-- Recorded regular dividend distribution of $0.39 per share, an increase
of 18% from the quarter ended March 31, 2006.
-- Priced third collateralized loan obligation ("CLO") with a weighted-
average cost of liabilities of LIBOR plus 0.51%.
-- Acquisition of $486.3 million of total assets.
-- Over $225.0 million of commercial real estate loans and future funding
obligations committed.
Estimated REIT taxable income for the first quarter ended March 31, 2007
was $9.7 million or $0.39 per share-diluted.
Jonathan Cohen, CEO and President of RCC, commented, "We continue to grow
our commercial real estate and commercial loan businesses as evidenced by
the $486 million of total assets originated, committed to and invested in
during this quarter. We expect to originate between $450 and $500 million
of commercial real estate deals, including future funding obligations, in
the first two quarters of 2007. Our mix has truly changed as evidenced by
in excess of 65% of our production being self-originated whole loans.
Although credit spread widening affected a small portion of our equity
investment portfolio, we expect our match-funding strategy and origination
capability to produce stable and growing dividends. We continue to
anticipate moving the dividend up substantially over the next three
quarters as we invest the capital raised in the December 2006 offering."
Additional Highlights for the first quarter ended March 31, 2007 and recent
developments include:
-- The Company paid a regular quarterly dividend of $0.39 per share on
24,995,217 common shares for the first quarter of 2007, an increase of
$0.01 per share, or 3.0% from the regular dividend paid for the fourth
quarter of 2006. This distribution was paid on April 16, 2007 to all
shareholders of record on March 30, 2007.
-- The Company's net interest income increased by $5.0 million (61%) to
$13.2 million for the quarter ended March 31, 2007 as compared to $8.2
million for the same period in 2006.
-- The Company's total assets grew by $325.1 million during the three
months ended March 31, 2007, primarily in commercial real estate and
commercial finance assets as detailed below.
Commercial Real Estate
-- The Company continued to increase its investment in commercial real
estate loans. RCC produced new loans, on a gross basis, of $228.0 million
during the first quarter ended March 31, 2007. The portfolio of loans (net
of sales, repayments and discounts) also grew by $75.9 million to $732.0
million at March 31, 2007 from $656.1 million at December 31, 2006 not
including future funding obligations of $51.9 million. The Company sold
$41.2 million of its commercial real estate loans and $29.9 million of CMBS
to diversify its potfolio.
The following table summarizes the Company's commercial real estate ("CRE")
loan origination activities and future funding obligations, at par, for the
three months, nine months and 12 months ended March 31, 2007 (in millions,
except percentages):
Three Nine
Months Months 12 Months
Ended Ended Ended Floating Weighted
--------- --------- --------- Weighted Average
March 31, March 31, March 31, Average Fixed
2007 2007 2007 Spread Rate
--------- --------- --------- -------- --------
Whole loans $ 118.9 $ 311.4 $ 311.4 2.96% 7.32%
Whole loans, future
funding obligations 51.9 51.9 51.9
A notes - 22.5 22.5 1.35% N/A
B notes - 66.2 110.7 3.39% 7.57%
Mezzanine loans 29.6 121.0 179.1 2.60% 8.13%
CMBS 27.6 57.7 57.7 N/A* 6.84%
--------- --------- ---------
New loans production 228.0 630.7 733.3
Sales of real estate
loans (41.2) (41.2) (41.2)
Sales of CMBS (29.9) (29.9) (29.9)
Payoffs (27.6) (60.6) (77.1)
Principal pay downs (0.6) (6.3) (6.3)
Whole loans, future
funding obligations (51.9) (51.9) (51.9)
--------- --------- ---------
Net - new loans 76.8 440.8 526.9
Discounts (0.9) (1.3) (7.1)
--------- --------- ---------
New loans, net of
discounts $ 75.9 $ 439.5 $ 519.8
========= ========= =========
* Weighed average floating rate coupon of 5.82% at March 31, 2007.
Commercial Finance
-- RCC accumulated bank loan assets of $258.3 million during the first
quarter for an anticipated third CLO closing in the second quarter of 2007.
The loans earned a weighted-average spread of LIBOR plus 2.06% as of March
31, 2007. The loans are currently being financed by a warehouse facility
with a balance of $254.0 million and a weighted average rate of LIBOR plus
0.625% as of March 31, 2007. The Company priced Apidos Cinco CLO which
will purchase and match-fund these loans. The weighted-average cost of
liabilities will be LIBOR plus 0.51% once this CLO closes in May 2007 .
