SOURCE: Resource America, Inc.

Resource America, Inc.

May 08, 2014 18:25 ET

Resource America, Inc. Reports Operating Results for the First Quarter Ended March 31, 2014

PHILADELPHIA, PA--(Marketwired - May 8, 2014) - Resource America, Inc. (NASDAQ: REXI)

First Quarter 2014 Highlights

  • Adjusted net income attributable to common shareholders of $2.3 million (see Schedule I)
  • Stand-alone operating income of $2.1 million as compared to $529,000 for the prior year period
  • Increased gross assets under management by 16% to $17.8 billion since March 31, 2013
  • Book value per common share of $7.83

First Quarter 2014 Results

Resource America, Inc. (NASDAQ: REXI) (the "Company") reported adjusted net income attributable to common shareholders, a non-GAAP measure, of $2.3 million, or $0.11 per common share-diluted for the three months ended March 31, 2014 as compared to adjusted net income attributable to common shareholders of $2.4 million, or $0.11 per common share-diluted for the three months ended March 31, 2013. A reconciliation of the Company's reported GAAP net income attributable to common shareholders to adjusted net income attributable to common shareholders, a non-GAAP measure, is included as Schedule I to this release.

The Company reported GAAP net income attributable to common shareholders of $990,000, or $0.04 per common share-diluted, for the three months ended March 31, 2014 as compared to GAAP net income attributable to common shareholders of $496,000, or $0.02 per common share-diluted, for the three months ended March 31, 2013. 

Assets Under Management

The following table details the Company's gross assets under management by operating segment, which increased by $2.5 billion (16%) from March 31, 2013 to 2014 (in billions):

     
    March 31,
    2014   2013
Financial fund management   $ 14.6   $ 13.0
Real estate     2.6     1.8
Commercial finance     0.6     0.5
    $ 17.8   $ 15.3
             
  Net assets under management (1)   $ 8.3   $ 6.8
   
   
(1) Net assets under management represents the proportionate share of assets managed by the Company after reflecting joint venture arrangements.
   

A description of how the Company calculates assets under management is set forth in Item 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2013.

Highlights for the First Quarter Ended March 31, 2014 and Recent Developments

REAL ESTATE ASSET MANAGEMENT:

Equity Asset Management

Resource Real Estate Opportunity REIT, Inc ("Opportunity REIT I"), a public non-traded real estate investment trust ("REIT") managed by the Company, which specializes in acquiring and managing distressed real estate assets, had the following highlights:

  • Increased total assets to $824.1 million at March 31, 2014, an increase of $594.1 million, or 258%, from $230.0 million at March 31, 2013.
  • In January 2014, acquired joint venture interests in 10 multifamily assets totaling 2,513 units and two office properties that contain 75,518 rentable square feet for $51.2 million. In March 2014, acquired the remaining ownership interest for one of the multifamily assets for $7.5 million. Including these acquisitions, Opportunity REIT I acquired $165.9 million of total assets during the quarter.

During the three months ended March 31, 2014, Resource Real Estate, the Company's real estate operating segment, placed financing of $115.0 million on properties and disposed of two properties for $82.9 million.

On February 6, 2014, Resource Real Estate Opportunity REIT II, Inc. ("Opportunity REIT II") commenced its initial public offering of common stock and will focus on acquiring under-performing multifamily rental properties, distressed real estate and performing loans. Opportunity REIT II is offering up to $1 billion in common stock at a maximum price of $10 per share. Resource Real Estate will be the external manager.

Debt Asset Management

Resource Capital Corp. ("RSO"), a publicly-traded REIT managed by the Company which focuses on commercial real estate assets, had the following highlights:

  • During the quarter, raised $15.8 million in equity capital through its preferred equity programs. Since March 31, 2014, raised an additional $14.0 million in equity capital, including $3.3 million from its DRIP program.
  • Originated $111.6 million of commercial real estate whole loans during the three months ended March 31, 2014.

The following additional highlights contributed to the Company's real estate asset management operations:

  • The Company's real estate operating segment increased its assets under management at March 31, 2014 to $2.6 billion, an increase of $796.5 million, or 44%, from March 31, 2013.
  • Real estate revenues increased 17% to $13.3 million, for the three months ended March 31, 2014 as compared to $11.3 million for the three months ended March 31, 2013, respectively. 

FINANCIAL FUND MANAGEMENT:

Credit Asset Management

CVC Credit Partners, L.P. ("CCP"), the Company's global joint venture, closed Apidos CLO XVI, Ltd. (issuing notes with a par value of $600.0 million) in January 2014 and Apidos CLO XVII, Ltd. (issuing notes with a par value of $500.0 million) and CVC Cordatus Loan Fund III Limited (issuing notes with a par value of EUR 436.0 million) in May 2014. Since creating this joint venture in April 2012, CCP has closed nine collateralized loan obligation issuers (issuing notes with a total par value of $4.6 billion) and expects to receive approximately $21.4 million in fees on an annual run rate basis. The Company has a 33% interest in this joint venture.

