Resource Capital Corp. Reports Results for Three and Six Months Ended June 30, 2016
(firmenpresse) - NEW YORK, NY -- (Marketwired) -- 08/01/16 -- Resource Capital Corp. (NYSE: RSO)
(NYSE: RSO), a real estate investment trust, or REIT, whose investment strategy focuses on commercial real estate ("CRE") assets, commercial mortgage-backed securities ("CMBS"), middle market loans, commercial finance assets and other investments, reported results for the three and six months ended June 30, 2016. All per share amounts stated in this release take into account the one-for-four reverse stock split effective on August 31, 2015 as though it were in full effect for all periods presented for comparison purposes.
RSO reported AFFO for the three and six months ended June 30, 2016 of $14.5 million, or $0.48 per share-diluted and $29.2 million, or $0.95 per share-diluted as compared to $20.1 million, or $0.61 per share-diluted and $41.3 million, or $1.26 per share-diluted for the three and six months ended June 30, 2015. A reconciliation of net income (loss) in accordance with accounting principles generally accepted in the United States ("GAAP") to AFFO is set forth in Schedule I of this release.
GAAP net income (loss) allocable to common shares for the three and six months ended June 30, 2016 was $(1.5) million, or $(0.05) per share-diluted and $8.1 million, or $0.26 per share-diluted as compared to net losses of $(31.0) million, or $(0.94) per share-diluted and $(21.6) million, or $(0.66) per share-diluted for the three and six months ended June 30, 2015.
Commercial Real Estate
Substantially all of the $1.4 billion CRE loan portfolio is comprised of senior whole loans as of June 30, 2016.
Of this portfolio, 98% of the loans are floating rate senior whole loans and have London Interbank Offered Rate ("LIBOR") floors with a weighted average floor of 0.28% as of June 30, 2016.
Interest income on whole loans increased by $2.2 million and $5.5 million or 12.3% and 16.1%, to $20.2 million and $39.6 million during the three and six months ended June 30, 2016, respectively, as compared to $18.0 million and $34.1 million during the three and six months ended June 30, 2015. For comparison purposes, this excludes income in the 2015 period from our legacy CRE CDOs deconsolidated in the first quarter of 2016.
RSO closed and funded $414.7 million of new whole loans in the 12 months ended June 30, 2016, with a weighted average yield of 5.37%, including amortization of origination fees.
The following table summarizes RSO's CRE loan activities and fundings of previous commitments, at par, for the three, six and 12 months ended June 30, 2016 (in millions, except percentages):
Legacy Commercial Real Estate CDO Liquidation
On April 25, 2016, RSO called and liquidated its investment in RREF CDO 2006-1. RREF CDO 2006-1 was RSO's first CRE CDO which closed on August 10, 2006 and was comprised of $345.0 million of assets at closing. RSO received the remaining collateral of $49.0 million, at par, recognizing a gain of approximately $846,000, in exchange for its remaining interest after paying off the CDO debt. As it relates to AFFO, RSO had deferred $21.4 million of gains on extinguishment of debt related to notes of its RREF CDO 2006-1 securitization that were repurchased at significant discounts and subsequently canceled. Approximately $6.3 million of that $21.4 million of gains on extinguishment of debt was realized in cash upon the refinancing of certain assets received in the liquidation of RREF CDO 2006-1. The remaining cash gains are expected to be recognized over subsequent periods in AFFO as RSO receives cash above its cost basis in the repurchased debt.
Commercial Finance & Middle Market Loans
On August 1, 2016, RSO entered into a purchase agreement to sell Northport TRS, LLC for $247.0 million. The transaction includes substantially all of the direct origination middle market loans and one syndicated loan with a collective par balance of $257.0 million and the assumption of the Credit Facility, for net proceeds of approximately $102.0 million. RSO will retain the remaining broadly syndicated middle market loans and one direct origination middle market loan totaling $68.0 million, at carrying value. During the second quarter, RSO recorded $9.0 million provision for loan losses on the loans sold to adjust the portfolio to fair value and accelerated the amortization of the remaining deferred debt issuance costs of $2.6 million pertaining to the Credit Facility. The ownership of Northport TRS, LLC is held approximately 70.0% in a taxable subsidiary and 30.0% in a non-taxable subsidiary. The impact of the added provisions and write-off of the remaining debt issuance costs, net of tax, is $8.2 million. It is anticipated the transaction will close on or before August 5, 2016.
