Resource Capital Corp.
JMP Conference Company Presentation
May 10, 2010
1
Safe Harbor
This presentation contains forward-looking statements that involve risks and uncertainties. These forward-looking statements are not historical facts but rather are based on
current beliefs, assumptions and expectations. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are
known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our
forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this presentation, and we
undertake no obligation to update these forward-looking statements in the future. We use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” and
variations of these words and similar expressions to identify forward-looking statements. Forward-looking statements are subject to various risks and uncertainties that could
cause actual results to vary from our forward-looking statements, including:
current beliefs, assumptions and expectations. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are
known to us or are within our control. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our
forward-looking statements. You should not place undue reliance on these forward-looking statements, which reflect our view only as of the date of this presentation, and we
undertake no obligation to update these forward-looking statements in the future. We use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” and
variations of these words and similar expressions to identify forward-looking statements. Forward-looking statements are subject to various risks and uncertainties that could
cause actual results to vary from our forward-looking statements, including:
§ changes in our industry, interest rates, the debt securities markets, real estate markets or the general economy;
§ increased rates of default and/or decreased recovery rates on our investments;
§ the performance and financial condition of our borrowers;
§ the cost and availability of our financings, which depends in part on our asset quality, the nature of our relationships with our lenders and other capital providers, our
business prospects and outlook and general market conditions;
business prospects and outlook and general market conditions;
§ the availability and attractiveness of terms of additional debt repurchases;
§ availability, terms and deployment of short-term and long-term capital;
§ availability of, and ability to retain, qualified personnel;
§ changes in governmental regulations, tax rates and similar matters;
§ changes in our business strategy;
§ availability of investment opportunities in commercial real estate-related and commercial finance assets;
§ the resolution of our non-performing and sub-performing assets;
§ our ability to comply with financial covenants in our debt instruments;
§ the degree and nature of our competition;
§ the adequacy of our cash reserves and working capital;
§ the timing of cash flows, if any, from our investments;
§ unanticipated increases in financial and other costs, including a rise in interest rates;
§ our ability to maintain compliance with over-collateralization and interest coverage tests in our CDOs;
§ our dependence on our Manager and ability to find a suitable replacement in a timely manner, or at all, if we or our Manager were to terminate the management
agreement;
agreement;
§ legislative and regulatory changes (including changes to laws governing the taxation of REITs or the exemptions from registration as an investment company);
§ environmental and/or safety requirements;
§ our ability to satisfy complex rules in order for us to qualify as a REIT, for federal income tax purposes and qualify for our exemption under the Investment Company
Act of 1940, as amended and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;
Act of 1940, as amended and our ability and the ability of our subsidiaries to operate effectively within the limitations imposed by these rules;
§ the continuing threat of terrorist attacks on the national, regional and total economies; and
§ other factors discussed under Item IA. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2009 and those factors that may be
contained in any filing we make with the Securities Exchange Commission.
contained in any filing we make with the Securities Exchange Commission.
We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required
by law. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur and actual results, performance or
achievement could differ materially from that anticipated or implied in the forward-looking statements.
by law. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this presentation might not occur and actual results, performance or
achievement could differ materially from that anticipated or implied in the forward-looking statements.
2
Business Overview
Ø Exchange / Ticker NYSE : “RSO”
Ø 144A Offering March 2005 $214.8 million
Ø Market Capitalization1 $309.3 million
Ø Trust preferred - May / September 2006 $50.0 million
Ø Investment Portfolio as of 3/31/2010 $1.8 billion
Ø Formed in 2005 - have paid 23 consecutive quarters of a cash dividend of $6.97/share
Ø Anticipated Dividend guidance for 2010 $1.00/share
§ Externally managed by a subsidiary of Resource America, Inc. (NASDAQ: “REXI”)
(1) Reflects Share price as of May 3, 2010 and total shares outstanding as of the same date
Resource Capital Corp.
