SOURCE: Resource Capital Corp.

November 05, 2013 19:55 ET

Resource Capital Corp. Reports Results for Three and Nine Months Ended September 30, 2013

NEW YORK, NY--(Marketwired - Nov 5, 2013) - Resource Capital Corp. (NYSE: RSO)

Highlights

  • Adjusted Funds from Operations ("AFFO") of $0.24 and $0.61 per share-diluted (see Schedule I).
  • Commercial real estate ("CRE") loan originations of $94.2 million and $246.9 million, for the three and nine months ended September 30, 2013, respectively, as compared to $32.6 million and $115.4 million for the same periods in 2012, increases of 189% and 114%, respectively.
  • Book value allocable to common shares of $5.56 per share at September 30, 2013 (see Schedule II).
  • Common stock cash dividend of $0.20 and $0.60 per share. Dividend guidance reaffirmed at $0.20 per share for the fourth quarter of 2013.
  • RSO is providing guidance of $0.20 per quarter common stock dividend per share throughout 2014 or $0.80 for the year.
  • In October 2013, RSO closed and issued $115.0 million aggregate principal amount of its 6.00% convertible senior notes due 2018, which included a $15.0 million over-allotment option. RSO received net proceeds of approximately $111.1 million after payment of underwriting discounts and commissions and other offering costs. 

Resource Capital Corp. (NYSE: RSO) ("RSO" or the "Company"), a real estate investment trust, or REIT, whose investment strategy focuses on CRE assets, commercial mortgage-backed securities ("CMBS"), commercial finance assets and other investments, reported results for the three and nine months ended September 30, 2013.

  • AFFO for the three and nine months ended September 30, 2013 was $30.8 million, or $0.24 per share-diluted, and $71.4 million, or $0.61 per share-diluted, respectively, as compared to $23.0 million, or $0.26 per share-diluted, and $63.8 million, or $0.75 per share-diluted for the three and nine months ended September 30, 2012, respectively. 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 and nine months ended September 30, 2013 was $22.1 million, or $0.18 per share-diluted, and $40.2 million, or $0.34 per share-diluted, respectively, as compared to $18.2 million, or $0.20 per share-diluted, and $49.1 million, or $0.57 per share-diluted for the three and nine months ended September 30, 2012, respectively.

Jonathan Cohen, CEO and President of Resource Capital Corp., commented, "We continued to expand our commercial real estate loan originations during this quarter and are now on a $450 million annualized run rate. We expect this to increase substantially in 2014 and will offset the runoff of our legacy CLO business. We are pleased to provide dividend per share guidance for 2014 of $0.80 or $0.20 per quarter."

Additional highlights:

Commercial Real Estate

  • CRE loan portfolio is comprised of approximately 90% senior whole loans as of September 30, 2013, as compared to 85% at December 31, 2012.
  • RSO closed $279.2 million of new whole loans in the last 12 months with a weighted average yield of 6.55%, including origination fees. In addition, RSO funded $15.8 million of previous loan commitments on existing loans for total production of $295.0 million in the last 12 months. During the 12 month period, RSO also acquired $15.2 million of mezzanine 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, nine and 12 months ended September 30, 2013 (in millions, except percentages):

                               
    Three Months Ended
September 30, 2013
    Nine Months Ended
September 30, 2013
    12 Months Ended
September 30, 2013
    Floating Weighted
Average Spread
(1)(2)
    Weighted Average
Fixed Rate
 
New whole loans production (3)   $ 94.2     $ 246.9     $ 295.0     5.60 %   -- %
Acquisition of loans     --       --       15.2     -- %   20.00 %
Loan production, gross     94.2       246.9       310.2              
Payoffs (4)     (30.8 )     (91.4 )     (126.7 )            
Subtotal     63.4       155.5       183.5              
Sales     --       (63.9 )     (63.9 )            
Principal paydowns     (13.0 )     (15.8 )     (20.2 )            
Loans, net (5)   $ 50.4     $ 75.8     $ 99.4              
                                     
