-- For the three months ended June 30, 2007, RCC had estimated REIT
taxable income of $0.42 per share-diluted.
-- For the quarter ended June 30, 2007, RCC declared a dividend of $0.41
per common share, which represents an increase of 5.1% from the dividend
paid for the quarter ended March 31, 2007.
-- RCC's Board of Directors approved a share repurchase plan of up to 2.5
million common shares.
-- The Company closed Apidos Cinco CDO, Ltd., financing a $350.0 million
portfolio of bank loans, with a weighted-average cost of liabilities at
three-month LIBOR plus 0.51%.
-- The Company closed Resource Real Estate Funding CDO 2007-1, Ltd.
("RREF CDO-2"), financing a $500.0 million portfolio of commercial real
estate loans and commercial mortgage-backed securities ("CMBS"), with a
weighted-average cost of liabilities of one-month LIBOR plus 0.61%.
-- RCC acquired $389.2 million of new assets, including $313.0 million of
commercial real estate loans and future funding obligations committed.
RCC reported that for the quarter ended June 30, 2007, net income excluding
the effect of a non-cash impairment charge was $10.6 million, or $0.43 per
share-diluted, compared to $0.34 per share-diluted for the second quarter
of 2006 an increase of $0.09 per share-diluted, or 26%. The impairment
charge was $787,000 with respect to two of its ABS-RMBS securities and
represents an other-than-temporary impairment under GAAP. This charge
resulted in a reduction to net income of $0.03 per share-diluted.
RCC reported that for the three months ended June 30, 2007 net income was
$9.8 million, or $0.39 per share-diluted as compared to net income of $6.1
million, or $0.34 per share-diluted for the second quarter of 2006 an
increase of $3.7 million (61%) and $0.05 (15%) per share-diluted,
respectively.
RCC reported that net income for the six months ended June 30, 2007 was
$19.3 million, or $0.77 per share-diluted as compared to net income for of
the six months ended June 30, 2006 of $11.2 million or $0.65 per
share-diluted for the second quarter ended June 30, 2006, an increase of
$8.1 million (72%) and $0.12 (18%) per share-diluted, respectively.
A reconciliation of REIT taxable income to net income is provided at the
end of this release.
Jonathan Cohen, CEO and President of RCC, commented, "We continued to
direct our focus during the second quarter to the origination and
match-funding of self-originated commercial real estate whole loans. After
closing our second commercial real estate CDO on June 26, 2007, we have
solidified long-term financing for approximately $850 million of commercial
real estate-related loans at a weighted-average funding rate of 70 basis
points over LIBOR. Given the current market, we expect to benefit as loans
prepay within our portfolio and are replaced by loans with wider spreads.
We believe this strategy will produce stable and growing results in the
future."
Additional Highlights for the second quarter ended June 30, 2007 and recent
developments include:
General
-- RCC's net interest income increased by $4.8 million (57%) to $13.2
million for the quarter ended June 30, 2007 as compared to $8.4 million for
the same period in 2006.
-- RCC's total assets grew by $583.0 million during the six months ended
June 30, 2007, primarily in commercial real estate and commercial finance
assets as detailed below.
Commercial Real Estate
-- RCC continued to increase its investment in commercial real estate
("CRE") loans. RCC produced new loans, on a gross basis, of $313.0 million
during the second quarter ended June 30, 2007. The aggregate portfolio of
commercial real estate loans (net of sales, repayments and discounts) grew
by $160.3 million to $892.3 million at June 30, 2007 from $732.0 million at
March 31, 2007 not including future funding obligations of $19.7 million.
-- On June 26, 2007, RCC closed RREF CDO-2 to provide long-term financing
for a $500.0 million portfolio of commercial real estate loans and CMBS.
RCC retained an investment of $110.0 million in this financing. The notes
issued by RREF CDO-2 bear interest at a weighted-average interest rate of
LIBOR plus 0.61%. At June 30, 2007, the weighted-average rate on all notes
issued to outside investors was 5.93%.