The following additional highlight contributed to the Company's financial fund asset management operations:

The Company's financial fund management operating segment increased its assets under management at March 31, 2014 to $14.6 billion, an increase of $1.6 billion, or 12%, from March 31, 2013.

CORPORATE/OTHER:

Corporate Credit Facility Modification

  • In April 2014, the Company increased its revolving credit facility with TD Bank, N.A. to $11.5 million and extended the maturity from December 2014 to December 2017.

Dividends

  • The Company's Board of Directors authorized a cash dividend of $0.05 per share on the Company's common stock and payment on April 30, 2014 to holders of record as of the close of business on April 16, 2014. 
  • RSO's Board of Directors declared a cash dividend of $0.20 per common share for its quarter ended March 31, 2014.

Resource America, Inc. is a specialized asset management company that uses industry specific expertise to evaluate, originate, service and manage investment opportunities for its own account, its joint ventures, and for outside investors in the real estate, financial fund management and commercial finance sectors.

For more information, please visit our website at www.resourceamerica.com or contact investor relations at pkamdar@resourceamerica.com.

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 and its other reports filed with the Securities and Exchange Commission, or SEC. For information pertaining to risks relating to these forward-looking statements, reference is made to the section "Risk Factors" contained in Item 1A of the Company's Annual Report on Form 10-K and in other of its public filings with the SEC. The Company undertakes no obligation to update or revise any forward-looking statements to reflect new or changing information or events except as may be required by law.

A registration statement relating to securities offered by Opportunity REIT II was declared effective by the SEC on February 6, 2014. A written prospectus relating to these securities may be obtained by contacting Resource Securities, Inc., 1845 Walnut Street, 18th Floor, Philadelphia, PA 19103.

This press release shall not constitute an offer to sell or a solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

The remainder of this release contains the Company's unaudited consolidated balance sheets, consolidated statements of operations, consolidating statements of operations and reconciliation of GAAP net income attributable to common shareholders to adjusted net income attributable to common shareholders.

   
RESOURCE AMERICA, INC  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
(unaudited)  
   
    March 31,
 2014
    December 31,
 2013
 
    (unaudited)        
ASSETS                
  Cash   $ 17,210     $ 19,853  
  Restricted cash     627       571  
  Receivables     572       541  
  Loans and receivables from managed entities and related parties, net     34,506       30,923  
  Investments in real estate, net     17,167       17,696  
  Investment securities, at fair value     9,100       7,839  
  Investments in unconsolidated loan manager     38,181       37,821  
  Investments in unconsolidated entities     13,609       14,342  
  Assets of consolidated variable interest entity ("VIE") - RSO:                
    Cash and cash equivalents (including restricted cash)     282,638       325,579  
    Investments, at fair value     243,538       226,764  
    Loans     1,618,060       1,397,458  
    Investments in real estate and unconsolidated entities     117,280       124,193  
    Other assets     79,819       76,467  
      Total assets of consolidated VIE - RSO     2,341,335       2,150,461  
                 
  Property and equipment, net     5,566       5,844  
  Deferred tax assets, net     26,587       27,769  
  Other assets     5,431       4,791  
    Total assets   $ 2,509,891     $ 2,318,451  
                 
LIABILITIES AND EQUITY                
Liabilities:                
  Accrued expenses and other liabilities   $ 22,698     $ 22,134  
  Payables to managed entities and related parties     3,112       3,110  
  Borrowings     20,501       20,619  
  Liabilities of consolidated VIE - RSO:                
    Borrowings     1,502,266       1,320,015  
    Other liabilities     56,934       55,247  
    Total liabilities of consolidated VIE - RSO     1,559,200       1,375,262  
      Total liabilities     1,605,511       1,421,125  
                 
Commitments and contingencies                
                 
Equity:                
  Preferred stock, $1.00 par value, 1,000,000 shares authorized; none outstanding     --       --  
  Common stock, $.01 par value, 49,000,000 shares authorized;30,807,746 and 30,378,339 shares issued (including nonvested restricted stock of 689,904 and 400,194), respectively     301       299  
  Additional paid-in capital     288,958       288,555  
  Accumulated deficit     (26,023 )     (26,025 )
  Treasury stock, at cost; 10,440,319 and 10,434,436 shares, respectively     (107,905 )     (107,874 )
  Accumulated other comprehensive loss     (1,164 )     (1,231 )
    Total stockholders' equity     154,167       153,724  
  Noncontrolling interests     221       238  
  Noncontrolling interests attributable to RSO     749,992       743,364  
    Total equity     904,380       897,326  
    $ 2,509,891     $ 2,318,451  
                 