(1)   Represents the weighted average rate above the one-month London Interbank Offered Rate ("LIBOR") on loans whose interest rate is based on LIBOR as of September 30, 2013. Of these loans, $477.6 million have LIBOR floors with a weighted average floor of 1.47%.
(2)   Reflects rates on RSO's portfolio balance as of September 30, 2013.
(3)   Whole loan production includes the funding of previous commitments of $7.1 million, $14.3 million and $15.8 million for the three, nine and 12 months ended September 30, 2013.
(4)   CRE loan payoffs and extensions resulted in $1.3 million in extension and exit fees during the nine months ended September 30, 2013.
(5)   The basis of net new loans does not include provisions for losses on legacy CRE loans of $0.1 million, $2.0 million and $2.4 million for the three, nine and 12 months ended September 30, 2013.
     
     

CMBS

  • During the nine months ended September 30, 2013, RSO acquired $32.9 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 $42.8 million, par value, of CMBS which were also partially financed by 30-day repurchase contracts with a repurchase value of $30.3 million. Also, during the nine months ended September 30, 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 third quarter of 2013 was $940.7 million, at amortized cost, with a weighted-average spread of one-month and three-month LIBOR plus 3.29% at September 30, 2013. RSO's bank loan portfolio was nearly 100% match-funded through five collateralized loan obligation ("CLO") issuances.
  • During the three and nine months ended September 30, 2013, RSO bought bank loans through its CLOs with a par value of $98.6 million and $331.3 million, respectively, at a net discount of $297,000 and $3.2 million, respectively. These purchased loans have an aggregate weighted average unlevered annual yield of approximately 4.34% and 4.13%, respectively.
  • RSO, through its subsidiary, Resource Capital Asset Management, earned $4.2 million of net fees during the nine months ended September 30, 2013.

Corporate

  • In October 2013, RSO completed an underwritten public offering of $115.0 million (including an over-allotment option exercise) aggregate principal amount of its 6.00% convertible senior notes due 2018. RSO received net proceeds of approximately $111.1 million after payment of underwriting discounts and commissions and other offering expenses. 
  • RSO sold approximately 157,000 shares of its 8.25% Series B cumulative redeemable preferred stock at a weighted average price of $24.80 with a liquidation preference of $25.00 per share for net proceeds of $3.7 million during the third quarter 2013, pursuant to an at-the-market program.
  • RSO also sold approximately 5,000 shares of its 8.50% Series A cumulative redeemable preferred stock at a weighted average price of $24.26 with a liquidation preference of $25.00 per share for net proceeds of $112,000 during the third quarter 2013, pursuant to an at-the-market program.
  • As we model our business into 2014, we now guide our shareholders that we currently expect to distribute $0.80 per common share in 2014 and accordingly, expect to pay a $0.20 common stock dividend per quarter throughout 2014. This guidance is based on our expectations of robust originations at our commercial real estate lending business and good capital allocation and returns from our other businesses.

Investment Portfolio

The table below summarizes the amortized cost and net carrying amount of RSO's investment portfolio as of September 30, 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):

                                 
    Amortized
cost
  Dollar
price
    Net
carrying
amount
  Dollar
price
    Net carrying
amount less
amortized
cost
    Dollar
price
 