-- RCC's bank loan portfolio, excluding the accumulation of loans for the
third CLO, ended the period with total investments of $618.3 million, at
cost, with a weighted-average spread of LIBOR plus 2.28%. The balance of
the company's bank loan portfolio is match-funded through two CLO issuances
with a weighted-average cost of LIBOR plus 0.46%.
-- RCC's commercial finance subsidiary ended the quarter with $87.9
million in direct financing leases and notes at a weighted-average rate of
8.74%. The Company's leasing portfolio is match-funded through a secured
term facility, which had a balance of $84.5 million as of March 31, 2007
and a weighted-average interest rate of 6.33%.
Corporate Matters
-- RCC closed a $150.0 million term repurchase facility on April, 20,
2007 with NATIXIS Real Estate Capital for a term of up to three (3) years
with a one year extension option. The facility will be used as a warehouse
facility to finance the purchase of commercial real estate loans, including
whole mortgage loans, A-notes, B-notes, CMBS and subordinated debt
including preferred equity.
-- RCC shareholders exercised warrants for 324,878 common shares,
representing 21% of the 1,568,244 warrants issued, at $15.00 per share
generating additional capital of $4.9 million during the first quarter of
2007. The Company's stockholders received one warrant on January 13, 2006
for each ten shares of common stock and restricted stock held as of January
4, 2006. The warrants expire on January 13, 2009.
Capital Allocation
As of March 31, 2007, RCC had allocated its equity capital among its
targeted asset classes as follows: 77% in commercial real estate loans, 15%
in commercial bank loans, 7% in asset-backed securities ("ABS") and 1% in
direct financing leases and notes.
Balance Sheet Summary
At March 31, 2007, RCC's investment portfolio including cash and restricted
cash totaled $2.1 billion and consisted of the following: $759.1 million of
commercial real estate-related investments, $871.6 million of bank loans,
$325.4 million of ABS, $87.9 million of direct financing leases and notes
and $62.8 million of temporary cash investments and restricted cash. At
March 31, 2007, RCC's investment portfolio was financed with $1.8 billion
of total indebtedness and included the following: $1.2 billion of senior
notes issued by collaterlized debt obligations secured primarily by
commercial real estate-related investments, mortgage-backed securities,
bank loans and other asset-backed securities; $208.5 million of repurchase
agreements secured by commercial real estate-related investments, $254.0
million through a warehouse facility secured by a portfolio of bank loans,
$84.5 million through a term facility secured by equipment leases and notes
and $51.5 million of unsecured junior subordinated debentures.
Book Value
The Company's book value per common share at March 31, 2007 was $11.82 as
compared to $13.33 at December 31, 2006, an 11% decrease, caused primarily
by an unrealized loss on our ABS-RMBS portfolio marked through other
comprehensive income. Total stockholders' equity was $295.4 million at
March 31, 2007 as compared to $317.6 million at December 31, 2006. Total
common shares outstanding were 24,995,217 at March 31, 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 Company's investment portfolio as of March 31, 2007, classified by
interest rate type. The following table includes both (i) the amortized
cost of the Company'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/ Period
cost to par Fair value to par losses change
---------- -------- ---------- ------ -------- ------
March 31, 2007
Floating rate
ABS-RMBS $ 339,842 99.28% $ 299,476 87.49% $(40,366) -11.79%
CMBS 387 100.00% 390 100.78% 3 0.78%
CMBS-private
placement 14,839 98.93% 14,722 98.15% (117) -0.78%
Other ABS 18,480 99.56% 18,451 99.41% (29) -0.15%
A notes 22,512 100.05% 22,512 100.05% - 0.00%
B notes 139,571 100.01% 139,571 100.01% - 0.00%
Mezzanine loans 134,454 100.05% 134,454 100.05% - 0.00%
Whole loans 233,787 99.14% 233,787 99.14% - 0.00%
Bank loans 871,633 100.14% 872,713 100.26% 1,080 0.12%
---------- ---------- --------
Total floating
rate $1,768,234 99.81% $1,728,822 97.58% $(39,412) -2.23%
========== ========== ========
Fixed rate
ABS-RMBS $ 6,000 100.00% $ 4,807 80.12% $ (1,193) -19.88%
CMBS 27,560 98.81% 26,730 95.83% (830) -2.98%
CMBS - Private
Placement 12,588 99.90% 12,600 100.00% 12 0.10%
Other ABS 2,866 100.00% 2,680 93.51% (186) -6.49%
B notes 56,297 100.22% 56,297 100.22% - 0.00%
Mezzanine loans 84,021 94.26% 84,021 94.26% - 0.00%
Whole loans 34,030 98.97% 34,030 98.97% - 0.00%
Equipment leases
and notes 87,934 100.00% 87,934 100.00% - 0.00%
---------- ---------- --------
Total fixed
rate $ 311,296 98.20% $ 309,099 97.51% $ (2,197) -0.69%
========== ========== ========
Grand total $2,079,530 99.56% $2,037,921 97.57% $(41,609) -1.99%
========== ========== ========
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 the Company's loans or on
loans underlying the Company's investments;
-- adverse market trends which may affect the value of real estate and
other assets underlying the Company's investments;
-- increases in financing or administrative costs; and
-- general business and economic conditions that would impair the credit
quality of borrowers and the Company'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 the Company is subject, see Item 1A, "Risk Factors" included
in the Company's annual report on Form 10-K and in other of its public
filings with the Securities and Exchange Commission.
