-- 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. (NYSE : RSO ), paid a cash dividend of $0.25 per
common share for its second quarter ended June 30, 2010.
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).
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)