Floating rate                                      
RMBS   $ 1,934   20.89 %   $ 519   5.61 %   $ (1,415 )   (15.28 )%
CMBS-private placement     27,439   92.47 %     15,593   52.55 %     (11,846 )   (39.92 )%
Structured notes     8,554   22.83 %     11,580   30.91 %     3,026     8.08 %
Whole loans (1)     668,115   99.55 %     658,902   98.18 %     (9,213 )   (1.37 )%
Bank loans (2)     576,677   99.03 %     573,723   98.52 %     (2,954 )   (0.51 )%
Loans held for sale (3)     332,351   97.98 %     332,351   97.98 %     --     -- %
ABS Securities     26,317   90.95 %     27,598   95.38 %     1,281     4.43 %
Corporate Bonds     5,375   97.21 %     5,313   96.09 %     (62 )   (1.12 )%
Total floating rate     1,646,762   96.33 %     1,625,579   95.09 %     (21,183 )   (1.24 )%
Fixed rate                                      
CMBS-private placement     166,829   78.63 %     172,180   81.15 %     5,351     2.52 %
CMBS-Linked Transactions     35,454   107.05 %     29,978   90.52 %     (5,476 )   (16.53 )%
B notes (1)     16,238   99.45 %     16,071   98.43 %     (167 )   (1.02 )%
Mezzanine loans (1)     57,574   99.84 %     57,043   98.92 %     (531 )   (0.92 )%
Loans receivable-related party     8,067   100.00 %     8,067   100.00 %     --     -- %
Total fixed rate     284,162   86.80 %     283,339   86.55 %     (823 )   (0.25 )%
Other (non-interest bearing)                                      
Investment in real estate     55,144   100.00 %     55,144   100.00 %     --     -- %
Investment in unconsolidated entities     72,955   100.00 %     72,955   100.00 %     --     -- %
Total other     128,099   100.00 %     128,099   100.00 %     --     -- %
Grand total   $ 2,059,023   95.11 %   $ 2,037,017   94.09 %   $ (22,006 )   (1.02 )%
                                       
(1)   Net carrying amount includes an allowance for loan losses of $9.9 million at September 30, 2013, allocated as follows: B notes $167,000, mezzanine loans $531,000 and whole loans $9.2 million.
(2)   Net carrying amount includes allowance for loan losses of $3.0 million as of September 30, 2013.
(3)   Loans held for sale are carried at the lower of cost or fair market value.
     
     

Liquidity

At October 31, 2013, after paying RSO's third quarter 2013 common and preferred stock dividends, RSO's liquidity is derived from three primary sources:

  • unrestricted cash and cash equivalents of $259.6 million, restricted cash of $777,000 in margin call accounts and $1.4 million in the form of real estate escrows, reserves and deposits;
  • capital available for reinvestment in one of its collateralized debt obligation ("CDO") and one CLO entity of $28.1 million, of which $430,000 is designated to finance future funding commitments on CRE loans; and
  • loan principal repayments that will pay down outstanding CLO notes of $23.1 million and $5.5 million in interest collections.

In addition, RSO has funds available through three term financing facilities to finance the origination of CRE loans of $90.9 million and $200.0 million, and to finance the purchase of CMBS of $42.2 million, respectively.

Capital Allocation

As of September 30, 2013, RSO had allocated its invested equity capital among its targeted asset classes as follows: 78% in CRE assets, 18% in commercial finance assets and 4% in other investments.

Supplemental Information

The following schedules of reconciliations or supplemental information as of September 30, 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.

About Resource Capital Corp.

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 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, 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.

   
RESOURCE CAPITAL CORP. AND SUBSIDIARIES  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share and per share data)  
   
    September 30,
2013
    December 31,
2012
 
    (Unaudited)        
ASSETS (1)                
  Cash and cash equivalents   $ 144,463     $ 85,278  
  Restricted cash     59,195       94,112  
  Investment securities, trading     12,099       24,843  
  Investment securities available-for-sale, pledged as collateral, at fair value     173,994       195,200  
  Investment securities available-for-sale, at fair value     46,690       36,390  
  Linked transactions, net at fair value     29,978       6,835  
  Loans held for sale     332,351       48,894  
  Investment in real estate     55,144       75,386  
  Loans, pledged as collateral and net of allowances of $12.9 million and $17.7 million     1,305,739       1,793,780  
  Loans receivable-related party     8,067       8,324  
  Investments in unconsolidated entities     72,955       45,413  
  Interest receivable     8,078       7,763  
  Deferred tax asset     3,268       2,766  
  Principal paydown receivable     7       25,570  
  Intangible assets     11,728       13,192  
  Prepaid expenses     4,961       10,396  
  Other assets     4,347       4,109  
    Total assets   $ 2,273,064     $ 2,478,251  
                     