RSO earned $912,000 of net fees through its subsidiary, Resource Capital Asset Management, during the six months ended June 30, 2016.
The following table summarizes RSO's middle market loan activities and fundings of previous commitments, at par, for the six months and 12 months ended June 30, 2016 (in millions, except percentages):
At June 30, 2016, RSO's liquidity is derived from three primary sources:
unrestricted cash and cash equivalents of $65.2 million and restricted cash of $30,000 in margin call accounts;
capital available for reinvestment in two of RSO's CRE securitizations of $6.3 million; and
loan principal repayments of $178,000 that will pay down outstanding CLO note balances, as well as interest collections of $113,000. In addition, RSO had $197,000 in restricted deposits related to certain of its investments.
In addition, as described under Commercial Finance & Middle Market Loans, the sale of Northport TRS, LLC is expected to yield net proceeds of approximately $102.0 million, which will be considered unrestricted cash.
RSO also has $240.7 million and $126.7 million, respectively, available through two term financing facilities to finance the origination of CRE loans and $77.4 million available through a term financing facility to finance the purchase of CMBS.
As of June 30, 2016, RSO had allocated its invested equity capital among its targeted asset classes as follows: 72% in total real estate assets, 27% in commercial finance and middle market assets and 1% in other investments.
As of June 30, 2016, RSO's book value per common share was $16.63, a decrease from $17.63 per common share at December 31, 2015. The decrease in book value is primarily attributable to the adoption of new consolidation accounting guidance effective January 1, 2016 combined with distributions paid in excess of earnings during the six months ended June 30, 2016. Upon adoption, RSO deconsolidated five variable interest entities resulting in a reduction to the beginning balance of retained earnings of $16.9 million, or $0.55 per common share. RSO has provided a schedule on economic book value which adjusts for certain investments which RSO intends to hold to maturity and has recorded unrealized losses on the investments, in excess of RSO's value at risk (See Schedule IV). Total stockholders' equity at June 30, 2016, which measures equity before the consideration of non-controlling interests, was $777.6 million, of which $270.1 million was attributable to preferred stock. Total stockholders' equity at December 31, 2015 was $818.9 million of which $274.7 million was attributable to preferred stock.
Since the inception of the share repurchase program in August 2015 through June 30, 2016, RSO has repurchased $33.9 million of its common stock (approximately 2.7 million shares), which represented approximately 8.0% of its outstanding common shares, at a weighted average price of $12.58 per share.
RSO repurchased 196,000 shares of its Series Preferred B stock, which had an accretive impact to our common shareholders of $1.5 million, or $0.05 per share-diluted, during the six months ended June 30, 2016.
The following table summarizes the amortized cost and net carrying amount of RSO's investment portfolio as of June 30, 2016, classified by asset type:
The following schedules of reconciliations and supplemental information as of June 30, 2016 are included at the end of this release:
Schedule I - Reconciliation of GAAP Net Income (Loss) to Funds from Operations ("FFO") and AFFO.
Schedule II - Summary of General and Administrative Expenses.
Schedule III - Summary of Securitization Performance Statistics.
Schedule IV - Reconciliation of GAAP Stockholders' Equity to Economic Book Value.
Supplemental Information regarding loan investment statistics, CRE loans and middle market loans.
RSO is a real estate investment trust that is primarily focused on originating, holding and managing commercial mortgage loans and other commercial real estate-related debt and equity investments. RSO also makes other commercial finance and residential mortgage investments and holds middle market loans.