The following table summarizes RCC's CRE loan origination activities and
future funding obligations, at par, for the three months, six months and 12
months ended June 30, 2007 (in millions, except percentages):
Three Six 12
Months Months Months
Ended Ended Ended Floating Weighted
-------- -------- -------- Weighted Average
June 30, June 30, June 30, Average Fixed
2007 2007 2007 Spread Rate
-------- -------- -------- -------- --------
Whole loans $ 178.7 $ 297.6 $ 490.2 2.69% 7.76%
Whole loans, future
funding obligations 19.7 49.3 67.5 N/A N/A
A notes - - 22.5 N/A N/A
B notes - - 66.2 3.12% 7.57%
Mezzanine loans 65.7 95.3 186.6 2.62% 8.17%
CMBS 48.9 76.5 106.6 N/A* 6.53%
-------- -------- --------
New loans production 313.0 518.7 939.6
Payoffs (126.0) (154.0) (187.0)
Principal pay downs (2.8) (2.9) (8.6)
Sales of CRE loans - (41.2) (41.2)
Whole loans, future
funding obligations (19.7) (49.3) (67.5)
Sales of CMBS - (29.9) (29.9)
-------- -------- --------
Net - new loans 164.5 241.4 605.4
Discounts (4.2) (5.5) (5.9)
-------- -------- --------
New loans, net of
discounts $ 160.3 $ 235.9 $ 599.5
======== ======== ========
* Weighed average floating rate coupon of 6.11% at June 30, 2007.
Commercial Finance
-- On May 30, 2007, RCC closed Apidos Cinco CDO, Ltd., a collateralized
loan obligation ("CLO"), that will provided long-term financing for a
$350.0 million portfolio of bank loans. RCC retained $28.0 million of
equity in this financing. The notes issued by Apidos Cinco CDO bear
interest at a weighted-average interest rate of three-month LIBOR plus
0.51%. At June 30, 2007, the weighted average rate on all notes was 5.88%.
-- RCC's bank loan portfolio ended the period with total investments of
$938.1 million, at cost, with a weighted-average spread of LIBOR plus
2.19%. All of RCC's bank loan portfolio is match-funded through three CLO
issuances with a weighted-average cost of three-month LIBOR plus 0.47%.
-- RCC's commercial finance subsidiary ended the quarter with $83.1
million in direct financing leases and notes at a weighted-average rate of
8.68%. RCC's leasing portfolio is match-funded through a secured term
facility, which had a balance of $80.9 million as of June 30, 2007 and a
weighted-average interest rate of 6.32%.
Corporate Matters
-- On July 12, 2007, RCC filed a registration statement on Form S-3 with
the Securities and Exchange Commission to register the shares of RCC common
stock underlying the warrants issued on January 13, 2006 to all holders of
RCC common stock of record as of January 4, 2006.
Liquidity
At August 7, 2007, RCC's liquidity consists of $40.5 million of restricted
cash to invest in its six CDO's and $47.1 million of cash and available
cash from its three year non-recourse secured financing facilities. RCC
also has $518.1 million of unused capacity under its secured financing
facilities, $43.3 million available to finance future funding commitments
associated with real estate whole loans under RREF CDO-2, $16.8 million
available under a secured term facility and $5.5 million of unused capacity
under its unsecured revolving credit facility.
Capital Allocation
As of June 30, 2007, RCC had allocated its equity capital among its
targeted asset classes as follows: 71.3% in commercial real estate loans,
21.0% in commercial bank loans, 7.1% in asset-backed securities, and 0.6%
in direct financing leases and notes.
