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Resource America, Inc. Reports Operating Results for the First Quarter Ended March 31, 2014

PHILADELPHIA, PA -- (Marketwired) -- 05/08/14 -- Resource America, Inc. (NASDAQ: REXI)

First Quarter 2014 Highlights

  • Adjusted net income attributable to common shareholders of $2.3 million (see Schedule I)
  • Stand-alone operating income of $2.1 million as compared to $529,000 for the prior year period
  • Increased gross assets under management by 16% to $17.8 billion since March 31, 2013
  • Book value per common share of $7.83

First Quarter 2014 Results

Resource America, Inc. (NASDAQ: REXI) (the "Company") reported adjusted net income attributable to common shareholders, a non-GAAP measure, of $2.3 million, or $0.11 per common share-diluted for the three months ended March 31, 2014 as compared to adjusted net income attributable to common shareholders of $2.4 million, or $0.11 per common share-diluted for the three months ended March 31, 2013. A reconciliation of the Company's reported GAAP net income attributable to common shareholders to adjusted net income attributable to common shareholders, a non-GAAP measure, is included as Schedule I to this release.

The Company reported GAAP net income attributable to common shareholders of $990,000, or $0.04 per common share-diluted, for the three months ended March 31, 2014 as compared to GAAP net income attributable to common shareholders of $496,000, or $0.02 per common share-diluted, for the three months ended March 31, 2013.

Assets Under Management

The following table details the Company's gross assets under management by operating segment, which increased by $2.5 billion (16%) from March 31, 2013 to 2014 (in billions):


                                                              March 31,
                                                         -------------------
                                                            2014      2013
                                                         --------- ---------
Financial fund management                                $    14.6 $    13.0
Real estate                                                    2.6       1.8
Commercial finance                                             0.6       0.5
                                                         --------- ---------
                                                         $    17.8 $    15.3
                                                         ========= =========

  Net assets under management (1)                        $     8.3 $     6.8
                                                         ========= =========

-----

(1)  Net assets under management represents the proportionate share of
     assets managed by the Company after reflecting joint venture
     arrangements.

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 year ended December 31, 2013.


Highlights for the First Quarter Ended March 31, 2014 and Recent Developments

REAL ESTATE ASSET MANAGEMENT:

Equity Asset Management

Resource Real Estate Opportunity REIT, Inc ("Opportunity REIT I"), a public non-traded real estate investment trust ("REIT") managed by the Company, which specializes in acquiring and managing distressed real estate assets, had the following highlights:

  • Increased total assets to $824.1 million at March 31, 2014, an increase of $594.1 million, or 258%, from $230.0 million at March 31, 2013.
  • In January 2014, acquired joint venture interests in 10 multifamily assets totaling 2,513 units and two office properties that contain 75,518 rentable square feet for $51.2 million. In March 2014, acquired the remaining ownership interest for one of the multifamily assets for $7.5 million. Including these acquisitions, Opportunity REIT I acquired $165.9 million of total assets during the quarter.

During the three months ended March 31, 2014, Resource Real Estate, the Company's real estate operating segment, placed financing of $115.0 million on properties and disposed of two properties for $82.9 million.

On February 6, 2014, Resource Real Estate Opportunity REIT II, Inc. ("Opportunity REIT II") commenced its initial public offering of common stock and will focus on acquiring under-performing multifamily rental properties, distressed real estate and performing loans. Opportunity REIT II is offering up to $1 billion in common stock at a maximum price of $10 per share. Resource Real Estate will be the external manager.

Debt Asset Management

Resource Capital Corp. ("RSO"), a publicly-traded REIT managed by the Company which focuses on commercial real estate assets, had the following highlights:

  • During the quarter, raised $15.8 million in equity capital through its preferred equity programs. Since March 31, 2014, raised an additional $14.0 million in equity capital, including $3.3 million from its DRIP program.
  • Originated $111.6 million of commercial real estate whole loans during the three months ended March 31, 2014.

The following additional highlights contributed to the Company's real estate asset management operations:

  • The Company's real estate operating segment increased its assets under management at March 31, 2014 to $2.6 billion, an increase of $796.5 million, or 44%, from March 31, 2013.
  • Real estate revenues increased 17% to $13.3 million, for the three months ended March 31, 2014 as compared to $11.3 million for the three months ended March 31, 2013, respectively.