                 
   
RESOURCE AMERICA, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data)  
(unaudited)  
   
    Three Months Ended  
    March 31,  
    2014     2013  
REVENUES:                
Real estate (includes revenues of $2,683 and $2,288 related to RSO)   $ 13,275     $ 11,340  
Financial fund management (includes revenues of $207 and $381 related to RSO)     7,075       4,287  
Commercial finance (includes no revenue related to RSO)     (99 )     (178 )
      20,251       15,449  
Revenues from consolidated VIE - RSO     31,931       30,578  
Elimination of consolidated VIE revenues attributed to operating segments     (2,880 )     (2,700 )
  Total revenues     49,302       43,327  
COSTS AND EXPENSES:                
Real estate     8,875       9,440  
Financial fund management     4,389       2,528  
Commercial finance     103       45  
General and administrative     3,154       2,153  
Provision for credit losses     1,208       338  
Depreciation and amortization     451       416  
      18,180       14,920  
Expenses from consolidated VIE - RSO     13,124       16,188  
Elimination of consolidated VIE expenses attributed to operating segments     (2,819 )     (2,654 )
  Total expenses     28,485       28,454  
OPERATING INCOME     20,817       14,873  
                 
OTHER INCOME (EXPENSE):                
Other-than-temporary impairment on investments     --       (214 )
Interest expense     (483 )     (494 )
Other income (expense), net     165       189  
      (318 )     (519 )
Other expense, net, from consolidated VIE - RSO     (1,331 )     --  
Elimination of consolidated VIE other income attributed to operating segments     18       31  
      (1,631 )     (488 )
Income from continuing operations before taxes     19,186       14,385  
Income tax provision (benefit)     1,069       (146 )
Income tax provision - RSO     16       1,762  
Income from continuing operations     18,101       12,769  
Loss from discontinued operations, net of tax     --       (2 )
Net income     18,101       12,767  
Net loss attributable to noncontrolling interests     40       43  
Net income attributable to noncontrolling interests of consolidated VIE - RSO     (17,151 )     (12,314 )
Net income attributable to common shareholders   $ 990     $ 496  
                 
Amounts attributable to common shareholders:                
Income from continuing operations   $ 990     $ 498  
Discontinued operations     --       (2 )
Net income   $ 990     $ 496  
                 
Basic earnings per share:                
Continuing operations   $ 0.05     $ 0.02  
Discontinued operations     --       --  
Net income   $ 0.05     $ 0.02  
Weighted average shares outstanding     20,252       20,124  
                 
Diluted earnings per share:                
Continuing operations   $ 0.04     $ 0.02  
Discontinued operations     --       --  
Net income   $ 0.04     $ 0.02  
Weighted average shares outstanding     22,027       21,815  
                 
                 
 
RESOURCE AMERICA, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
 

 The following table presents the consolidating statement of operations for the first quarter ended March 31, 2014:

                         
    RAI     RSO     Eliminations     Consolidated  
REVENUES:                                
Real estate   $ 13,275     $ --     $ --     $ 13,275  
Financial fund management     7,075       --       --       7,075  
Commercial finance     (99 )     --       --       (99 )
      20,251       --       --       20,251  
Revenues from consolidated VIE - RSO     --       31,931       --       31,931  
Elimination of consolidated VIE revenues attributed to operating segments     --       --       (2,880 )     (2,880 )
Total revenues     20,251       31,931       (2,880 )     49,302  
                                 
COSTS AND EXPENSES:                                
Real estate     8,875       --       --       8,875  
Financial fund management     4,389       --       --       4,389  
Commercial finance     103       --       --       103  
General and administrative     3,154       --       --       3,154  
Provision for credit losses     1,208       --       --       1,208  
Depreciation and amortization     451       --       --       451  
      18,180       --       --       18,180  
Expenses from consolidated VIE - RSO     --       13,140       (16 )     13,124  
Elimination of consolidated VIE expenses attributed to operating segments     --       --       (2,819 )     (2,819 )
Total expenses     18,180       13,140       (2,835 )     28,485  
OPERATING INCOME     2,071       18,791       (45 )     20,817  
                                 
OTHER INCOME (EXPENSE):                                
Interest expense     (483 )     --       --       (483 )
Other income, net     737       --       (572 )     165  
Other expense, net, from consolidated VIE - RSO     --       (1,331 )     --       (1,331 )
Elimination of consolidated VIE other income, net     --       --       18       18  
      254       (1,331 )     (554 )     (1,631 )
Income from continuing operations before taxes     2,325       17,460       (599 )     19,186  
Income tax provision     1,069       --       16       1,085  
Net income     1,256       17,460       (615 )     18,101  
Net loss attributable to noncontrolling interests     40       --       --       40  
Net income attributable to noncontrolling interests - RSO     --       (2,344 )     (14,807 )     (17,151 )
Net income attributable to common shareholders   $ 1,296     $ 15,116     $ (15,422 )   $ 990  
                                 