Book Value
RCC's book value per common share at June 30, 2007 was $11.57 as compared
to $13.33 at December 31, 2006, a 13% decrease, caused primarily by an
unrealized loss on our ABS-RMBS portfolio marked through other
comprehensive income. Total stockholders' equity was $290.6 million at
June 30, 2007 as compared to $317.6 million at December 31, 2006. Total
common shares outstanding were 25,116,217 at June 30, 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 RCC's investment portfolio as of June 30, 2007, classified by interest
rate type. The following table includes both (i) the amortized cost of
RCC'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/ Dollar
cost to par Fair value to par losses price
----------- ------ ----------- ------ --------- ------
June 30, 2007
Floating rate
ABS-RMBS $ 337,983 99.12% $ 289,208 84.82% $ (48,775) -14.30%
CMBS 373 100.00% 375 100.54% 2 0.54%
CMBS-private
placement 33,288 99.98% 33,199 99.72% (89) -0.26%
REIT - TRUPS 5,644 94.07% 5,614 93.57% (30) -0.50%
Other ABS 16,719 99.52% 15,965 95.03% (754) -4.49%
A notes - 0.00% - 0.00% - 0.00%
B notes 99,929 99.99% 99,929 99.99% - 0.00%
Mezzanine loans 151,626 100.05% 151,626 100.05% - 0.00%
Whole loans 348,221 99.16% 348,221 99.16% - 0.00%
Bank loans 938,068 100.11% 936,616 99.95% (1,452) -0.16%
----------- ----------- ---------
Total floating
rate $ 1,931,851 99.73% $ 1,880,753 97.09% $ (51,098) -2.64%
=========== =========== =========
Fixed rate
ABS-RMBS $ 6,000 100.00% $ 4,988 83.13% $ (1,012) -16.87%
CMBS 27,570 98.84% 25,668 92.02% (1,902) -6.82%
CMBS - Private
Placement 38,387 94.38% 36,928 90.79% (1,459) -3.59%
REIT-TRUPS - 0.00% - 0.00% - 0.00%
Other ABS 2,715 100.00% 2,529 93.15% (186) -6.85%
B notes 56,198 100.19% 56,198 100.19% - 0.00%
Mezzanine loans 80,993 94.25% 80,993 94.25% - 0.00%
Whole loans 84,651 99.01% 84,651 99.01% - 0.00%
Equipment leases
and notes 83,074 100.00% 83,074 100.00% - 0.00%
----------- ----------- ---------
Total fixed
rate $ 379,588 97.86% $ 375,029 96.69% $ (4,559) -1.17%
=========== =========== =========
Grand total $ 2,311,439 99.41% $ 2,255,782 97.02% $ (55,657) -2.39%
=========== =========== =========
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. (
-- fluctuations in interest rates and related hedging activities;
-- capital markets conditions and the availability of financing;
-- defaults or bankruptcies by borrowers on RCC's loans or on loans
underlying its investments;
-- adverse market trends which may affect the value of real estate and
other assets underlying the RCC's investments;
-- increases in financing or administrative costs; and
-- general business and economic conditions that would impair the credit
quality of borrowers and the RCC'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 RCC is subject, see Item 1A, "Risk Factors" included in its
annual report on Form 10-K and in other of its public filings with the
Securities and Exchange Commission.
RCC 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 RCC 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, RCC 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 RCC's consolidated balance sheets, consolidated statements of operations and a reconciliation of its estimated REIT taxable income to the Company's GAAP net income.
