Resource Capital Corp. Reports Results for Three Months Ended March 31, 2016
(firmenpresse) - NEW YORK, NY -- (Marketwired) -- 05/02/16 -- Resource Capital Corp. (NYSE: RSO)
(NYSE: RSO) , a real estate investment trust, or REIT, whose investment strategy focuses on CRE assets, commercial mortgage-backed securities ("CMBS"), middle market loans, commercial finance assets and other investments, reported results for the three months ended March 31, 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 months ended March 31, 2016 of $14.7 million, or $0.47 per share-diluted as compared to $21.3 million, or $0.64 per share-diluted for the three months ended March 31, 2015. A reconciliation of GAAP net income (loss) to AFFO is set forth in Schedule I of this release.
GAAP net income (loss) allocable to common shares for the three months ended March 31, 2016 was $9.7 million, or $0.31 per share-diluted as compared to net income of $9.4 million, or $0.28 per share-diluted for the three months ended March 31, 2015.
On January 1, 2016, RSO adopted Accounting Standards Update 2015-02: Consolidation (Topic 810): Amendments to the Consolidation Analysis ("ASU 2015-02") as required. It was determined that RSO is no longer the primary beneficiary of the following variable interest entities ("VIEs"); and, therefore, they were deconsolidated: RREF CDO 2006-1, RREF CDO 2007-1, Apidos Cinco CDO, Pelium Capital Partners, L.P., and RCM Global, LLC. As a result of these deconsolidations, RSO will no longer reflect the underlying collateral (loans and securities) of those VIEs in its consolidated financial statements. Instead, RSO will prospectively reflect in its balance sheet its direct investments (the "retained investments") in the issued and outstanding securities of those VIEs. RSO''s retained investments in RREF CDO 2006-1, RREF CDO 2007-1, Apidos Cinco CDO are now accounted for as investment securities, available-for-sale and, as a result, are marked-to-market while the RSO''s retained investments in Pelium Capital Partners, L.P., and RCM Global, LLC are accounted for as equity method investments. RSO has elected to retrospectively reflect the deconsolidation of these entities on a modified basis, which resulted in a reduction to the beginning balance of retained earnings as of January 1, 2016, of $16.9 million, or $0.55 per common share. The reduction to retained earnings represents the effect of marking the investments to market as of the date of the required adoption of ASU 2015-02 and represents discounts to par due to illiquidity premiums and other market forces which are expected to be recovered over time as the investments approach their respective maturities. To reflect the impact of this expectation, we present a reconciliation from GAAP book value to economic book value in Schedule IV.
Commercial Real Estate
CRE loan portfolio of $1.5 billion, at carrying value, is comprised 100% of senior whole loans as of March 31, 2016.
$1.4 billion, or 99%, of floating rate whole loans in the CRE portfolio have London Interbank Offered Rate ("LIBOR") floors with a weighted average floor of 0.27% as of March 31, 2016.
Interest income on whole loans increased by $3.3 million or 20.2%, to $19.4 million during the three months ended March 31, 2016 as compared to $16.1 million during the three months ended March 31, 2015. For comparison purposes, this excludes income in the 2015 period from our legacy CRE CDOs deconsolidated in Q1 2016.
Closed and funded $573.3 million of new whole loans in the 12 months ended March 31, 2016, with a weighted average yield of 5.38%, including amortization of origination fees.
The following table summarizes RSO''s CRE loan activities and fundings of previous commitments, at par, for the three and 12 months ended March 31, 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, in exchange for its remaining interest after paying off the CDO debt. In addition, RREF 2006-1 held an interest of $17.25 million, at par, in certain notes of RREF CDO 2007-1 and, as a result, the liquidation increased RSO''s net investment in RREF 2007-1. RSO had deferred AFFO, representing cash gains on extinguishment of debt, of $21.4 million as of March 31, 2016. These cash gains will be recognized over subsequent periods as AFFO as RSO receives cash above its cost basis in the repurchased debt.
Commercial Finance & Middle Market Loans
RSO''s middle market loan portfolio was $326.7 million, at carrying value, with a weighted-average spread of one-month and three-month LIBOR plus 8.60% at March 31, 2016. There was $153.0 million outstanding on RSO''s senior secured credit facility used to finance middle market lending as of March 31, 2016.
Middle market loan payoffs of $105.1 million resulted in $2.6 million of prepayment fees earned during the three months ended March 31, 2016.
RSO earned $402,000 of net fees through its subsidiary, Resource Capital Asset Management, during the three months ended March 31, 2016.