LIABILITIES (2)                
  Borrowings   $ 1,422,430     $ 1,785,600  
  Distribution payable     26,796       21,655  
  Accrued interest expense     2,708       2,918  
  Derivatives, at fair value     12,208       14,687  
  Accrued tax liability     4,989       13,641  
  Deferred tax liability     7,690       8,376  
  Accounts payable and other liabilities     12,829       18,029  
    Total liabilities     1,489,650       1,864,906  
                     
STOCKHOLDERS' EQUITY                
  Preferred stock, par value $0.001: 8.50% Series A 100,000,000 shares authorized, 680,952 and 676,373 shares issued and outstanding     1       1  
  Preferred stock, par value $0.001: 8.25% Series B 100,000,000 shares authorized, 3,229,317 and 1,126,898 shares issued and outstanding     3       1  
  Common stock, par value $0.001: 500,000,000 shares authorized; 127,237,134 and 105,118,093 shares issued and outstanding (including 3,046,343 and 3,308,343 unvested restricted shares)     127       105  
  Additional paid-in capital     1,028,826       836,053  
  Accumulated other comprehensive loss     (17,383 )     (27,078 )
  Distributions in excess of earnings     (228,160 )     (195,737 )
    Total stockholders' equity     783,414       613,345  
TOTAL LIABILITIES AND EQUITY   $ 2,273,064     $ 2,478,251  
                 
                 
 
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
(in thousands, except share and per share data)
 
    September 30,
2013
  December 31,
2012
    (Unaudited)    
(1) Assets of consolidated VIEs included in the total assets above:            
Restricted cash   $ 53,752   $ 90,108
Investments securities available-for-sale, pledged as collateral, at fair value     110,993     135,566
Loans held for sale     332,351     14,894
  Loans, pledged as collateral and net of allowances of $7.3 million and $15.2 million     981,513     1,678,719
Interest receivable     5,506     5,986
Prepaid expenses     254     328
Principal receivable     7     25,570
Other assets     35     333
  Total assets of consolidated VIEs (a)   $ 1,484,411   $ 1,951,504
             
(2) Liabilities of consolidated VIEs included in the total liabilities above:            
Borrowings   $ 1,166,209   $ 1,614,882
Accrued interest expense     2,184     2,666
Derivatives, at fair value     11,766     14,078
Accounts payable and other liabilities     646     698
  Total liabilities of consolidated VIEs (b)   $ 1,180,805   $ 1,632,324
             
(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.
     
     
   
RESOURCE CAPITAL CORP. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF INCOME  
(in thousands, except share and per share data)  
(unaudited)  
   
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  
REVENUES                                
  Interest income:                                
    Loans   $ 24,374     $ 24,130     $ 78,370     $ 70,757  
    Securities     3,411       3,564       10,949       10,520  
    Interest income - other     649       2,218       3,150       8,204  
      Total interest income     28,434       29,912       92,469       89,481  
  Interest expense     11,762       8,208       34,061       25,460  
      Net interest income     16,672       21,704       58,408       64,021  
  Rental income     4,649       2,689       15,875       6,642  
  Dividend income     223       17       256       51  
  Equity in losses of unconsolidated subsidiaries     (505 )     (779 )     (858 )     (1,469 )
  Fee income     1,245       1,777       4,182       5,528  
  Net realized and unrealized gain on sales of investment securities available-for-sale and loans     570       346       3,355       2,148  
  Net realized and unrealized (loss) gain on investment securities, trading     (229 )     9,782       (864 )     13,350  
  Unrealized gain (loss) and net interest income on linked transactions, net     1,161       133       (4,343 )     386  
    Total revenues     23,786       35,669       76,011       90,657  
OPERATING EXPENSES                                
  Management fees - related party     5,113       5,521       11,006       13,512  
  Equity compensation - related party     2,120       1,404       7,866       3,412  
  Professional services     1,396       845       3,745       2,562  
  Insurance     214       161       588       478  
  Rental operating expense     3,523       1,827       11,084       4,456  
  General and administrative     1,288       844       4,428       3,377  
  Depreciation and amortization     904       1,249       3,041       3,974  
  Income tax expense     722       3,979       4,221       6,978  
  Net impairment losses recognized in earnings     255       9       811       180  
  Provision for loan losses     741       1,370       541       7,801  
    Total operating expenses     16,276       17,209       47,331       46,730  
      7,510       18,460       28,680       43,927  
OTHER REVENUE (EXPENSE)                                
  Gain on the extinguishment of debt     --       --       --       5,464  
  Gain on sale of real estate     16,607       --       16,607       --  
    Total other revenue     16,607       --       16,607       5,464  
NET INCOME     24,117       18,460       45,287       49,391  
  Net income allocated to preferred shares     (1,996 )     (308 )     (5,107 )     (333 )
NET INCOME ALLOCABLE TO COMMON SHARES   $ 22,121     $ 18,152     $ 40,180     $ 49,058  
NET INCOME PER COMMON SHARE - BASIC   $ 0.18     $ 0.20     $ 0.34     $ 0.58  
NET INCOME PER COMMON SHARE - DILUTED   $ 0.18     $ 0.20     $ 0.34     $ 0.57  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC   124,212,032      89,066,927     116,471,142      84,594,892  
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - DILUTED   126,072,682      89,965,680     117,973,978      85,365,343  
                                 