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
June 30, December 31,
2007 2006
------------- -------------
(unaudited)
ASSETS
Cash and cash equivalents $ 2,729 $ 5,354
Restricted cash 102,509 30,721
Due from broker - 2,010
Securities available-for-sale, at fair
value 414,474 420,997
Loans held for investment 1,759,686 1,240,288
Direct financing leases and notes 83,074 88,970
Investments in unconsolidated entities 1,548 1,548
Derivatives, at fair value 72 -
Accrued interest receivable 12,538 8,839
Principal paydown receivables 4,595 503
Other assets 4,600 3,599
------------- -------------
Total assets $ 2,385,825 $ 1,802,829
============= =============
LIABILITIES
Borrowings $ 2,072,786 $ 1,463,853
Distribution payable 10,298 7,663
Accrued interest expense 8,155 6,523
Derivatives, at fair value - 2,904
Accounts payable and other liabilities 3,988 4,335
------------- -------------
Total liabilities 2,095,227 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;
25,116,217 and 23,821,434 shares issued
and outstanding (including 363,945 and
234,224 unvested restricted shares) 25 24
Additional paid-in capital 356,774 341,400
Deferred equity compensation - (1,072)
Accumulated other comprehensive loss (51,908) (9,279)
Distributions in excess of earnings (14,293) (13,522)
------------- -------------
Total stockholders’ equity 290,598 317,551
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 2,385,825 $ 1,802,829
============= =============
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
2007 2006 2007 2006
---------- ----------- ---------- ----------
REVENUES
Securities $ 7,908 $ 16,053 $ 15,304 $ 32,425
Loans 32,711 15,700 62,992 26,720
Leases 1,901 1,297 3,811 1,803
Interest income - other 910 1,846 1,311 3,382
---------- ----------- ---------- ----------
Interest income 43,430 34,896 83,418 64,330
Interest expense 30,222 26,519 56,989 47,721
---------- ----------- ---------- ----------
Net interest income 13,208 8,377 26,429 16,609
OTHER REVENUE
Net realized (losses)
gains on investments (636) 161 (566) (538)
Other income 433 7 469 7
---------- ----------- ---------- ----------
Total revenues 13,005 8,545 26,332 16,078
---------- ----------- ---------- ----------
EXPENSES
Management fees - related
party 2,027 1,237 4,059 2,230
Equity compensation -
related party 137 240 623 822
Professional services 541 469 1,233 785
Insurance 114 125 235 246
General and
administrative 350 408 907 778
---------- ----------- ---------- ----------
Total expenses 3,169 2,479 7,057 4,861
---------- ----------- ---------- ----------
NET INCOME $ 9,836 $ 6,066 $ 19,275 $ 11,217
========== =========== ========== ==========
NET INCOME PER SHARE -
BASIC $ 0.40 $ 0.35 $ 0.78 $ 0.66
========== =========== ========== ==========
NET INCOME PER SHARE -
DILUTED $ 0.39 $ 0.34 $ 0.77 $ 0.65
========== =========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
BASIC 24,704,471 17,580,293 24,569,694 17,099,051
========== =========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING -
DILUTED 24,944,162 17,692,586 24,891,686 17,222,553
========== =========== ========== ==========
DIVIDENDS DECLARED PER
SHARE $ 0.41 $ 0.36 $ 0.80 $ 0.69
========== =========== ========== ==========
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO ESTIMATED REIT TAXABLE INCOME
(Unaudited)
Estimated REIT Taxable Income
RCC 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 Six Months Ended
June 30, June 30,
------------------ -------------------
2007 2006 2007 2006
-------- --------- -------- ---------
Net income $ 9,836 $ 6,066 $ 19,275 $ 11,217
Additions:
Share-based compensation to
related parties (345) 240 (340) 822
Incentive management fee expense
to related parties paid in
shares 231 77 417 108
Capital losses from the sale of
securities available-for-sale - - - 1,411
Addback of GAAP loss reserve 856 - 856 -
Other net book to tax adjustments (60) - (20) -
-------- --------- -------- ---------
Estimated REIT taxable income $ 10,518 $ 6,383 $ 20,188 $ 13,558
======== ========= ======== =========
Amounts per share $ 0.42 $ 0.36 $ 0.81 $ 0.76
======== ========= ======== =========
RCC 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 its 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 RCC. Estimated REIT taxable
income, however, includes the taxable income of RCC's foreign taxable REIT
subsidiaries because RCC generally will 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 Information: 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)