The Company 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 the Company 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, the Company 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 Company's consolidated balance
sheets, consolidated statements of operations and a reconciliation of the
Company's estimated REIT taxable income to its GAAP net income.
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 31, December 31,
2007 2006
----------- -----------
(unaudited)
ASSETS
Cash and cash equivalents $ 14,517 $ 5,354
Restricted cash 48,298 30,721
Due from broker 1,883 2,010
Securities available-for-sale, at fair value 379,856 420,997
Loans held for investment 1,576,305 1,240,288
Direct financing leases and notes 87,934 88,970
Investments in unconsolidated entities 1,548 1,548
Accrued interest receivable 12,498 8,839
Principal paydown receivables 1,496 503
Other assets 3,579 3,599
----------- -----------
Total assets $ 2,127,914 $ 1,802,829
=========== ===========
LIABILITIES
Borrowings $ 1,806,693 $ 1,463,853
Distribution payable 9,748 7,663
Accrued interest expense 9,161 6,523
Derivatives, at fair value 3,457 2,904
Accounts payable and other liabilities 3,438 4,335
----------- -----------
Total liabilities 1,832,497 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; 24,995,217 and 23,821,434
shares issued and outstanding (including
303,945 and 234,224 unvested restricted
shares) 25 24
Additional paid-in capital 355,707 341,400
Deferred equity compensation - (1,072)
Accumulated other comprehensive loss (46,485) (9,279)
Distributions in excess of earnings (13,830) (13,522)
----------- -----------
Total stockholders' equity 295,417 317,551
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,127,914 $ 1,802,829
=========== ===========
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended
March 31,
-------------------------
2007 2006
------------ -----------
REVENUES
Securities $ 7,396 $ 16,372
Loans 30,281 11,019
Leases 1,910 506
Interest income - other 423 1,536
------------ -----------
Interest income 40,010 29,433
Interest expense 26,789 21,202
------------ -----------
Net interest income 13,221 8,231
Net realized gains (losses) on securities
available-for-sale 70 (699)
Other income 36 -
------------ -----------
Total revenues 13,327 7,532
------------ -----------
EXPENSES
Management fee expense - related party 2,032 993
Equity compensation expense - related party 486 582
Professional services 692 261
Insurance expense 121 120
General and administrative 557 426
------------ -----------
Total expenses 3,888 2,382
------------ -----------
NET INCOME $ 9,439 $ 5,150
============ ===========
NET INCOME PER SHARE - BASIC $ 0.39 $ 0.31
============ ===========
NET INCOME PER SHARE - DILUTED $ 0.38 $ 0.31
============ ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
BASIC 24,433,417 16,617,808
============ ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING -
DILUTED 24,837,709 16,752,520
============ ===========
DIVIDENDS DECLARED PER SHARE $ 0.39 $ 0.33
============ ===========
RESOURCE CAPITAL CORP. AND SUBSIDIARIES
RECONCILIATION OF GAAP NET INCOME TO ESTIMATED REIT TAXABLE INCOME
(Unaudited)
Estimated REIT Taxable Income
The Company 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 March 31,
-------------------------
2007 2006
------------ ------------
Net income $ 9,439 $ 5,150
Additions:
Share-based compensation to related parties 5 582
Incentive management fee expense to related
party paid in shares 186 31
Capital losses from the sale of securities
available-for-sale - 1,412
Other net book to tax adjustments 41 -
------------ ------------
Estimated REIT taxable income $ 9,671 $ 7,175
============ ============
The Company 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 the Company's
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 the Company. Estimated REIT
taxable income, however, includes the taxable income of RCC's foreign
taxable REIT subsidiaries because the Company will generally 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)