3
Ø A commercial finance business structured as a REIT with substantial focus on
commercial mortgage investments as well as commercial loans
commercial mortgage investments as well as commercial loans
Ø Provides customized financing solutions
• Whole loans
• B notes
• Mezzanine loans
• Bank loans
• Small business loans and leases
Ø Committed and experienced sponsor and management team
•12.6% ownership by management team and affiliates
•Long track record in creating public stockholder value
Ø Substantially match-funded through 5 structured credit vehicles
Ø Predominantly invests in senior secured loans in real estate and leveraged
corporate loans
corporate loans
Ø RSO has paid off all short-term debt
4
Ø All RSO Real Estate Portfolios and Corporate Lending Portfolios continue to pay all
classes according to their terms and are in compliance with OC and IC tests as of
3/31/2010
classes according to their terms and are in compliance with OC and IC tests as of
3/31/2010
– 2 real estate portfolios generated cash flow of $33.7 million in 2009
– 3 corporate loan portfolios generated cash flow of $20.6 million in 2009
Ø Solid Origination Capabilities
– Dedicated team of 12 real estate professionals bolstered by 35 additional professionals at
Resource Real Estate
Resource Real Estate
– Diversified corporate loan team of 18 professionals bolstered by 15 additional professionals
at Resource America
at Resource America
Well Positioned
Strong Management and Large Team that
Can Deliver Solutions
Can Deliver Solutions
5
Resource Capital
Corp.
Corp.
CORPORATE LENDING
TEAM
TEAM
REAL ESTATE TEAM
– Dedicated team of 12 professionals
bolstered by 35 additional
professionals at Resource Real
Estate
bolstered by 35 additional
professionals at Resource Real
Estate
– Management team has worked
together for over 10 years
together for over 10 years
– The team is experienced in investing
in periods of distress
in periods of distress
– The team has 18 professionals
bolstered by 15 additional professionals
at Resource America
bolstered by 15 additional professionals
at Resource America
– We believe that our corporate lending
team possesses one of the top
performing portfolios relative to similar
sized competitors
team possesses one of the top
performing portfolios relative to similar
sized competitors
– Have a team in the U.S. and in Europe
with their ear to the ground to capitalize
on potential investment opportunities
with their ear to the ground to capitalize
on potential investment opportunities
6
Jonathan Z. Cohen
President & CEO
Steven J. Kessler
Chairman, Resource
Capital Corp.
Capital Corp.
Joan Sapinsley
Managing Director Debt
Origination
Origination
10 Additional Professionals Dedicated to
Commercial Real Estate Lending
Commercial Real Estate Lending
35 Additional Professionals Dedicated
to Commercial Real Estate
Property Acquisitions and Asset Management
to Commercial Real Estate
Property Acquisitions and Asset Management
David Bloom
President, Resource Real
Estate
President, Resource Real
Estate
David Bryant
CFO, Resource Capital
Corp.
CFO, Resource Capital
Corp.
Kyle Geoghegan
Managing Director Debt
Origination
Managing Director Debt
Origination
Darryl Myrose
Managing Director Debt
Origination
Managing Director Debt
Origination
Alan F. Feldman
CEO, Resource Real
Estate
Estate
Jeffrey Brotman
Executive Vice President,
Resource America
Resource America
Yuriko Iwai
Vice President, Debt
Origination
Vice President, Debt
Origination
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§ Resource Real Estate has a history dating back 1991 and has a track record of investing through market
cycles with investments in major urban areas throughout the United States
cycles with investments in major urban areas throughout the United States
§ Resource Real Estate has sourced and invested in over $5 billion of real estate opportunities
– Deep knowledge of major US markets and experience investing across the capital structure
§ Relationships with borrowers, middle-market contacts and high-end brokers
– Ability to customize solutions solidifies borrower relationships
– Established relationships have brought repeat and referral business to the platform
