.5      1.35%      N/A
B notes                        -       66.2      110.7      3.39%     7.57%
Mezzanine loans             29.6      121.0      179.1      2.60%     8.13%
CMBS                        27.6       57.7       57.7       N/A*     6.84%
                       ---------  ---------  ---------
New loans production       228.0      630.7      733.3
Sales of real estate
 loans                     (41.2)     (41.2)     (41.2)
Sales of CMBS              (29.9)     (29.9)     (29.9)
Payoffs                    (27.6)     (60.6)     (77.1)
Principal pay downs         (0.6)      (6.3)      (6.3)
Whole loans, future
 funding obligations       (51.9)     (51.9)     (51.9)
                       ---------  ---------  ---------
Net - new loans             76.8      440.8      526.9
Discounts                   (0.9)      (1.3)      (7.1)
                       ---------  ---------  ---------
New loans, net of
 discounts             $    75.9  $   439.5  $   519.8
                       =========  =========  =========
* Weighed average floating rate coupon of 5.82% at March 31, 2007.

Commercial Finance

  • RCC accumulated bank loan assets of $258.3 million during the first quarter for an anticipated third CLO closing in the second quarter of 2007. The loans earned a weighted-average spread of LIBOR plus 2.06% as of March 31, 2007. The loans are currently being financed by a warehouse facility with a balance of $254.0 million and a weighted average rate of LIBOR plus 0.625% as of March 31, 2007. The Company priced Apidos Cinco CLO which will purchase and match-fund these loans. The weighted-average cost of liabilities will be LIBOR plus 0.51% once this CLO closes in May 2007 .
  • RCC's bank loan portfolio, excluding the accumulation of loans for the third CLO, ended the period with total investments of $618.3 million, at cost, with a weighted-average spread of LIBOR plus 2.28%. The balance of the company's bank loan portfolio is match-funded through two CLO issuances with a weighted-average cost of LIBOR plus 0.46%.
  • RCC's commercial finance subsidiary ended the quarter with $87.9 million in direct financing leases and notes at a weighted-average rate of 8.74%. The Company's leasing portfolio is match-funded through a secured term facility, which had a balance of $84.5 million as of March 31, 2007 and a weighted-average interest rate of 6.33%.

Corporate Matters

  • RCC closed a $150.0 million term repurchase facility on April, 20, 2007 with NATIXIS Real Estate Capital for a term of up to three (3) years with a one year extension option. The facility will be used as a warehouse facility to finance the purchase of commercial real estate loans, including whole mortgage loans, A-notes, B-notes, CMBS and subordinated debt including preferred equity.
  • RCC shareholders exercised warrants for 324,878 common shares, representing 21% of the 1,568,244 warrants issued, at $15.00 per share generating additional capital of $4.9 million during the first quarter of 2007. The Company's stockholders received one warrant on January 13, 2006 for each ten shares of common stock and restricted stock held as of January 4, 2006. The warrants expire on January 13, 2009.

Capital Allocation

As of March 31, 2007, RCC had allocated its equity capital among its targeted asset classes as follows: 77% in commercial real estate loans, 15% in commercial bank loans, 7% in asset-backed securities ("ABS") and 1% in direct financing leases and notes.

Balance Sheet Summary

At March 31, 2007, RCC's investment portfolio including cash and restricted cash totaled $2.1 billion and consisted of the following: $759.1 million of commercial real estate-related investments, $871.6 million of bank loans, $325.4 million of ABS, $87.9 million of direct financing leases and notes and $62.8 million of temporary cash investments and restricted cash. At March 31, 2007, RCC's investment portfolio was financed with $1.8 billion of total indebtedness and included the following: $1.2 billion of senior notes issued by collaterlized debt obligations secured primarily by commercial real estate-related investments, mortgage-backed securities, bank loans and other asset-backed securities; $208.5 million of repurchase agreements secured by commercial real estate-related investments, $254.0 million through a warehouse facility secured by a portfolio of bank loans, $84.5 million through a term facility secured by equipment leases and notes and $51.5 million of unsecured junior subordinated debentures.

Book Value

The Company's book value per common share at March 31, 2007 was $11.82 as compared to $13.33 at December 31, 2006, an 11% decrease, caused primarily by an unrealized loss on our ABS-RMBS portfolio marked through other comprehensive income. Total stockholders' equity was $295.4 million at March 31, 2007 as compared to $317.6 million at December 31, 2006. Total common shares outstanding were 24,995,217 at March 31, 2007 as compared to 23,821,434 at December 31, 2006.