                                 
 
RESOURCE AMERICA, INC.
CONSOLIDATING STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
 

 The following table presents the consolidating statement of operations for the first quarter ended March 31, 2013:

                         
    RAI     RSO     Eliminations     Consolidated  
REVENUES:                                
Real estate   $ 11,340     $ --     $ --     $ 11,340  
Financial fund management     4,287       --       --       4,287  
Commercial finance     (178 )     --       --       (178 )
      15,449       --       --       15,449  
Revenues from consolidated VIE - RSO     --       30,578       --       30,578  
Elimination of consolidated VIE revenues attributed to operating segments     --       --       (2,700 )     (2,700 )
Total revenues     15,449       30,578       (2,700 )     43,327  
                                 
COSTS AND EXPENSES:                                
Real estate     9,440       --       --       9,440  
Financial fund management     2,528       --       --       2,528  
Commercial finance     45       --       --       45  
General and administrative     2,153       --       --       2,153  
Provision for credit losses     338       --       --       338  
Depreciation and amortization     416       --       --       416  
      14,920       --       --       14,920  
Expenses from consolidated VIE - RSO     --       17,950       (1,762 )     16,188  
Elimination of consolidated VIE expenses attributed to operating segments     --       --       (2,654 )     (2,654 )
Total expenses     14,920       17,950       (4,416 )     28,454  
OPERATING INCOME     529       12,628       1,716       14,873  
                                 
OTHER INCOME (EXPENSE):                                
Other-than-temporary impairment on investments     (214 )     --       --       (214 )
Interest expense     (494 )     --       --       (494 )
Other income, net     745       --       (556 )     189  
Elimination of consolidated VIE other income, net     --       --       31       31  
      37       --       (525 )     (488 )
Income from continuing operations before taxes     566       12,628       1,191       14,385  
Income tax (benefit) provision     (146 )     --       1,762       1,616  
Income from continuing operations     712       12,628       (571 )     12,769  
Loss from discontinued operations, net of tax     (2 )     --       --       (2 )
Net income     710       12,628       (571 )     12,767  
Net loss attributable to noncontrolling interests - RAI     43       --       --       43  
Net income attributable to noncontrolling interests - RSO     --       (1,102 )     (11,212 )     (12,314 )
Net income attributable to common shareholders   $ 753     $ 11,526     $ (11,783 )   $ 496  
                                 
Amounts attributable to common shareholders:                                
Income from continuing operations   $ 755     $ 11,526     $ (11,783 )   $ 498  
Discontinued operations     (2 )     --       --       (2 )
Net income   $ 753     $ 11,526     $ (11,783 )   $ 496  
                                 
                                 

Schedule I

 
RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO
ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS (1)
(in thousands, except per share data)
(unaudited)
 
    Three Months Ended    
    March 31,    
    2014   2013    
Net income attributable to common shareholders - GAAP   $ 990   $ 496    
                 
Adjustments, net of tax:                
Income, net of eliminations, attributable to consolidation of RSO     306     257    
Loss attributable to commercial finance     863     1,873   (2)
Deferred tax provision (benefit)     161     (225 )  
Adjusted net income attributable to common shareholders   $ 2,320   $ 2,401    
                 
Weighted average diluted shares outstanding     22,027     21,815    
                 
Adjusted net income attributable to common shareholders per common per share-diluted   $ 0.11   $ 0.11    
   
   
(1) Adjusted net income attributable to common shareholders presents the Company's operations prior to the consolidation of RSO and without the effect of its commercial finance operations and deferred tax provision (benefit). The Company believes that this provides useful information to investors since it allows investors to evaluate the Company's progress, excluding the impact of the RSO consolidation, in both its real estate and financial fund management segments for the three months ended March 31, 2014 and 2013 separately from its commercial finance operations and deferred tax provision (benefit). Adjusted net income attributable to common shareholders should not be considered as an alternative to net income attributable to common shareholders (computed in accordance with GAAP). Instead, adjusted net income attributable to common shareholders should be reviewed in connection with net income attributable to common shareholders in the Company's consolidated financial statements to help analyze how the Company's business is performing.
(2) Utilizes a full year continuing income tax rate of 39%.
   
   

Contact Information

  • Contact:
    Thomas C. Elliott
    Chief Financial Officer
    Resource America, Inc.
    One Crescent Drive, Suite 203
    Philadelphia, PA 19112
    (215) 546-5005
    (215) 640-6357 (fax)