FINANCIAL FUND MANAGEMENT:

Credit Asset Management

CVC Credit Partners, L.P. ("CCP"), the Company's global joint venture, closed Apidos CLO XVI, Ltd. (issuing notes with a par value of $600.0 million) in January 2014 and Apidos CLO XVII, Ltd. (issuing notes with a par value of $500.0 million) and CVC Cordatus Loan Fund III Limited (issuing notes with a par value of EUR 436.0 million) in May 2014. Since creating this joint venture in April 2012, CCP has closed nine collateralized loan obligation issuers (issuing notes with a total par value of $4.6 billion) and expects to receive approximately $21.4 million in fees on an annual run rate basis. The Company has a 33% interest in this joint venture.

The following additional highlight contributed to the Company's financial fund asset management operations:

The Company's financial fund management operating segment increased its assets under management at March 31, 2014 to $14.6 billion, an increase of $1.6 billion, or 12%, from March 31, 2013.

CORPORATE/OTHER:

Corporate Credit Facility Modification

  • In April 2014, the Company increased its revolving credit facility with TD Bank, N.A. to $11.5 million and extended the maturity from December 2014 to December 2017.

Dividends

  • The Company's Board of Directors authorized a cash dividend of $0.05 per share on the Company's common stock and payment on April 30, 2014 to holders of record as of the close of business on April 16, 2014.
  • RSO's Board of Directors declared a cash dividend of $0.20 per common share for its quarter ended March 31, 2014.

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, its joint ventures, and for outside investors in the real estate, financial fund management and commercial finance sectors.

For more information, please visit our website at www.resourceamerica.com or contact investor relations at [email protected].

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, or SEC. 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 SEC. 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 registration statement relating to securities offered by Opportunity REIT II was declared effective by the SEC on February 6, 2014. A written prospectus relating to these securities may be obtained by contacting Resource Securities, Inc., 1845 Walnut Street, 18th 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, consolidating statements of operations and reconciliation of GAAP net income attributable to common shareholders to adjusted net income attributable to common shareholders.


                           RESOURCE AMERICA, INC
                        CONSOLIDATED BALANCE SHEETS
                     (in thousands, except share data)
                                (unaudited)

                                                   March 31,   December 31,
                                                      2014          2013
                                                 ------------  ------------
                                                  (unaudited)
ASSETS
  Cash                                           $     17,210  $     19,853
  Restricted cash                                         627           571
  Receivables                                             572           541
  Loans and receivables from managed entities
   and related parties, net                            34,506        30,923
  Investments in real estate, net                      17,167        17,696
  Investment securities, at fair value                  9,100         7,839
  Investments in unconsolidated loan manager           38,181        37,821
  Investments in unconsolidated entities               13,609        14,342
  Assets of consolidated variable interest
   entity ("VIE") - RSO:
    Cash and cash equivalents (including
     restricted cash)                                 282,638       325,579
    Investments, at fair value                        243,538       226,764
    Loans                                           1,618,060     1,397,458
    Investments in real estate and
     unconsolidated entities                          117,280       124,193
    Other assets                                       79,819        76,467
                                                 ------------  ------------
      Total assets of consolidated VIE - RSO        2,341,335     2,150,461
                                                 ------------  ------------

  Property and equipment, net                           5,566         5,844
  Deferred tax assets, net                             26,587        27,769
  Other assets                                          5,431         4,791
                                                 ------------  ------------
    Total assets                                 $  2,509,891  $  2,318,451
                                                 ============  ============

LIABILITIES AND EQUITY
Liabilities:
  Accrued expenses and other liabilities         $     22,698  $     22,134
  Payables to managed entities and related
   parties                                              3,112         3,110
  Borrowings                                           20,501        20,619
  Liabilities of consolidated VIE - RSO:
    Borrowings                                      1,502,266     1,320,015
    Other liabilities                                  56,934        55,247
                                                 ------------  ------------
    Total liabilities of consolidated VIE - RSO     1,559,200     1,375,262
                                                 ------------  ------------
      Total liabilities                             1,605,511     1,421,125
                                                 ------------  ------------

