-- Settlement of Legacy Portfolio Asset. On June 23, 2010, Resource Real Estate received $4.6 million in settlement of a discounted loan in connection with the sale of a property in Washington, DC, by its owner and recorded a gain of $1.7 million. This was the 2nd highest valuation in the DC area in the last 2 years. -- Resource Real Estate Opportunity REIT, Inc. Resource Real Estate filed a $750.0 million registration statement with the Securities and Exchange Commission on July 7, 2009 for Resource Real Estate Opportunity REIT, Inc. of which Resource Real Estate is the external manager. The registration statement became effective during June 2010. -- Debt Reduction. As of June 30, 2010, the Company reduced its total consolidated borrowings outstanding to $44.9 million from $191.4 million as of September 30, 2009, a decrease of $146.5 million (77%). At June 30, 2010, borrowings include $14.6 million of corporate revolving debt, $13.9 million of senior notes, net of a discount, and $16.4 million of other debt, of which $13.5 million is in mortgage debt secured by the underlying properties. -- Adjusted Revenues and Adjusted Operating Income (Loss) -- Non-GAAP Measures. For the third fiscal quarter and nine months ended June 30, 2010, the Company reported adjusted revenues of $25.3 million and $67.5 million, respectively, as compared to $22.3 million and $81.4 million for the third fiscal quarter and nine months ended June 30, 2009, respectively. For the third fiscal quarter and nine months ended June 30, 2010, the Company reported adjusted operating income of $2.1 million and $2.6 million as compared to an adjusted operating loss of $407,000 and adjusted operating income of $7.0 million for the third fiscal quarter and nine months ended June 30, 2009, respectively. Adjusted revenues and adjusted operating income (loss) include $44,000 of pre-tax fair value losses and exclude $2.6 million of pre-tax fair value gains for the third fiscal quarter and nine months ended June 30, 2010, respectively, as compared to $263,000 and $226,000 of pre-tax fair value gains for the third fiscal quarter and nine months ended June 30, 2009, respectively. Adjusted operating income (loss) also includes $7.2 million and $7.7 million of pre-tax losses on the sale of leases and loans for the third fiscal quarter and nine months ended June 30, 2010, respectively, as compared to $71,000 and $390,000 of pre-tax gains on the sale of leases and loans for the third fiscal quarter and nine months ended June 30, 2009, respectively. A reconciliation of the Company's total GAAP revenues and GAAP operating (loss) income to adjusted revenues and adjusted operating income (loss) is included in Schedule II to this release.Assets Under Management The following table details the Company's assets under management by operating segment, which decreased by $1.7 billion (12%) from June 30, 2009 to June 30, 2010:
At June 30, ----------------------------- 2010 2009 -------------- -------------- Financial fund management $ 10.1 billion $ 11.3 billion Real estate 1.6 billion 1.7 billion Commercial finance 1.0 billion 1.4 billion -------------- -------------- $ 12.7 billion $ 14.4 billion ============== ==============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 fiscal year ended September 30, 2009. Book Value As of June 30, 2010, the Company's GAAP book value per common share was $7.55 per share. Total stockholders' equity was $138.0 million as of June 30, 2010 as compared to $131.4 million as of June 30, 2009. Total common shares outstanding were 18,261,250 as of June 30, 2010 as compared to 17,950,360 as of June 30, 2009. Other Highlights for the Third Fiscal Quarter Ended June 30, 2010 and Recent Developments
-- On July 27, 2010, the Company announced that its Board of Directors formed a Special Committee, consisting entirely of independent directors, to identify and evaluate strategic alternatives for the Company to enhance shareholder value. -- In May 2010, Resource Real Estate earned a $642,000 promoted return in connection with the sale of an asset in Pittsburgh, PA owned with a joint venture partner. -- In April 2010, Resource Real Estate purchased three loans on behalf of Resource Capital Corp, a REIT that it manages, from the U.S. Department of Housing and Urban Development for approximately $44.2 million with an existing joint venture partner. These loans are secured by multifamily rental properties located in Atlanta, Georgia, Cleveland, Ohio and Prince George County, Maryland. In connection with the purchase of these three loans, the Company will receive asset management and property management fees in the future. -- As of July 2010, Resource Real Estate Opportunity Fund L.P. ("RRE Opportunity Fund") has sold 45 of 49 units in a Kansas City, Missouri Condominium, that it acquired in June 2009, generating gross sales proceeds of approximately $10.4 million. RRE Opportunity Fund's total acquisition costs were $9.0 million. -- Resource Real Estate Management, Inc., the Company's property management subsidiary, increased