Resource Capital Corp. Reports Results for Three Months Ended March 31, 2017
(firmenpresse) - NEW YORK, NY -- (Marketwired) -- 05/09/17 -- Resource Capital Corp. (NYSE: RSO)
GAAP net income allocable to common shares of $0.09 per share-diluted and core earnings, a non-GAAP measure, of $(0.11) per share-diluted (see Schedule I).
Common stock cash dividend of $0.05 per share.
Book value of $14.16 per common share at March 31, 2017, as compared to $14.17 per common share at December 31, 2016.
GAAP net income for the three months ended March 31, 2017 includes a realized gain of $7.0 million related to a $21.3 million monetization of one legacy commercial real estate ("CRE") loan previously classified as held for sale. Legacy CRE loans are loans originated prior to 2010.
Through March 31, 2017, Resource Capital Corp. ("RSO") has monetized $100.3 million of the investments that were included in management''s previously communicated strategic plan (the "Plan"), which includes $55.6 million during the three months ended March 31, 2017.
(NYSE: RSO) reported results for the three months ended March 31, 2017.
GAAP net income allocable to common shares for the three months ended March 31, 2017 was $2.7 million, or $0.09 per share-diluted, as compared to $9.7 million, or $0.31 per share-diluted, for the three months ended March 31, 2016.
Core earnings for the three months ended March 31, 2017 of $(3.3) million, or $(0.11) per share-diluted. A reconciliation of GAAP net income (loss) to core earnings is set forth in Schedule I of this release.
RSO declared and paid a common stock cash dividend of $0.05 per share for the first quarter of 2017.
Commercial Real Estate
Substantially all of the $1.3 billion CRE loan portfolio comprises floating rate senior whole loans at March 31, 2017.
The CRE whole loan portfolio had a weighted average spread of 4.91% and a weighted average London Interbank Offered Rate ("LIBOR") floor of 0.33% at March 31, 2017.
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, 2017 (in millions, except percentages):
Commercial Finance
Proceeds of $13.6 million related to the partial liquidation of Pelium Capital Partners.
Proceeds of $9.4 million from the sale of RSO''s investment in ZAIS CLO 4, Limited.
Proceeds of $4.1 million from the redemption of one investment security held in RSO''s trading portfolio, substantially completing the liquidation of RSO''s investments in trading securities.
Proceeds of $2.3 million from the liquidation of assets in Apidos Cinco CDO, Ltd.
Discontinued Operations
Pursuant to the Plan, the assets and liabilities of RSO''s residential mortgage lending business, Primary Capital Mortgage, LLC ("PCM"), and RSO''s middle market syndicated loan portfolio were reclassified to held for sale during the fourth quarter of 2016 and are reported as discontinued operations at March 31, 2017 in the consolidated statements of operations.
PCM recognized a net loss of approximately $1.4 million for the three months ended March 31, 2017.
In January 2017, RSO received $4.9 million of proceeds from the sale of a middle market syndicated loan. At March 31, 2017, the remaining six middle market syndicated loans, with an aggregate carrying value of $38.5 million, were current with respect to contractual payments due. At March 31, 2017, the one remaining directly originated middle market loan, with a carrying value of $1.9 million, was in default.
The middle market portfolio generated net income of $878,000 for the three months ended March 31, 2017.
Assets Held for Sale
Proceeds of $21.3 million as a result of a discounted payoff of a legacy CRE loan. The loan, with a par value of $32.5 million, was held on the balance sheet at its appraised value of $14.3 million, resulting in a realized gain of $7.0 million.
At April 30, 2017, RSO''s liquidity consisted of two primary sources:
unrestricted cash and cash equivalents of $157.3 million; and
$121.7 million and $85.7 million available under two term financing facilities to finance originations of CRE loans and $79.1 million available under a term financing facility to finance purchases of commercial mortgage-backed securities ("CMBS").
At March 31, 2017, RSO''s book value per common share was $14.16, a decrease from $14.17 per common share at December 31, 2016. The decrease in book value over the three month period was attributable to the following: dividends paid of $0.05 per common share (decrease); $0.05 per common share of expense attributable to the vesting of restricted stock (decrease); and net income of $0.09 per common share (increase).
Total stockholders'' equity at March 31, 2017, which measures equity before accounting for non-controlling interests, was $706.4 million, of which $270.1 million was attributable to preferred stock. Total stockholders'' equity at December 31, 2016 was $704.3 million, of which $270.1 million was attributable to preferred stock.