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;30,807,746 and 30,378,339
   shares issued (including nonvested restricted
   stock of 689,904 and 400,194), respectively            301           299
  Additional paid-in capital                          288,958       288,555
  Accumulated deficit                                 (26,023)      (26,025)
  Treasury stock, at cost; 10,440,319 and
   10,434,436 shares, respectively                   (107,905)     (107,874)
  Accumulated other comprehensive loss                 (1,164)       (1,231)
                                                 ------------  ------------
    Total stockholders' equity                        154,167       153,724
  Noncontrolling interests                                221           238
  Noncontrolling interests attributable to RSO        749,992       743,364
                                                 ------------  ------------
    Total equity                                      904,380       897,326
                                                 ------------  ------------
                                                 $  2,509,891  $  2,318,451
                                                 ============  ============



                           RESOURCE AMERICA, INC.
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share data)
                                (unaudited)

                                                        Three Months Ended
                                                             March 31,
                                                       --------------------
                                                          2014       2013
                                                       ---------  ---------
REVENUES:
Real estate (includes revenues of $2,683 and $2,288
 related to RSO)                                       $  13,275  $  11,340
Financial fund management (includes revenues of $207
 and $381 related to RSO)                                  7,075      4,287
Commercial finance (includes no revenue related to
 RSO)                                                        (99)      (178)
                                                       ---------  ---------
                                                          20,251     15,449
Revenues from consolidated VIE - RSO                      31,931     30,578
Elimination of consolidated VIE revenues attributed to
 operating segments                                       (2,880)    (2,700)
                                                       ---------  ---------
  Total revenues                                          49,302     43,327
                                                       ---------  ---------
COSTS AND EXPENSES:
Real estate                                                8,875      9,440
Financial fund management                                  4,389      2,528
Commercial finance                                           103         45
General and administrative                                 3,154      2,153
Provision for credit losses                                1,208        338
Depreciation and amortization                                451        416
                                                       ---------  ---------
                                                          18,180     14,920
Expenses from consolidated VIE - RSO                      13,124     16,188
Elimination of consolidated VIE expenses attributed to
 operating segments                                       (2,819)    (2,654)
                                                       ---------  ---------
  Total expenses                                          28,485     28,454
                                                       ---------  ---------
OPERATING INCOME                                          20,817     14,873
                                                       ---------  ---------

OTHER INCOME (EXPENSE):
Other-than-temporary impairment on investments                --       (214)
Interest expense                                            (483)      (494)
Other income (expense), net                                  165        189
                                                       ---------  ---------
                                                            (318)      (519)
Other expense, net, from consolidated VIE - RSO           (1,331)        --
Elimination of consolidated VIE other income
 attributed to operating segments                             18         31
                                                       ---------  ---------
                                                          (1,631)      (488)
                                                       ---------  ---------
Income from continuing operations before taxes            19,186     14,385
Income tax provision (benefit)                             1,069       (146)
Income tax provision - RSO                                    16      1,762
                                                       ---------  ---------
Income from continuing operations                         18,101     12,769
Loss from discontinued operations, net of tax                 --         (2)
                                                       ---------  ---------
Net income                                                18,101     12,767
Net loss attributable to noncontrolling interests             40         43
Net income attributable to noncontrolling interests of
 consolidated VIE - RSO                                  (17,151)   (12,314)
                                                       ---------  ---------
Net income attributable to common shareholders         $     990  $     496
                                                       =========  =========

Amounts attributable to common shareholders:
Income from continuing operations                      $     990  $     498
Discontinued operations                                       --         (2)
                                                       ---------  ---------
Net income                                             $     990  $     496
                                                       =========  =========

Basic earnings per share:
Continuing operations                                  $    0.05  $    0.02
Discontinued operations                                       --         --
                                                       ---------  ---------
Net income                                             $    0.05  $    0.02
                                                       =========  =========
Weighted average shares outstanding                       20,252     20,124
                                                       =========  =========

Diluted earnings per share:
Continuing operations                                  $    0.04  $    0.02
Discontinued operations                                       --         --
                                                       ---------  ---------
Net income                                             $    0.04  $    0.02
                                                       =========  =========
Weighted average shares outstanding                       22,027     21,815
                                                       =========  =========