RSO is externally managed by Resource Capital Manager, Inc., an indirect wholly-owned subsidiary of Resource America, Inc. (NASDAQ: REXI), an asset management company that specializes in real estate and credit investments.
For more information, please visit RSO's website at or contact investor relations at .
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
changes in general business and economic conditions that in the past have impaired and may in the future 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.
Furthermore, certain non-GAAP financial measures are discussed in this release. RSO's presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP can be accessed through our filings with the SEC at .
The remainder of this release contains RSO's unaudited consolidated balance sheets, unaudited consolidated statements of operations, reconciliation of GAAP net income (loss) to FFO and AFFO, summary of securitization performance statistics and supplemental information regarding RSO's CRE loan and middle market loan portfolios and a reconciliation of GAAP stockholders' equity to economic book value.
RSO evaluates 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 operating performance. RSO calculates AFFO by adding or subtracting from FFO the impact of non-cash accounting items as well as the effects of items that we deem to be non-recurring in nature. We deem transactions to be non-recurring if a similar transaction has not occurred in the past two years, and if we do not expect a similar transaction to occur in the next two years. We adjust for these non-cash and nonrecurring items to analyze our ability to produce cash flow from on-going operations, which we use to pay dividends to our shareholders. Non-cash adjustments to FFO include the following: impairment losses resulting from fair value adjustments on financial instruments; provisions for loan losses; equity investment gains and losses; straight-line rental effects; share based compensation expense; amortization of various deferred items and intangible assets; gains on sales of property that are wholly owned or owned through a joint venture; the cash impact of capital expenditures that are related to our real estate owned; and REIT tax planning adjustments, which primarily relate to accruals for owned properties for which we made a foreclosure election and adjustments to tax estimates with respect to the final resolution of foreclosed property when it is listed for sale. In addition, we calculate AFFO by adding and subtracting from FFO the realized cash impacts of the following: extinguishment of debt, reissuances 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 its operating performance, and believes they are also useful to investors because they facilitate an understanding of our operating performance apart from non-cash and non-recurring items, which may not necessarily be indicative of current operating performance and that may not allow accurate period to period comparisons of our operating performance.
While RSO's calculations of AFFO may differ from the methodology used for calculating AFFO by other REITs and our FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs, RSO also believes 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 its liquidity.
The following table reconciles GAAP net income (loss) to FFO and AFFO for the periods presented (unaudited) (in thousands, except share and per share data):
RSO has five reportable operating segments: Commercial Real Estate Lending, Commercial Finance, Middle Market Lending, Residential Mortgage Lending, and Corporate & Other. The reportable operating segments are business units that offer different products and services. The Commercial Real Estate Lending operating segment includes our activities and operations related to commercial real estate loans, commercial real estate-related securities, and investments in real estate. The Commercial Finance operating segment includes RSO's activities and operations related to bank loans, bank loan-related securities, and direct financing leases. The Middle Market Lending operating segment includes RSO's activities and operations related to the origination and purchase of middle market loans. The Residential Mortgage Lending operating segment includes RSO's activities and operations related to the origination and servicing of residential mortgage loans and the investment in residential mortgage-backed securities ("RMBS"). The Corporate & Other segment includes corporate level interest income, interest expense, inter-segment eliminations not allocable to any particular operating segment, and general and administrative expense. The following table presents a reconciliation of GAAP net income (loss) to AFFO for the three months ended June 30, 2016 presented by operating segment (in thousands, except per share data):
The following table presents the allocation of general and administrative expenses between Corporate and Residential Mortgage Lending:
The following table sets forth the distributions made and coverage test summaries for each of the Company's securitizations for the periods presented (in thousands):
The following table presents information on RSO's impaired loans and related allowances for the periods indicated (based on amortized cost):
The following table presents commercial real estate loan portfolio statistics as of June 30, 2016 (based on carrying value):
The following table presents middle market loan portfolio statistics by industry as of June 30, 2016 (based on carrying value):
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Datum: 02.08.2016 - 01:11 Uhr
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