the apartment units it manages to 13,724 units at 51 properties as of June 30, 2010 from 12,134 units at 50 properties as of June 30, 2009. -- In May 2010, LEAF Financial Corporation, on behalf of two affiliates, completed two securitization transactions totaling $210 million, both of which were term funded by the issuance of contract-backed notes. LEAF will continue to service these securitization pools. -- The Company reduced its borrowings to $44.9 million at June 30, 2010, a decrease of $146.5 million from September 30, 2009. This decrease primarily reflects the repayment and termination of the commercial finance credit facility, which had a $136.5 million balance at September 30, 2009. -- The Company's Board of Directors authorized the payment on July 30, 2010 of a $0.03 cash dividend per share on the Company's common stock to holders of record as of the close of business on July 19, 2010. -- Resource Capital Corp. (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 and for outside investors in the real estate, commercial finance and financial fund management 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. 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 Securities and Exchange Commission. 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 written prospectus, relating to the securities to be offered by Resource Real Estate Opportunity REIT, Inc., may be obtained by contacting Chadwick Securities, Inc., 1845 Walnut Street, 10th 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, consolidated statements of cash flows, reconciliation of GAAP loss from continuing operations attributable to common shareholders to adjusted income (loss) from continuing operations attributable to common shareholders and reconciliation of GAAP revenues to adjusted revenues and reconciliation of GAAP operating (loss) income to adjusted operating income (loss).NYSE :RSO ), paid a cash dividend of $0.25 per common share for its second quarter ended June 30, 2010.
RESOURCE AMERICA, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) June 30, September 30, 2010 2009 ----------- ----------- (unaudited) ASSETS Cash $ 9,164 $ 26,197 Restricted cash 1,673 2,741 Receivables 1,286 1,358 Receivables from managed entities and related parties, net 67,495 55,047 Investments in commercial finance - held for investment, net 1,125 2,429 Investments in commercial finance - held for sale, net 515 142,701 Investments in real estate, net 24,977 27,313 Investment securities available-for-sale, at fair value 18,704 19,500 Investments in unconsolidated entities 14,269 16,241 Property and equipment, net 9,890 13,435 Deferred tax assets 44,296 45,656 Goodwill 7,969 7,969 Intangible assets, net 3,035 3,637 Other assets 14,748 11,616 ----------- ----------- Total assets $ 219,146 $ 375,840 =========== =========== LIABILITIES AND EQUITY Liabilities: Accrued expenses and other liabilities $ 36,004 $ 40,986 Payables to managed entities and related parties 173 1,284 Borrowings 44,903 191,383 Deferred tax liabilities 2,046 2,046 ----------- ----------- Total liabilities 83,126 235,699 ----------- ----------- 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; 28,154,910 and 27,757,849 shares issued, respectively (including nonvested restricted stock of 762,310 and 552,461, respectively) 274 272 Additional paid-in capital 280,761 277,944 Accumulated deficit (29,134) (22,471) Treasury stock, at cost; 9,131,350 and 9,213,665 shares, respectively (99,454) (100,367) Accumulated other comprehensive loss (14,491) (15,560) ----------- ----------- Total stockholders' equity 137,956 139,818 Noncontrolling interests (1,936) 323 ----------- ----------- Total equity 136,020 140,141 ----------- ----------- Total liabilities and equity $ 219,146 $ 375,840 =========== =========== RESOURCE AMERICA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Three Months Ended Nine Months Ended June 30, June 30, -------------------- -------------------- 2010 2009 2010 2009 --------- --------- --------- --------- REVENUES: Real estate $ 11,162 $ 5,198 $ 23,879 $ 17,261 Commercial finance 5,592 10,476 21,824 38,962 Financial fund management 8,484 6,884 24,357 25,414 --------- --------- --------- --------- 25,238 22,558 70,060 81,637 --------- --------- --------- --------- COSTS AND EXPENSES: Real estate 5,856 5,821 16,099 17,109 Commercial finance 4,512 5,841 13,818 20,064 Financial fund management 6,471 4,722 15,875 15,532 General and administrative 2,946 3,371 9,146 11,049 Loss (gain) on sale of leases and loans 7,154 (71) 7,705 (390) Provision for credit losses 1,428 1,048 3,414 5,645 Depreciation and amortization 2,005 1,899 6,593 4,981 --------- --------- --------- --------- 30,372 22,631 72,650 73,990 --------- --------- --------- --------- OPERATING (LOSS) INCOME (5,134) (73) (2,590) 7,647 OTHER (EXPENSE) INCOME: Total other-than-temporary impairment losses on investment securities (67) - (364) (7,962) Portion recognized in other comprehensive loss - - - - --------- --------- --------- --------- Net other-than-temporary impairment