                                 

SCHEDULE I

 
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO FFO and AFFO
(in thousands, except per share data)
(unaudited)
 

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 (in thousands, except per share data):

             
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  
Net income allocable to common shares - GAAP   $ 22,121     $ 18,152     $ 40,180     $ 49,058  
Adjustments:                                
Real estate depreciation and amortization     477       536       1,741       2,025  
Gains on sales of property (1)     (14,277 )     (353 )     (14,255 )     (1,440 )
FFO     8,321       18,335       27,666       49,643  
Adjustments:                                
Non-cash items:                                
(Benefit) provision for loan losses     (405 )     40       (2,139 )     4,508  
  Amortization of deferred costs (non real estate) and intangible assets     1,439       1,765       4,909       5,756  
Equity investment losses     347       1,025       378       2,300  
Share-based compensation     2,120       1,404       7,866       3,412  
Impairment losses     255       9       811       180  
Unrealized (gain) loss on CMBS marks - linked transactions     (561 )     --       5,823       --  
Straight line rental adjustments     (9 )     2       (6 )     14  
Add-back interest related to Whitney note discount amortization     2,549       --       2,549       --  
REIT tax planning adjustments     721       --       3,079       (1,835 )
Cash items:                                
Gains on sales of property (1)     14,277       353       14,255       1,440  
Gain on the extinguishment of debt     1,949       663       7,250       663  
Capital expenditures     (188 )     (591 )     (1,010 )     (2,255 )
AFFO   $ 30,815     $ 23,005     $ 71,431     $ 63,826  
                                 
Weighted average shares - diluted   126,072,682     89,965,680     117,973,978     85,365,343  
                                 
AFFO per share - diluted   $ 0.24     $ 0.26     $ 0.61     $ 0.75  
                                 
(1)   Amounts represent gains/losses on sales of joint venture real estate interests that were recorded by RSO on an equity basis. Amounts for the three and nine months ended September 30, 2013, also include net gain on sale of property of $16.2 million after deducting incentive management fees paid to our manager, Resource Capital Manager, Inc., a subsidiary of Resource America, Inc., of $1.9 million.
     
     

SCHEDULE II

   
RESOURCE CAPITAL CORP. AND SUBSIDIARIES  
BOOK VALUE ALLOCABLE TO COMMON SHARES ROLLFORWARD  
(dollars in thousands, except per share data)  
(unaudited)  
   
Nine Months Ended September 30, 2013:   Amount     Per Share  
Book value at December 31, 2012, allocable to common shares (2)   $ 570,893     $ 5.61  
Net income allocable to common shares - nine months ended     40,180       0.34  
                 
Change in other comprehensive income:                
Available-for-sale securities     6,916       0.06  
Derivatives     2,802       0.02  
Foreign currency conversion     (23 )     --  
Common dividends     (72,480 )     (0.60 )
Proceeds/Accretion from additional shares issued during the period (3)     141,544       0.13  
Total net increases (decreases)     118,939       (0.05 )
Book value at September 30, 2013, allocable to common shares (1)(3)   $ 689,832     $ 5.56  
                 