Established Real Estate History
Resource Real Estate Investments
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Ø Real estate whole loans originated and underwritten by Manager
– Maximizes security and ability to control the asset
– Direct access to borrower
– Provides unique insight into ongoing credit quality
Ø Assets remain on RSO balance sheet
– Not dependent on secondary loan trading market
Direct Origination Differentiates
Dedicated and Experienced Bank Loan Team
in The U.S. and Europe
in The U.S. and Europe
9
Jonathan Z. Cohen
President & CEO
Gretchen Bergstresser
President, Senior PM
(U.S)
(U.S)
Fred Colen
Senior Analyst
6 Additional Professionals Dedicated to
The Bank Loan Team
The Bank Loan Team
Oscar Anderson
PM, Fund COO
PM, Fund COO
Vincent Ingato
PM
Phillip Raciti
Senior Analyst/Trader
Senior Analyst/Trader
Michele Dragonetti
Senior Analyst
Andrew Littell
Managing Director
Christopher Allen
Chief Operating Officer
Eric Ballantine
Senior Analyst
Senior Analyst
David Stanbrook
Senior Analyst
Rob Reynolds
Senior PM (Europe)
Justin Sughrue
Senior Analyst
10
Bank Loan Portfolio at 3/31/2010
Ø $869.0 million carrying value ($906.0 million amortized cost net of $11.9 million allowance
and $25.1 million unrealized MTM on loans and securities)
and $25.1 million unrealized MTM on loans and securities)
Ø Weighted average interest rate of bank loan portfolio LIBOR + 2.70% and weighted average
cost LIBOR + 0.47%, resulting in a net interest spread of 2.23%
cost LIBOR + 0.47%, resulting in a net interest spread of 2.23%
Ø Maturity dates ranging from March 2011 to August 2022
Ø Portfolio is diversified by collateral type and geography
Ø Reinvestment periods for Apidos I, Apidos III and Apidos Cinco continue through July
2011, June 2012 and May 2014, respectively
2011, June 2012 and May 2014, respectively
11
Benefits From Repurchase of Real Estate and
Corporate Loan Debt
Corporate Loan Debt
Recent Repurchases
Ø In FY 2010, RSO repurchased $46.9 million of its corporate notes for $29.7 million
– 37% discount to par
– $17.1 million gain
– Return of 58% on repurchase price(1)
Benefits
§ Reduces RSO liabilities and deleverages balance sheet
§ Increase GAAP and economic book value
(1) Calculated by dividing the $17.1 million realized gain by the repurchase price of $29.7 million
12
Summary Balance Sheet
Note: The Company has not adopted FAS 159 regarding its non-trading financial assets and liabilities.
($ in 000's) | 3/31/2010 Balance |
Cash and equivalents | $ 27,650 |
Restricted cash | 82,176 |
Investments | 82,883 |
Loans pledged as collateral | 1,555,593 |
Loans held for sale | 2,376 |
Other assets | 34,467 |
Total Assets | $ 1,785,145 |
CRE Debt | 567,293 |
Bank Loan Debt | 898,489 |
TRUPS | 51,548 |
Derivatives at Fair Value | 13,267 |
Other Liabilities | 14,901 |
Total Liabilities | $ 1,545,498 |
Equity | 239,647 |
13
Liquidity at 3/31/2010
Description | Amount (in Millions) |
Unrestricted cash balances | $27.6 |
Restricted cash available for investment 73.3 | |
Restricted cash in margin call and other accounts 8.9 | |
Subtotal restricted cash | 82.2 |
Total cash as of March 31, 2010 | $109.8 |
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Economic Book Value at 3/31/2010
* In thousands except share data
Description | As of 3.31.10 |
Stockholders' equity - GAAP | 239,647 |
Add: | |
Unrealized losses - CMBS Portfolio | 46,869 |
Unrealized losses recognized in excess of value at risk - Interest Rate Swaps | 13,277 |
Unrealized net accretion of bank loans purchased at a discount | 32,845 |
Economic Book Value | 332,638 |
Shares outstanding as of March 31, 2010 | 40,079,753 |
Economic Book Value Per Share | $ 8.30 |
15
§ Balance sheet repositioned for economic climate
§ Portfolio that continues to perform through tough market conditions
§ Integrated commercial finance platform focused on origination of commercial mortgage
investments
investments
§ Experienced management team with a long track record in creating public stockholder value
RSO Has Consistently Delivered on Plan Since Inception
Why Resource Capital?
Resource Capital Corp.
May 2010