Investment Portfolio

The table below summarizes the amortized cost and estimated fair value of the Company's investment portfolio as of March 31, 2007, classified by interest rate type. The following table includes both (i) the amortized cost of the Company'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 our investment portfolio and the related dollar price, which is computed by dividing the estimated fair value by par amount (in thousands, except percentages):

                             Premium/             Market  Unrealized
                  Amortized  discount             value    gains/   Period
                    cost      to par   Fair value to par   losses   change
                  ---------- --------  ---------- ------  --------  ------
  March 31, 2007
   Floating rate
ABS-RMBS          $  339,842    99.28% $  299,476  87.49% $(40,366) -11.79%
CMBS                     387   100.00%        390 100.78%        3    0.78%
CMBS-private
 placement            14,839    98.93%     14,722  98.15%     (117)  -0.78%
Other ABS             18,480    99.56%     18,451  99.41%      (29)  -0.15%
A notes               22,512   100.05%     22,512 100.05%        -    0.00%
B notes              139,571   100.01%    139,571 100.01%        -    0.00%
Mezzanine loans      134,454   100.05%    134,454 100.05%        -    0.00%
Whole loans          233,787    99.14%    233,787  99.14%        -    0.00%
Bank loans           871,633   100.14%    872,713 100.26%    1,080    0.12%
                  ----------           ----------         --------
   Total floating
    rate          $1,768,234    99.81% $1,728,822  97.58% $(39,412)  -2.23%
                  ==========           ==========         ========
Fixed rate
ABS-RMBS          $    6,000   100.00% $    4,807  80.12% $ (1,193) -19.88%
CMBS                  27,560    98.81%     26,730  95.83%     (830)  -2.98%
CMBS - Private
 Placement            12,588    99.90%     12,600 100.00%       12    0.10%
Other ABS              2,866   100.00%      2,680  93.51%     (186)  -6.49%
B notes               56,297   100.22%     56,297 100.22%        -    0.00%
Mezzanine loans       84,021    94.26%     84,021  94.26%        -    0.00%
Whole loans           34,030    98.97%     34,030  98.97%        -    0.00%
Equipment leases
 and notes            87,934   100.00%     87,934 100.00%        -    0.00%
                  ----------           ----------         --------
   Total fixed
    rate          $  311,296    98.20% $  309,099  97.51% $ (2,197)  -0.69%
                  ==========           ==========         ========
      Grand total $2,079,530    99.56% $2,037,921  97.57% $(41,609)  -1.99%
                  ==========           ==========         ========

About Resource Capital Corp.

Resource Capital Corp. is a diversified real estate finance company that qualifies as a real estate investment trust, or REIT, for federal income tax purposes. RCC's investment strategy focuses on commercial real estate-related assets, and, to a lesser extent, higher-yielding commercial finance assets. RCC invests in the following asset classes: commercial real estate-related assets such as whole loans, A-notes, B-notes, mezzanine loans and mortgage-related securities and commercial finance assets such as other asset-backed securities, bank loans, equipment leases and notes, trust preferred securities, debt tranches of collateralized debt obligations 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 commercial finance sectors.

For more information, please visit the Company's website at www.resourcecapitalcorp.com or contact investor 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. 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;
  • capital markets conditions and the availability of financing;
  • defaults or bankruptcies by borrowers on the Company's loans or on loans underlying the Company's investments;
  • adverse market trends which may affect the value of real estate and other assets underlying the Company's investments;
  • increases in financing or administrative costs; and
  • general business and economic conditions that would impair the credit quality of borrowers and the Company'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 the Company is subject, see Item 1A, "Risk Factors" included in the Company's annual report on Form 10-K and in other of its public filings with the Securities and Exchange Commission.

The Company 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 the Company 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, the Company 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 the Company's consolidated balance sheets, consolidated statements of operations and a reconciliation of the Company's estimated REIT taxable income to its GAAP net income.