                           RESOURCE AMERICA, INC.
                   CONSOLIDATING STATEMENTS OF OPERATIONS
                               (in thousands)
                                 (unaudited)

The following table presents the consolidating statement of operations for the first quarter ended March 31, 2014:


                              RAI        RSO     Eliminations  Consolidated
                           ---------  ---------  ------------  ------------
REVENUES:
Real estate                $  13,275  $      --  $         --  $     13,275
Financial fund management      7,075         --            --         7,075
Commercial finance               (99)        --            --           (99)
                           ---------  ---------  ------------  ------------
                              20,251         --            --        20,251
                           ---------  ---------  ------------  ------------
Revenues from consolidated
 VIE - RSO                        --     31,931            --        31,931
Elimination of
 consolidated VIE revenues
 attributed to operating
 segments                         --         --        (2,880)       (2,880)
                           ---------  ---------  ------------  ------------
Total revenues                20,251     31,931        (2,880)       49,302

COSTS AND EXPENSES:
Real estate                    8,875         --            --         8,875
Financial fund management      4,389         --            --         4,389
Commercial finance               103         --            --           103
General and administrative     3,154         --            --         3,154
Provision for credit
 losses                        1,208         --            --         1,208
Depreciation and
 amortization                    451         --            --           451
                           ---------  ---------  ------------  ------------
                              18,180         --            --        18,180
Expenses from consolidated
 VIE - RSO                        --     13,140           (16)       13,124
Elimination of
 consolidated VIE expenses
 attributed to operating
 segments                         --         --        (2,819)       (2,819)
                           ---------  ---------  ------------  ------------
Total expenses                18,180     13,140        (2,835)       28,485
                           ---------  ---------  ------------  ------------
OPERATING INCOME               2,071     18,791           (45)       20,817
                           ---------  ---------  ------------  ------------

OTHER INCOME (EXPENSE):
Interest expense                (483)        --            --          (483)
Other income, net                737         --          (572)          165
Other expense, net, from
 consolidated VIE - RSO           --     (1,331)           --        (1,331)
Elimination of
 consolidated VIE other
 income, net                      --         --            18            18
                           ---------  ---------  ------------  ------------
                                 254     (1,331)         (554)       (1,631)
                           ---------  ---------  ------------  ------------
Income from continuing
 operations before taxes       2,325     17,460          (599)       19,186
Income tax provision           1,069         --            16         1,085
                           ---------  ---------  ------------  ------------
Net income                     1,256     17,460          (615)       18,101
Net loss attributable to
 noncontrolling interests         40         --            --            40
Net income attributable to
 noncontrolling interests
 - RSO                            --     (2,344)      (14,807)      (17,151)
                           ---------  ---------  ------------  ------------
Net income attributable to
 common shareholders       $   1,296  $  15,116  $    (15,422) $        990
                           =========  =========  ============  ============



                           RESOURCE AMERICA, INC.
                   CONSOLIDATING STATEMENTS OF OPERATIONS
                               (in thousands)
                                 (unaudited)

The following table presents the consolidating statement of operations for the first quarter ended March 31, 2013:


                              RAI        RSO     Eliminations  Consolidated
                           ---------  ---------  ------------  ------------
REVENUES:
Real estate                $  11,340  $      --  $         --  $     11,340
Financial fund management      4,287         --            --         4,287
Commercial finance              (178)        --            --          (178)
                           ---------  ---------  ------------  ------------
                              15,449         --            --        15,449
Revenues from consolidated
 VIE - RSO                        --     30,578            --        30,578
Elimination of
 consolidated VIE revenues
 attributed to operating
 segments                         --         --        (2,700)       (2,700)
                           ---------  ---------  ------------  ------------
Total revenues                15,449     30,578        (2,700)       43,327
                           ---------  ---------  ------------  ------------