The following table summarizes the amortized cost and net carrying amount of RSO''s investment portfolio at March 31, 2017, classified by asset type (in thousands, except percentages):
The following schedules of reconciliations and supplemental information at March 31, 2017 are included at the end of this release:
Schedule I - Reconciliation of GAAP Net Income (Loss) to Core Earnings;
Schedule II - Summary of Securitization Performance Statistics;
Schedule III - Strategic Plan Update; and
Supplemental Information.
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 investments. RSO has historically made other commercial finance investments.
RSO is externally managed by Resource Capital Manager, Inc., an indirect wholly-owned subsidiary of Resource America, Inc. In September 2016, Resource America was acquired by C-III Capital Partners LLC, a leading commercial real estate investment management and services company engaged in a broad range of activities.
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 that 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 release 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 of 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 are set forth in Schedule I of this release and can be accessed through RSO''s filings with the SEC at .
The remainder of this release contains RSO''s unaudited consolidated balance sheets, unaudited consolidated statements of operations, a reconciliation of GAAP net income (loss) to core earnings, a summary of securitization performance statistics, RSO''s strategic plan update and supplemental information regarding RSO''s CRE loan portfolio and loans held for sale.
(in thousands, except per share data)
(unaudited)
Beginning with the three months and year ended December 31, 2016, RSO uses Core Earnings as a non-GAAP financial measure to evaluate its operating performance. RSO previously used Adjusted Funds from Operations as a non-GAAP measure of operating performance.
Core Earnings exclude the effects of certain transactions and GAAP adjustments that RSO believes are not indicative of its current CRE loan portfolio and other CRE related investments and operations. Core Earnings exclude income (loss) from all non-core assets, such as Commercial Finance, Middle Market Lending, Residential Mortgage Lending, legacy CRE loans and other non-CRE assets designated as assets held for sale at the initial measurement date.(1)
Core Earnings is defined as GAAP net income (loss) allocable to common shareholders, excluding (i) non-cash equity compensation expense, (ii) incentive fees payable to our external manager, (iii) unrealized gains and losses, (iv) non-cash provisions for loan losses, (v) non-cash impairments on securities, (vi) non-cash amortization of discounts or premiums associated with borrowings, (vii) net income or loss from a limited partnership interest owned at the initial measurement date, (viii) net income or loss from non-core assets,(2) (ix) real estate depreciation and amortization and (x) foreign currency gains or losses. Core Earnings may also be adjusted periodically to exclude certain one-time events pursuant to changes in GAAP and certain non-cash items.
Core Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to GAAP net income or as a measure of liquidity under GAAP. RSO''s methodology for calculating Core Earnings may differ from methodologies used by other companies to calculate similar supplemental performance measures, and, accordingly, its reported Core Earnings may not be comparable to similar performance measures used by other companies.
The following table provides a reconciliation from GAAP net income allocable to common shares to Core Earnings for the periods presented (in thousands, except per share data):
We have five operating segments: Commercial Real Estate Debt Investments; Commercial Finance; Middle Market Lending; Residential Mortgage Lending; and Corporate & Other. The Commercial Real Estate Debt Investments operating segment includes our activities and operations related to commercial real estate loans and commercial real estate-related securities. The Commercial Finance operating segment includes our activities and operations related to syndicated corporate loans, syndicated corporate 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 corporate loans. The Residential Mortgage Lending operating segment includes our activities and operations related to originating and servicing residential mortgage loans and investments in residential mortgage-backed securities. 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.
As part of our plan to exit non-CRE businesses, the entire Middle Market Lending and substantially all of the Residential Mortgage Lending segments are reported as discontinued operations. The following table presents a reconciliation of GAAP net income (loss) to Core Earnings for the three months ended March 31, 2017 presented by operating segment (in thousands, except per share data):
(unaudited)
The following table sets forth the distributions made by and coverage test summaries for RSO''s securitizations for the periods presented (in thousands):
(in millions) (unaudited)
In November 2016 the board of directors approved the Plan, pursuant to which RSO is focused on making CRE debt investments going forward. The Plan includes disposing of certain non-core businesses and investments and underperforming legacy CRE loans ("Identified Assets"), as well as maintaining a dividend policy based on sustainable earnings. As part of the Plan, the Identified Assets were reclassified as discontinued operations ("Discops") and/or assets held for sale ("AHFS") during the fourth quarter of 2016. The following table delineates these disposable investments by business segment and details the current net book value of the businesses and investments included in the Plan.
(in thousands, except percentages)
The following table presents information on RSO''s allowances for loan losses and its loans held for sale portfolio for the periods indicated (based on amortized cost):
(unaudited)
The following table presents CRE loan portfolio statistics at March 31, 2017 (based on carrying value):
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Datum: 09.05.2017 - 17:01 Uhr
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