SOURCE: Resource America, Inc.

Resource America, Inc.

August 02, 2016 18:05 ET

Resource America, Inc. Reports Operating Results for the Second Quarter Ended June 30, 2016

PHILADELPHIA, PA--(Marketwired - Aug 2, 2016) - Resource America, Inc. (NASDAQ: REXI)

Second Quarter 2016 Highlights

  • GAAP net loss attributable to common shareholders of $272,000, or $0.01 per common share-diluted, and adjusted net income attributable to common shareholders of $2.0 million, or $0.09 per common share-diluted (see Schedule I)
  • Increased real estate assets under management by 10% to $4.2 billion since June 30, 2015
  • On May 22, 2016, Resource America, Inc. entered into a definitive agreement to be acquired by C-III Capital Partners LLC. Resource America stockholders will receive $9.78 per share in cash

Second Quarter 2016 Results

Resource America, Inc. (NASDAQ: REXI) (the "Company") reported a GAAP net loss attributable to common shareholders of $272,000, or $0.01 per common share-diluted, and GAAP net income of $2.8 million, or $0.13 per common share-diluted, for the three and six months ended June 30, 2016 as compared to GAAP net income attributable to common shareholders of $201,000, or $0.01 per common share-diluted, and $1.7 million, or $0.08 per common share-diluted, for the three and six months ended June 30, 2015. The Company's GAAP results for the three and six months ended June 30, 2016 include $4.0 million ($2.2 million and $2.4 million, after tax, for the three and six months, respectively) of transaction costs related to the pending merger with C-III Capital Partners LLC ("C-III").

The Company reported adjusted net income attributable to common shareholders, a non-GAAP measure, of $2.0 million, or $0.09 per common share-diluted, and $5.7 million, or $0.27 per common share-diluted, for the three and six months ended June 30, 2016 as compared to adjusted net income attributable to common shareholders of $3.4 million, or $0.15 per common share-diluted, and $5.7 million, or $0.25 per common share-diluted, for the three and six months ended June 30, 2015. A reconciliation of the Company's reported GAAP net income (loss) attributable to common shareholders to adjusted net income attributable to common shareholders, a non-GAAP measure, is included as Schedule I to this release.

Assets Under Management

The following table details the Company's gross assets under management by operating segment, which increased by $1.2 billion (6%) from June 30, 2015 to 2016 (in billions):

     
    June 30,
    2016   2015
Financial fund management   $ 18.0   $ 17.3
Real estate     4.2     3.8
Commercial finance     0.8     0.7
    $ 23.0   $ 21.8
             
  Net assets under management (1)   $ 9.6   $ 10.6
               
(1)   Net assets under management represents the proportionate share of assets managed by the Company after reflecting joint venture arrangements. At June 30, 2016, net assets reflects the Company's 24% interest in CVC Credit Partners, L.P. ("CCP"), the Company's global joint venture, while net assets as of June 30, 2015 reflects the Company's 33% interest in CCP.
     

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, 2015.

Highlights for the Second Quarter Ended June 30, 2016 and Recent Developments

REAL ESTATE ASSET MANAGEMENT:

Equity Asset Management

Resource Real Estate Opportunity REIT II, Inc. ("Opportunity REIT II"), a public non-traded real estate investment trust ("REIT") managed by the Company that specializes in acquiring multifamily rental properties and selected loans, had the following highlights:

  • Acquired $171.7 million of assets and placed $194.6 million of financing during the three months ended June 30, 2016.
  • Increased total assets to $815.9 million at June 30, 2016.

Resource Real Estate Opportunity REIT, Inc. ("Opportunity REIT I"), a public non-traded REIT managed by the Company that specializes in acquiring and managing distressed real estate assets, had $973.7 million in total assets at June 30, 2016.

Resource Real Estate Diversified Income Fund ("DIF"), a public closed-end real estate-focused investment fund managed by the Company, has raised $131.4 million since inception.