The following table summarizes RSO''s middle market loan activities and fundings of previous commitments, at par, for the three months and 12 months ended March 31, 2016 (in millions, except percentages):
At March 31, 2016, RSO''s liquidity is derived from three primary sources:
unrestricted cash and cash equivalents of $71.4 million and restricted cash of $540,000 in margin call accounts;
capital available for reinvestment in two of RSO''s CRE securitizations of $7.6 million; and
loan principal repayments of $222,000 that will pay down outstanding CLO note balances, as well as interest collections of $141,000. In addition, RSO had $195,000 in restricted deposits related to certain of its investments.
In addition, RSO has $251.1 million and $141.8 million, respectively, available through two term financing facilities to finance the origination of CRE loans and $75.7 million available through a term financing facility to finance the purchase of CMBS. RSO also has $72.0 million available through a middle market syndicated revolving credit facility to finance the direct origination of middle market loans and purchase of syndicated bank loans.
As of March 31, 2016, RSO had allocated its invested equity capital among its targeted asset classes as follows: 70% in CRE assets, 27% in commercial finance and middle market assets and 3% in other investments.
As of March 31, 2016, RSO''s book value per common share was $17.12, 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. 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 March 31, 2016, which measures equity before the consideration of non-controlling interests, was $788.7 million, of which $270.0 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.
During the three months ended March 31, 2016, RSO repurchased $7.3 million of its common stock (approximately 643,000 shares). Since the inception of the program through March 31, 2016, RSO has repurchased $33.2 million of its common stock (approximately 2.6 million shares), which represented approximately 7.9% of the outstanding common shares, at a weighted average price of $12.60 per share.
RSO repurchased 196,000 Preferred B shares, which had an accretive impact to our common shareholders of $1.6 million, or $0.05 per share-diluted, during the three months ended March 31, 2016.
In March 2016, RSO''s board of directors approved a new securities repurchase program for up to $50.0 million of its outstanding securities.
The following table summarizes the amortized cost and net carrying amount of RSO''s investment portfolio as of March 31, 2016, classified by asset type:
The following schedules of reconciliations and supplemental information as of March 31, 2016 are included at the end of this release:
Schedule I - Reconciliation of GAAP Net Income 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 middle market loans, commercial finance and residential mortgage investments.
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
general business and economic conditions that have impaired and may continue to 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 will be 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 Generally Accepted Accounting Principles 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 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.
The Company evaluates its performance based on several performance measures, including funds from operations, or FFO, and adjusted funds from operations, or AFFO, in addition to net income. The Company computes 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. The Company calculates AFFO by adding or subtracting from FFO the impact of non-cash accounting items as well as the effects of items that are deemed to be non-recurring in nature. The Company deems transactions to be non-recurring if a similar transaction has not occurred in the past two years, and if it does not expect a similar transaction to occur in the next two years. The Company adjusts for these non-cash and non-recurring items to analyze its ability to produce cash flow from on-going operations, which is used to pay dividends to its 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 properties that are wholly owned or owned through a joint venture; the cash impact of capital expenditures that are related to the Company''s real estate owned; and REIT tax planning adjustments, which primarily relate to accruals for owned properties for which the Company 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, the Company calculates 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 the Company''s 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 the Company''s operating performance, and believes they are also useful to investors, because they facilitate an understanding of the Company''s operating performance after adjustment for certain non-cash items, such as real estate depreciation, share-based compensation and various other items required by GAAP, and capital expenditures, that may not necessarily be indicative of current operating performance and that may not allow accurate period to period comparisons of the Company''s operating performance.
While the Company''s calculations of FFO and AFFO may differ from the methodology used for calculating FFO and AFFO by other REITs, and its FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs, the Company also believes that FFO and AFFO may provide the Company and its investors with an additional useful measure to compare its 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 the Company''s 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):
We have 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 our activities and operations related to bank loans, bank loan-related securities, and direct financing leases. The Middle Market Lending operating segment includes our activities and operations related to the origination and purchase of middle market loans. The Residential Mortgage Lending operating segment includes our 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 March 31, 2016 presented by operating segment (in thousands,except per share data):
The following table presents the break out of general and administrative expenses between Corporate general and administrative expenses and Residential Mortgage Lending general and administrative expenses:
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 March 31, 2016 (based on carrying value):
The following table presents middle market loan portfolio statistics by industry as of March 31, 2016 (based on carrying value):
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Datum: 02.05.2016 - 19:03 Uhr
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