losses recognized in earnings (67) - (364) (7,962) Loss on sale of loans and investment securities, net (27) - (451) (11,588) Interest expense (3,504) (2,634) (11,192) (16,957) Other income, net 739 981 1,946 3,224 --------- --------- --------- --------- (2,859) (1,653) (10,061) (33,283) --------- --------- --------- --------- Loss from continuing operations before taxes (7,993) (1,726) (12,651) (25,636) Income tax benefit (1,404) (1,613) (4,805) (9,219) --------- --------- --------- --------- Loss from continuing operations (6,589) (113) (7,846) (16,417) Loss from discontinued operations, net of tax (1) (78) (3) (166) --------- --------- --------- --------- Net loss (6,590) (191) (7,849) (16,583) Add: Net loss (income) attributable to noncontrolling interests 1,275 (13) 2,273 1,526 --------- --------- --------- --------- Net loss attributable to common shareholders $ (5,315) $ (204) $ (5,576) $ (15,057) ========= ========= ========= ========= Basic loss per share attributable to common shareholders: Continuing operations $ (0.28) $ (0.01) $ (0.29) $ (0.81) Discontinued operations - - - (0.01) --------- --------- --------- --------- Net loss $ (0.28) $ (0.01) $ (0.29) $ (0.82) ========= ========= ========= ========= Weighted average shares outstanding 19,140 18,567 18,972 18,437 ========= ========= ========= ========= Diluted loss per share attributable to common shareholders: Continuing operations $ (0.28) $ (0.01) $ (0.29) $ (0.81) Discontinued operations - - - (0.01) --------- --------- --------- --------- Net loss $ (0.28) $ (0.01) $ (0.29) $ (0.82) ========= ========= ========= ========= Weighted average shares outstanding 19,140 18,567 18,972 18,437 ========= ========= ========= ========= Dividends declared per common share $ 0.00 $ 0.03 $ 0.06 $ 0.17 Amounts attributable to common shareholders: Loss from continuing operations, net of tax $ (5,314) $ (126) $ (5,573) $ (14,891) Discontinued operations, net of tax (1) (78) (3) (166) --------- --------- --------- --------- Net loss $ (5,315) $ (204) $ (5,576) $ (15,057) ========= ========= ========= ========= RESOURCE AMERICA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Nine Months Ended June 30, -------------------- 2010 2009 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (7,849) $ (16,583) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Net other-than-temporary impairment losses recognized in earnings 364 7,962 Depreciation and amortization 10,192 6,567 Provision for credit losses 3,414 5,645 Equity in earnings of unconsolidated entities (4,098) (758) Distributions from unconsolidated entities 3,479 4,549 Loss (gain) on sale of leases and loans 7,705 (390) Loss on sale of loans and investment securities, net 451 11,588 Gain on resolution of assets (2,040) (635) Deferred income tax benefit 29 (4,348) Equity-based compensation issued 2,874 3,898 Equity-based compensation received (1,118) (98) Decrease (increase) in commercial finance investments - held for sale 30,959 (32,149) Changes in operating assets and liabilities (21,720) (18,497) --------- --------- Net cash provided by (used in) operating activities 22,642 (33,249) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (320) (244) Payments received on real estate loans and real estate 8,355 10,044 Investments in unconsolidated real estate entities (1,908) (3,230) Return of capital from investments in unconsolidated entities 344 684 Purchase of commercial finance assets - held for investment - (41,942) Payments received on commercial finance assets - held for investment - 44,607 Purchase of loans and investments (1,011) (19,203) Proceeds from sale of loans and investment securities 2,740 4,561 Principal payments received on loans - 4,061 --------- --------- Net cash provided by (used in) investing activities 8,200 (662) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Increase in borrowings 81,802 350,856 Principal payments on borrowings (127,889) (322,424) Repayment from managed entity on RCC lease portfolio purchase - 4,500 Dividends paid (1,087) (3,020) Decrease in restricted cash 1,068 9,532 Repurchase of subsidiary stock held by a noncontrolling stockholder - (264) Other (1,766) (2,533) --------- --------- Net cash (used in) provided by financing activities 47,872 36,647 --------- --------- CASH FLOWS FROM DISCONTINUED OPERATIONS: Operating activities (3) (6) Financing activities - (159) --------- --------- Net cash used in discontinued operations (3) (165) --------- --------- (Decrease) increase in cash (17,033) 2,571 Cash at beginning of year 26,197 14,910 --------- --------- Cash at end of period $ 9,164 $ 17,481 ========= ========= This press release contains supplemental financial information determined by methods other than in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"). Management believes the presentation of this non-GAAP financial measure excluding the impact of these items provides useful supplemental information that is essential to a proper understanding of the financial results of the Company. These disclosures should not be viewed