COSTS AND EXPENSES:
Real estate                    9,440         --            --         9,440
Financial fund management      2,528         --            --         2,528
Commercial finance                45         --            --            45
General and administrative     2,153         --            --         2,153
Provision for credit
 losses                          338         --            --           338
Depreciation and
 amortization                    416         --            --           416
                           ---------  ---------  ------------  ------------
                              14,920         --            --        14,920
Expenses from consolidated
 VIE - RSO                        --     17,950        (1,762)       16,188
Elimination of
 consolidated VIE expenses
 attributed to operating
 segments                         --         --        (2,654)       (2,654)
                           ---------  ---------  ------------  ------------
Total expenses                14,920     17,950        (4,416)       28,454
                           ---------  ---------  ------------  ------------
OPERATING INCOME                 529     12,628         1,716        14,873
                           ---------  ---------  ------------  ------------

OTHER INCOME (EXPENSE):
Other-than-temporary
 impairment on investments      (214)        --            --          (214)
Interest expense                (494)        --            --          (494)
Other income, net                745         --          (556)          189
Elimination of
 consolidated VIE other
 income, net                      --         --            31            31
                           ---------  ---------  ------------  ------------
                                  37         --          (525)         (488)
                           ---------  ---------  ------------  ------------
Income from continuing
 operations before taxes         566     12,628         1,191        14,385
Income tax (benefit)
 provision                      (146)        --         1,762         1,616
                           ---------  ---------  ------------  ------------
Income from continuing
 operations                      712     12,628          (571)       12,769
Loss from discontinued
 operations, net of tax           (2)        --            --            (2)
                           ---------  ---------  ------------  ------------
Net income                       710     12,628          (571)       12,767
Net loss attributable to
 noncontrolling interests
 - RAI                            43         --            --            43
Net income attributable to
 noncontrolling interests
 - RSO                            --     (1,102)      (11,212)      (12,314)
                           ---------  ---------  ------------  ------------
Net income attributable to
 common shareholders       $     753  $  11,526  $    (11,783) $        496
                           =========  =========  ============  ============

Amounts attributable to
 common shareholders:
Income from continuing
 operations                $     755  $  11,526  $    (11,783) $        498
Discontinued operations           (2)        --            --            (2)
                           ---------  ---------  ------------  ------------
Net income                 $     753  $  11,526  $    (11,783) $        496
                           =========  =========  ============  ============


Schedule I


  RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS TO
         ADJUSTED NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS (1)
                    (in thousands, except per share data)
                                 (unaudited)

                                                      Three Months Ended
                                                          March 31,
                                                     -------------------
                                                        2014      2013
                                                     --------- ---------
Net income attributable to common shareholders -
 GAAP                                                $     990 $     496

Adjustments, net of tax:
Income, net of eliminations, attributable to
 consolidation of RSO                                      306       257
Loss attributable to commercial finance                    863     1,873 (2)
Deferred tax provision (benefit)                           161      (225)
                                                     --------- ---------
Adjusted net income attributable to common
 shareholders                                        $   2,320 $   2,401
                                                     ========= =========

Weighted average diluted shares outstanding             22,027    21,815
                                                     ========= =========

Adjusted net income attributable to common
 shareholders per common per share-diluted           $    0.11 $    0.11
                                                     ========= =========

-----

(1)  Adjusted net income attributable to common shareholders presents the
     Company's operations prior to the consolidation of RSO and without the
     effect of its commercial finance operations and deferred tax provision
     (benefit). The Company believes that this provides useful information
     to investors since it allows investors to evaluate the Company's
     progress, excluding the impact of the RSO consolidation, in both its
     real estate and financial fund management segments for the three months
     ended March 31, 2014 and 2013 separately from its commercial finance
     operations and deferred tax provision (benefit). Adjusted net income
     attributable to common shareholders should not be considered as an
     alternative to net income attributable to common shareholders (computed
     in accordance with GAAP). Instead, adjusted net income attributable to
     common shareholders should be reviewed in connection with net income
     attributable to common shareholders in the Company's consolidated
     financial statements to help analyze how the Company's business is
     performing.
(2)  Utilizes a full year continuing income tax rate of 39%.


Contact:
Thomas C. Elliott
Chief Financial Officer
Resource America, Inc.
One Crescent Drive, Suite 203
Philadelphia, PA 19112
(215) 546-5005
(215) 640-6357 (fax)


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