Resource Capital Corp. ( RSO)

Q2 2011 Earnings Call

August 2, 2011 8:30 am ET


Jonathan Cohen – President and CEO

Purvi Kamdar – Director, IR

David Bloom – SVP, Real Estate Lending

David Bryant – CFO

Christopher Allen – SVP, Commercial Real Estate


Steve Delaney – JMP Securities

Lee Cooperman – Omega Advisors

Jack [ph] – FBR



Good day ladies and gentlemen and welcome to the second quarter 2011 Resource Capital Corporation Earnings Conference Call. My name is Janeida [ph], and I will be your operator for today. (Operator instructions) I would now like to turn the conference over your host for today, Mr. Jonathan Cohen, President and CEO. Please proceed.

Jonathan Cohen

Thank you for joining the Resource Capital Corp conference call for the second quarter ended June 30, 2011. I am Jonathan Cohen, President and CEO of Resource Capital Corp. Before I begin I would like to ask Purvi Kamdar, our Director of Investor Relations to read the safe harbor statement.

Purvi Kamdar

Thank you Jonathan. When used in this conference call, the words believes, anticipates, expects and similar expressions are intended to identify forward-looking statements. Although the company believes that these forward-looking statements are based on reasonable assumptions such statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from these contained in the forward-looking statements. These risks and uncertainties are discussed in the company’s report filed with the SEC including its reports on forms 8-K, 10-Q and 10-K, and in particular item 1-A on the form 10-K report under the title Risk Factors. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. And with that I’ll turn it back to Jonathan.

Jonathan Cohen

Thank you Purvi. For a few highlights, we had adjusted net income of $18 million or $0.25 per share diluted and $33.7 million or $0.51 per share diluted for the for the three and six months ended June 30, 2011 respectively, as compared to $10.9 million or $0.24 per share diluted and $21.1 million or $0.51 per share diluted for the three and six months ended June 30, 2010 respectively, which is an increase of $7.1 million or 65% for the quarter and $12.6 million or 60% for the six months.

We announced a dividend of $0.25 per common share for the quarter or $18.6 million in aggregate, which was paid on July 27, 2011 to stockholders of record on June 30, 2011.

With those highlights out of the way I will now introduce my colleagues. With me today are David Blume, Senior Vice President in charge of Real Estate; David Bryant, our Chief Financial Officer; Christopher Allen, Senior Vice President of our Leverage Loan Business; and Purvi Kamdar, our Director of Investor Relations.

The second quarter of 2011 saw consistency for resource capital, but it was also a very active period in terms of moving forward with our plans. We continue to build our investment portfolio while paring some older and riskier real estate positions. In fact, we were originated more than $61 million of real estate whole loans for the quarter. This is self originated by our team, and are in the process of closing even more after June 30, a tremendous effort.

We saw an increase in our net interest income of over $2.7 million or 17% for the quarter ending June 30 versus a year ago, and $7.2 million or 25% for the six months ended June 30, 2011 versus the first six months of 2010. We sold some positions, and received over $50 million of cash from payments in sales, we impaired our last low rated 2007 fixed CMBS bond.

We converted two real estate positions to equity ownership, and after the quarter ended bought another real estate property very opportunistically, a very active quarter and one that is positioning us to attain our goals. While credit generally continued to improve, we ran certain impairments through the balance sheet, including as I mentioned our last 2007 CMBS fixed rate bond of almost $5 million and real estate loans which we converted to equity.

We also had a very unique loan provision on the leverage loan side of the book for two loans. Loan losses in general decreased significantly from our prior year, but were still elevated due to our one-time items. We believe the credit environment is still improving for real estate, and remains extremely benign on the corporate side, but we know with caution the weaker macro situation.

These activities mark good progress for our company. We are focusing on making the high-quality present and future investments, so while getting rid of some older subordinate positions; we have been investing in new senior secured real estate opportunities. Although most of these new loans did not close in the quarter, we now have closed approximately $100 million since restarting our commercial real estate lending program post financial crisis.

Our pipeline is substantial as David Bloom will discuss. In addition, we started ramping our newest CLO of commercial syndicated bank loans, which we expect to close within a short period of time. We continue to build our lead team venture, and expect it to turn a profit as a company within the next few quarters.

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