(1)   Per share calculations are calculated using total shares outstanding of 105.1 million and 127.2 million less unvested restricted stock, of 3.0 million and 3.3 million shares as of September 30, 2013 and December 31, 2012, respectively, as disclosed on the consolidated balance sheet.
(2)   Book value is calculated as total stockholder's equity of $783.4 million less preferred stock equity of $93.6 million.
(3)   Includes issuance of 18.7 million shares from our common stock offering, 3.1 million shares from our dividend reinvestment plan and issuance of 363,000 shares of restricted stock.
     
     
             
Three Months Ended September 30, 2013:   Amount     Per Share  
Book value at June 30, 2013, allocable to common shares (2)   $ 687,636     $ 5.55  
Net income allocable to common shares - three months ended     22,121       0.18  
                 
Change in other comprehensive income:                
Available-for-sale securities     2,119       0.01  
Derivatives     627       0.01  
Foreign currency conversion     (23 )     --  
Common dividends     (25,447 )     (0.20 )
Proceeds/Accretion from additional shares issued during the period (3)     2,799       0.01  
Total net increases     2,196       0.01  
Book value at September 30, 2013, allocable to common shares (1)(3)   $ 689,832     $ 5.56  
                 
(1)   Per share calculations are calculated using total shares outstanding of 127.0 million and 127.2 million less unvested restricted stock of 3.0 million and 3.0 million shares as of June 30, 2013 and September 30, 2013, respectively, as disclosed on the consolidated balance sheet.
(2)   Book value is calculated as total stockholder's equity of $783.4 million less preferred stock equity of $93.6 million.
(3)   Includes issuance of 153,000 shares from our dividend reinvestment plan and the issuance of 98,000 shares of restricted stock.
     
     

SCHEDULE III

 
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUMMARY OF CDO AND CLO PERFORMANCE STATISTICS
(in thousands)
(unaudited)
 

Collateralized Debt Obligations - Distributions and Coverage Test Summary

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:

                 
        Cash Distributions   Annualized Interest Coverage Cushion   Overcollateralization Cushion


Name
 

CDO Type
  Nine Months Ended
September 30,
2013 (1)
  Year Ended
December 31,
2012 (1)
  As of
September 30,
2013 (2) (3)
  As of
September 30,
2013 (4)
  As of Initial
Measurement
Date
        (actual)   (actual)            
Apidos CDO I (5)   CLO   $ 3,931   $ 7,971   $ 2,379   $ 13,051   $ 17,136
Apidos CDO III (6)   CLO   $ 5,270   $ 8,742   $ 2,609   $ 9,351   $ 11,269
Apidos Cinco CDO (7)   CLO   $ 9,307   $ 11,109   $ 5,819   $ 19,919   $ 17,774
Apidos CLO VIII (8)   CLO   $ 3,220   $ 2,992   $ 4,477   $ 15,562   $ 13,657
Whitney CLO I (9)   CLO   $ 7,881   $ 802   $ 3   $ 13,659     N/A
RREF 2006-1 (10)   CRE CDO   $ 34,600   $ 15,050   $ 7,213   $ 64,608   $ 24,941
RREF 2007-1 (11)   CRE CDO   $ 8,707   $ 13,226   $ 8,309   $ 43,645   $ 26,032
                                   