On February 16, 2016, Resource Innovation Office REIT, Inc. ("Innovation Office REIT"), a company-sponsored REIT that will focus on acquiring office buildings, commenced an initial public offering of its common stock. Resource Innovation Office Advisor, LLC, a subsidiary of Resource Real Estate, Inc, which is a wholly-owned subsidiary of the Company, is the external manager.

On April 28, 2016, Resource Apartment REIT III, Inc., ("Apartment REIT III"), a company-sponsored REIT that will focus on acquiring under-performing apartment communities for renovation, commenced an initial public offering of its common stock. Resource Apartment Advisor III, LLC, a subsidiary of Resource Real Estate, Inc, is the external manager.

Debt Asset Management

Resource Capital Corp., a publicly-traded REIT managed by the Company which focuses on commercial real estate assets, entered into a purchase agreement on August 1, 2016 to sell Northport TRS, LLC, its self-originated middle market loan business ("Northport"), for $247.0 million. RSO is retaining Northport's portfolio of broadly syndicated loans and one self-originated loan.

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

The Company's real estate operating segment increased its gross assets under management at June 30, 2016 to $4.2 billion, an increase of $386.0 million, or 10%, from June 30, 2015.

FINANCIAL FUND MANAGEMENT:

The Company's financial fund management operating segment increased its gross assets under management at June 30, 2016 to $18.0 billion, an increase of $728.0 million, or 4.2%, from June 30, 2015.

CORPORATE:

Dividends

  • The Company's Board of Directors authorized a cash dividend of $0.06 per share on the Company's common stock which was paid on July 29, 2016 to holders of record as of the close of business on July 15, 2016.
  • RSO's Board of Directors declared a cash dividend of $0.42 per share on its common stock for the three months ended June 30, 2016.

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, for 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 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 post-effective amendment relating to securities offered by Innovation Office REIT was declared effective by the SEC on March 7, 2016. A written prospectus relating to these securities may be obtained by contacting Resource Securities, Inc., 1845 Walnut Street, 18th Floor, Philadelphia, PA 19103.

A registration statement relating to securities offered by Apartment REIT III was declared effective by the SEC on April 28, 2016. A written prospectus relating to these securities may be obtained by contacting Resource Securities, Inc., 1845 Walnut Street, 18th Floor, Philadelphia, PA 19103.

A registration statement relating to securities offered by DIF was declared effective by the SEC on March 11, 2013. 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 and reconciliation of GAAP net income (loss) attributable to common shareholders to adjusted net income attributable to common shareholders.

   
RESOURCE AMERICA, INC  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share data)  
   
    June 30,
 2016
    December 31,
 2015
 
    (unaudited)        
ASSETS                
  Cash   $ 26,522     $ 24,132  
  Restricted cash     1,228       937  
  Receivables     1,624       1,424  
  Loans and receivables from managed entities and related parties, net     23,970       26,667  
  Investments in real estate, net     16,100       16,022  
  Investment securities, at fair value     43,916       47,476  
  Investments in unconsolidated loan manager     31,617       32,616  
  Investments in unconsolidated entities     24,278       17,553  
  Property and equipment, net     4,712       5,371  
  Deferred tax assets, net     27,332       29,264  
  Other assets     9,916       9,519  
    Total assets   $ 211,215     $ 210,981  
                 
LIABILITIES AND EQUITY                
Liabilities:                
  Accrued expenses and other liabilities   $ 26,360     $ 27,184  
  Payables to managed entities and related parties     4,365       3,145  
  Borrowings, net     20,272       20,533  
      Total liabilities     50,997       50,862  
                 
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; 35,865,433 and 34,973,987 shares issued (including nonvested restricted stock of 1,730,069 and 1,095,238), respectively     348       339  
  Additional paid-in capital     313,532       311,491  
  Accumulated deficit     (30,304 )     (30,676 )
  Treasury stock, at cost; 15,036,154 and 14,460,024 shares, respectively     (143,209 )     (139,858 )
  Accumulated other comprehensive loss     (4,367 )     (3,533 )
    Total stockholders' equity     136,000       137,763  
  Noncontrolling interests     24,218       22,356  
                   