as a substitute for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. SCHEDULE I RECONCILIATION OF GAAP LOSS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS TO ADJUSTED INCOME (LOSS) FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREHOLDERS (in thousands, except per share data) (unaudited) Three Months Ended Nine Months Ended June 30, June 30, -------------------- -------------------- 2010 2009 2010 2009 --------- --------- --------- --------- Loss from continuing operations attributable to common shareholders - GAAP $ (5,314) $ (126) $ (5,573) $ (14,891) Adjustments, net of tax: Loss on sale of leases 1,619 - 2,314 - Deferred tax asset 4,250 - 3,038 - --------- --------- --------- --------- Adjusted income (loss) from continuing operations attributable to common shareholders (1) $ 555 $ (126) $ (221) $ (14,891) ========= ========= ========= ========= Adjusted weighted average diluted shares outstanding (2) 19,512 18,567 18,972 18,437 ========= ========= ========= ========= Adjusted income (loss) from continuing operations attributable to common shareholders per common share-diluted $ 0.03 $ (0.01) $ (0.01) $ (0.81) ========= ========= ========= ========= (1) During the three and nine months ended June 30, 2010, in connection with a sale of a leasing portfolio held by the Company's commercial finance business and losses generated from the Company's commercial finance business resulting in the elimination of certain state tax benefits, which were recorded as a reduction to the Company's tax benefit, the Company recorded several significant adjustments that it believes do not directly impact its continuing operations. For comparability purposes, the Company is presenting adjusted income (loss) from continuing operations attributable to common shareholders because it facilitates the evaluation of the Company's underlying operating performance without the effect of adjustments that do not directly relate to that performance. Adjusted income (loss) from continuing operations attributable to common shareholders should not be considered as an alternative to loss from continuing operations attributable to common shareholders (computed in accordance with GAAP). Instead, adjusted income (loss) from continuing operations attributable to common shareholders should be reviewed in connection with loss from continuing operations attributable to common shareholders in the Company's consolidated financial statements, to help analyze how the Company's business is performing. (2) Dilutive shares used in the calculation of adjusted income (loss) from continuing operations attributable to common shareholders per common share-diluted includes an additional 372,000 shares for the three months ended June 30, 2010, which were anti-dilutive, and therefore, not used in the calculation of loss from continuing operations attributable to common shareholders per common share-diluted. SCHEDULE II Reconciliation of GAAP Revenues to Adjusted Revenues and Reconciliation of GAAP Operating (Loss) Income to Adjusted Operating Income (Loss) Three Months Ended Nine Months Ended June 30, June 30, -------------------- -------------------- 2010 2009 2010 2009 --------- --------- --------- --------- Revenues: Real estate $ 11,162 $ 5,198 $ 23,879 $ 17,261 Commercial finance 5,592 10,476 21,824 38,962 Financial fund management 8,484 6,884 24,357 25,414 --------- --------- --------- --------- Total revenues - GAAP 25,238 22,558 70,060 81,637 Adjustments: Fair value adjustments (1) 44 (263) (2,555) (226) --------- --------- --------- --------- Adjusted revenues (2) $ 25,282 $ 22,295 $ 67,505 $ 81,411 ========= ========= ========= ========= Operating (loss) income - GAAP $ (5,134) $ (73) $ (2,590) $ 7,647 Adjustments: Loss (gain) on sale of leases and loans (3) 7,154 (71) 7,705 (390) Fair value adjustments (1) 44 (263) (2,555) (226) --------- --------- --------- --------- Adjusted operating income (loss) (2) $ 2,064 $ (407) $ 2,560 $ 7,031 ========= ========= ========= ========= (1) Reflects pre-tax fair value adjustments on investments reported under the equity method of accounting. (2) The Company's management views adjusted revenues and adjusted operating income (loss), both non-GAAP measures, as useful and appropriate supplements to GAAP revenues and operating (loss) income since they exclude fair value adjustments related to current credit market conditions and loss (gain) on sale of leases and loans related to our commercial finance business which are not indicative of the Company's current operating performance. Because not all companies use the same calculations, this presentation of adjusted revenues and adjusted operating income (loss) may not be comparable to other, similarly-titled measures of other companies. (3) Reflects the pre-tax loss (gain) on sale of leases and loans reported in the Company's commercial finance business.
Contact Information: CONTACT: THOMAS C. ELLIOTT CHIEF FINANCIAL OFFICER RESOURCE AMERICA, INC. ONE CRESCENT DRIVE, SUITE 203 PHILADELPHIA, PA 19112 215/546-5005, 215/546-4785 (fax)