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July 26, 2010
Share ThisResource Capital Corp. (RSO), a real estate investment trust (REIT) that invests in commercial real estate debt and other commercial finance assets, has recently debriefed investors about details of its second quarter fiscal 2010 investments.
During the quarter, the company purchased $36.1 million (principal sum) worth of notes at a 45.5% discount, resulting in a gain of approximately $16.4 million. Subsequent to the quarter end, Resource Capital also purchased $20.0 million (principal sum) worth of notes at a 31.3% discount, resulting in a gain of approximately $6.3 million.
The company bought CMBS (commercial mortgage backed securities) worth $7.5 million (principal sum) at a 27.6% discount. Subsequent to the end of fiscal 2010 second quarter, Resource Capital purchased additional CMBS worth $10.0 million (principal sum) at a 20.0% discount. The combined net discount of $4.1 million provides a weighted-average annual yield of approximately 7.2%.
Resource Capital is currently in a defensive mode as it tries to weather the turmoil in the credit markets and the downturn in commercial real estate. During the quarter, the company sold a joint-venture stake in real estate for $1.4 million, realizing a profit of $753,000. In addition, Resource Capital committed over $20 million of capital to fund its first mortgage commercial real estate loans.
The investment strategy of Resource Capital concentrates on commercial real estate assets and commercial finance assets. Commercial real estate assets include mortgage loans, mezzanine debt, CMBS and A-Notes. Commercial finance assets include senior corporate loans, asset-backed securities, equipment leases, CDOs (collateralized debt obligations) and private equity investments.
Resource Capital earns the spread between revenues from assets and the cost to finance those assets. The company is externally managed by Resource Capital Manager Inc., an indirect wholly-owned subsidiary of Resource America Inc. (REXI), an asset management company involved in financial fund management, real estate and commercial finance.
We currently have a Neutral rating on Resource Capital with a Zacks #3 Rank, which translates into a short-term “Hold" recommendation.
Read the full analyst report on "RSO"
Read the full analyst report on "REXI"
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