                  RESOURCE CAPITAL CORP. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
              (in thousands, except share and per share data)
                                                   March 31,   December 31,
                                                      2007         2006
                                                  -----------  -----------
                                                  (unaudited)
ASSETS
   Cash and cash equivalents                      $    14,517  $     5,354
   Restricted cash                                     48,298       30,721
   Due from broker                                      1,883        2,010
   Securities available-for-sale, at fair value       379,856      420,997
   Loans held for investment                        1,576,305    1,240,288
   Direct financing leases and notes                   87,934       88,970
   Investments in unconsolidated entities               1,548        1,548
   Accrued interest receivable                         12,498        8,839
   Principal paydown receivables                        1,496          503
   Other assets                                         3,579        3,599
                                                  -----------  -----------
      Total assets                                $ 2,127,914  $ 1,802,829
                                                  ===========  ===========
LIABILITIES
   Borrowings                                     $ 1,806,693  $ 1,463,853
   Distribution payable                                 9,748        7,663
   Accrued interest expense                             9,161        6,523
   Derivatives, at fair value                           3,457        2,904
   Accounts payable and other liabilities               3,438        4,335
                                                  -----------  -----------
      Total liabilities                             1,832,497    1,485,278
                                                  -----------  -----------
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; 24,995,217 and 23,821,434
    shares issued and outstanding (including
    303,945 and 234,224 unvested restricted
    shares)                                                25           24
   Additional paid-in capital                         355,707      341,400
   Deferred equity compensation                             -       (1,072)
   Accumulated other comprehensive loss               (46,485)      (9,279)
   Distributions in excess of earnings                (13,830)     (13,522)
                                                  -----------  -----------
      Total stockholders' equity                      295,417      317,551
                                                  -----------  -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $ 2,127,914  $ 1,802,829
                                                  ===========  ===========
                  RESOURCE CAPITAL CORP. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF INCOME
              (in thousands, except share and per share data)
                                (Unaudited)
                                                     Three Months Ended
                                                          March 31,
                                                  -------------------------
                                                      2007         2006
                                                  ------------ -----------
REVENUES
   Securities                                     $      7,396 $    16,372
   Loans                                                30,281      11,019
   Leases                                                1,910         506
   Interest income - other                                 423       1,536
                                                  ------------ -----------
      Interest income                                   40,010      29,433
   Interest expense                                     26,789      21,202
                                                  ------------ -----------
      Net interest income                               13,221       8,231
   Net realized gains (losses) on securities
    available-for-sale                                      70        (699)
   Other income                                             36           -
                                                  ------------ -----------
      Total revenues                                    13,327       7,532
                                                  ------------ -----------
EXPENSES
   Management fee expense - related party                2,032         993
   Equity compensation expense - related party             486         582
   Professional services                                   692         261
   Insurance expense                                       121         120
   General and administrative                              557         426
                                                  ------------ -----------
      Total expenses                                     3,888       2,382
                                                  ------------ -----------
NET INCOME                                        $      9,439 $     5,150
                                                  ============ ===========
NET INCOME PER SHARE - BASIC                      $       0.39 $      0.31
                                                  ============ ===========
NET INCOME PER SHARE - DILUTED                    $       0.38 $      0.31
                                                  ============ ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
 BASIC                                              24,433,417  16,617,808
                                                  ============ ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
 DILUTED                                            24,837,709  16,752,520
                                                  ============ ===========
DIVIDENDS DECLARED PER SHARE                      $       0.39 $      0.33
                                                  ============ ===========
                  RESOURCE CAPITAL CORP. AND SUBSIDIARIES
    RECONCILIATION OF GAAP NET INCOME 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 net income to estimated REIT taxable income for the periods presented (in thousands):

                                               Three Months Ended March 31,
                                                 -------------------------
                                                     2007         2006
                                                 ------------ ------------
Net income                                       $      9,439 $      5,150
Additions:
   Share-based compensation to related parties              5          582
   Incentive management fee expense to related
    party paid in shares                                  186           31
   Capital losses from the sale of securities
    available-for-sale                                      -        1,412
   Other net book to tax adjustments                       41            -
                                                 ------------ ------------
Estimated REIT taxable income                    $      9,671 $      7,175
                                                 ============ ============

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 the Company's 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. 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:
DAVID J. BRYANT
CHIEF FINANCIAL OFFICER
RESOURCE CAPITAL CORP.
1845 WALNUT STREET
10TH FLOOR
PHILADELPHIA, PA 19103
215/546-5005
215/546-5388 (fax)

SOURCE: Resource Capital Corp.

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New York and Philadelphia Locations
712 Fifth Avenue
12th Floor
New York, NY 10019

1845 Walnut Street
18th Floor
Philadelphia, PA 19103
t. 212.506.3899



t. 215.546.5005
RSO (Common Stock)
ExchangeNYSE (US Dollar)
Price$8.49
Change (%) Stock is Up 0.09 (1.07%)
Volume275,092
Data as of 03/01/17 1:33 p.m. ET
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