    Total equity     160,218       160,119  
    Total liabilities and equity   $ 211,215     $ 210,981  
                     
                     
                     
RESOURCE AMERICA, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data)  
(unaudited)  
   
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2016     2015     2016     2015  
REVENUES:                                
Real estate   $ 18,467     $ 21,116     $ 37,630     $ 38,082  
Financial fund management     7,543       6,167       14,272       13,042  
Commercial finance     129       2       205       --  
  Total revenues     26,139       27,285       52,107       51,124  
COSTS AND EXPENSES:                                
Real estate     10,204       12,082       21,222       23,581  
Financial fund management     4,825       3,238       8,505       6,301  
Commercial finance     400       458       792       1,037  
Transaction costs     4,040       --       4,040       --  
General and administrative     4,452       4,181       9,335       7,478  
Provision for credit losses     (102 )     276       7       678  
Depreciation and amortization     506       515       1,010       972  
  Total expenses     24,325       20,750       44,911       40,047  
OPERATING INCOME (LOSS)     1,814       6,535       7,196       11,077  
                                 
OTHER INCOME (EXPENSE):                                
Gain (loss) on sale of investment securities, net     134       --       632       --  
Impairment on investments in available for sale securities     (803 )     (4,346 )     (901 )     (4,346 )
Interest expense     (434 )     (455 )     (874 )     (876 )
Other income (expense), net     369       689       876       1,003  
  Total other income (expense)     (734 )     (4,112 )     (267 )     (4,219 )
Income (loss) from continuing operations before taxes     1,080       2,423       6,929       6,858  
Income tax provision (benefit)     (130 )     857       2,316       2,101  
Net income (loss)     1,210       1,566       4,613       4,757  
Net (income) loss attributable to noncontrolling interests     (1,482 )     (1,365 )     (1,848 )     (3,022 )
Net income (loss) attributable to common shareholders   $ (272 )   $ 201     $ 2,765     $ 1,735  
                                 
Basic earnings (loss) per share:                                
Net income (loss)   $ (0.01 )   $ 0.01     $ 0.13     $ 0.08  
Weighted average shares outstanding     20,835       22,867       20,722       22,915  
                                 
Diluted earnings (loss) per share:                                
Net income (loss)   $ (0.01 )   $ 0.01     $ 0.13     $ 0.08  
Weighted average shares outstanding     20,835       23,135       21,005       23,186  
                                 
                                 
                                 

Schedule I

 
RECONCILIATION OF GAAP NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS TO
ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS (1)
(in thousands, except per share data)
(unaudited)
 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2016     2015   2016   2015
Net income (loss) attributable to common shareholders - GAAP   $ (272 )   $ 201   $ 2,765   $ 1,735
                           
Adjustments, net of tax:                          
Transaction costs     2,164       --     2,381     --
Impairment of investment in unconsolidated loan manager     --       2,485     --     2,589
Loss attributable to commercial finance     91       305     343     836
Deferred tax provision     --       377     177     528
Adjusted net income attributable to common shareholders   $ 1,983     $ 3,368   $ 5,666   $ 5,688
                           
Adjusted weighted average diluted shares outstanding     21,124       23,135     21,005     23,186
                           
Adjusted net income attributable to common shareholders per common per share-diluted   $ 0.09     $ 0.15   $ 0.27   $ 0.25
                           
(1)   Adjusted net income attributable to common shareholders presents the Company's operations without the effect of the transaction costs related to the pending merger with C-III, and the Company's commercial finance operations and deferred tax provision. The Company believes that this provides useful information to investors since it allows investors to evaluate the Company's progress in both its real estate and financial fund management segments for the three and six months ended June 30, 2016 and 2015 separately from these items. Adjusted net income attributable to common shareholders should not be considered as an alternative to net income (loss) 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 (loss) attributable to common shareholders in the Company's consolidated financial statements to help analyze how the Company's business is performing.

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)