(1)   Distributions on retained equity interests in CDOs (comprised of note investments and preference share ownership) and principal paydowns on notes owned; RREF CDO 2006-1 includes $27.4 million and $2.3 million of paydowns as of September 30, 2013 and December 31, 2012, respectively.
(2)   Interest coverage includes annualized amounts based on the most recent trustee statements.
(3)   Interest coverage cushion represents the amount by which annualized interest income expected exceeds the annualized amount payable on all classes of CDO notes senior to RSO's preference shares.
(4)   Overcollateralization cushion represents the amount by which the collateral held by the CDO issuer exceeds the maximum amount required.
(5)   Apidos CDO I's reinvestment period expired in July 2011.
(6)   Apidos CDO III's reinvestment period expired in June 2012.
(7)   Apidos Cinco CDO's investment period ends in May 2014.
(8)   Distributions from Apidos CLO VIII includes $570,000 and $752,000 in base and subordinated management fees for the nine months ended September 30, 2013 and year ended December 31, 2012, respectively; RSO's distributions represent 43% of the subordinated debt as a result of our investment of $15.0 million. Apidos VIII's non-call period ended on October 17, 2013, at which time all assets were liquidated and all outstanding notes were paid off.
(9)   Whitney CLO I was acquired in October 2012. RSO holds 68.3% of the outstanding preference shares. Distributions from Whitney CLO I include $439,000 and $236,000 of collateral management fees for the nine months ended September 30, 2013 and year ended December 31, 2012, respectively. Whitney CLO I was called and substantially liquidated in September 2013.
(10)   RREF CDO 2006-1's reinvestment period expired in September 2011.
(11)   RREF CDO 2007-1's reinvestment period expired in June 2012.
     
     
 
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(in thousands, except percentages)
 

Loan Investment Statistics

The following table presents information on RSO's allowance for loan losses for the periods indicated:

             
    September 30,     December 31,  
    2013     2012  
    (Unaudited)        
Allowance for loan losses:                
Specific allowance:                
Commercial real estate loans   $ 4,067     $ 2,142  
Bank loans     1,882       3,236  
Total specific allowance     5,949       5,378  
General allowance:                
Commercial real estate loans     5,844       5,844  
Bank loans     1,072       6,469  
Total general allowance     6,916       12,313  
Total allowance for loans   $ 12,865     $ 17,691  
Allowance as a percentage of total loans     0.8 %     0.9 %
                 
Loans held for sale:                
Commercial real estate loans   $ --     $ 34,000  
  Bank loans (2)     332,351       14,894  
Total loans held for sale (1)   $ 332,351     $ 48,894  
                 
(1)   Loans held for sale are presented at the lower of cost or fair value.
(2)   $325,000 of the bank loans held for sale at September 30, 2013 are due to the equity of Apidos CLO VIII being called and the portfolio being substantially liquidated in October 2013.
     
     
 
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(unaudited)
 

The following table presents commercial real estate loan portfolio statistics as of September 30, 2013 (based on par value):

     
Security type:    
Whole loans   90.1 %
Mezzanine loans   7.7 %
B Notes   2.2 %
Total   100.0 %
     
Collateral type:    
Multifamily   39.3 %
Hotel   19.8 %
Retail   18.5 %
Office   12.6 %
Mixed Use   4.4 %
Industrial   1.9 %
Other   3.5 %
Total   100.0 %
     
Collateral location:    
Southern California   31.5 %
Northern California   7.7 %
Texas   14.8 %
Arizona   7.1 %
Washington   4.0 %
Florida   2.6 %
Colorado   1.2 %
New York   1.1 %
Other   30.0 %
Total   100.0 %
       
       
 
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
SUPPLEMENTAL INFORMATION
(unaudited)
 

The following table presents bank loan portfolio statistics by industry as of September 30, 2013 (based on par value):

     
Industry type:    
Healthcare, education and childcare   15.2 %
Diversified/conglomerate service   11.6 %
Broadcasting and entertainment   6.8 %
Chemicals, plastics and rubber   5.9 %
Automobile   5.9 %
Retail Stores   5.6 %
Hotels, motels, inns and gaming   4.2 %
Electronics   3.8 %
Personal, food and miscellaneous services   3.6 %
Telecommunications   3.4 %
CDO   3.0 %
Aerospace and defense   2.6 %
Leisure, Amusement, Motion Pictures, Entertainment   2.3 %
Finance   2.3 %
Personal Transportation   2.3 %
Other   21.5 %
Total   100.0 %
       
       

Contact Information

  • CONTACT:
    DAVID J. BRYANT
    CHIEF FINANCIAL OFFICER
    RESOURCE CAPITAL CORP.
    712 Fifth Ave, 12
    THFloor
    New York, NY 10019
    212-506-3870