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Resource Capital Corp. (NYSE: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.

The financing markets are back and we’re actively pursuing opportunities to grow our net investment income. It is nice to know that banks and others continue to want to grow their business with us. We are nearing completion of new facilities, and are excited by the prospects of new capital to fuel our growth.

We are well capitalized, have access to all types of liquidity, and are prepared to grow. With these results and with our new investments, I reiterate as I have before many times that we are dedicated to a $1 cash dividend for 2011. the second quarter of 2011 was marked by many positive events, including earning $0.25 of adjusted net income, with over $235 million of cash on hand to invest, and making new investments of over $206 million during the quarter, and $387 million for the six months into commercial real estate loans, syndicated bank loans and commercial finance, all areas where we expect to achieve pre-tax returns on 12% to 25% on new dollars invested.

We believe that our investment results will improve dramatically as we get more fully invested. We are now only 3.4 times levered, and need to invest the $235 million of cash available to us. Stay tuned for the next 3 to 6 months. We are confident that this reshuffling, selling risky legacy debt and originating higher yielding new senior loans has resulted in a much improved company, more stable and able to seize more upside.

We are proud that we are able to do this while maintaining meaningful cash return to our shareholders. Going forward, we will focus on expanding our real estate lending operations, finding new investments in syndicated bank loans, and finally building franchise value in our commercial finance business.

Now I will ask Dave Bloom to review our real estate activities. Dave.

David Bloom

Thanks very much Jonathan. Resource Capital Corp’s commercial mortgage portfolio has a current committed balance of approximately $706 million in a granular pool of 46 individual loans. On our call last quarter, the portfolio had a balance of 664 million, however, as Jon mentioned, in the second quarter we sold two legacy positions, and received two pay-offs totaling $52 million, which reduced the size of the portfolio $612 million.

There has been a net increase of $94 million in the size of our portfolio since our last call, and with our full forward pipeline, we see the size of our portfolio continuing to grow appreciably.

The collateral base underlying the portfolio continues to be spread across the major asset categories in geographically diverse markets with a portfolio breakdown of 37% multifamily, 11% office, 27% hotel, 11% retail and 14% other such as light industrial and self-storage. Our portfolio of commercial mortgage positions is in components as follows, 80% whole loans, 14% mezzanine loans, and 6% B-notes. Still of note in our portfolio composition is the significant increase in the percentage of our self originated whole loans, and the corresponding decrease in our subordinated debt positions.

We continue to benefit from a 15% year-over-year increase in our self originated whole loan positions from 65% in August of 2010 to 80% we have in portfolio today. This mix shift is the result of our origination of new whole loans and the sale of legacy subordinate debt positions. Since we have been actively originating new loans again, which began in the fourth quarter of 2010, we have originated and closed, or in the process of closing a total of 12 new loans with an aggregate balance of approximately $139 million.

We have steadily ramped up our loan production and our originations by quarter breakdown as follows, two loans totaling approximately $18 million in the fourth quarter of 2010, two loans totaling approximately $22 million in the first quarter of 2011, four loans totaling approximately $52 million in the second quarter of 2011, and four loans totaling approximately $47 million so far in the third quarter of 2011.

We continue to see both sales and financing transaction volumes increase, and liquidity returning to the market, and we continue to experience payoffs in our portfolio. We currently have a full forward pipeline of approximately $200 million of new transactions, and will continue to convert select opportunities to loans for our portfolio.

From a credit perspective we note improving metrics across the portfolio with the majority of our properties securing our loans having improved cash flow on a year-over-year basis, and continuing to trend in an upward direction. We are seeing borrowers plans for value creation being realized across the multi-family properties with rents increasing, occupancy in average daily rate numbers at hotels are raising, new leases being signed in office buildings, and so on. I am pleased to report that our commercial mortgage portfolio continues to be current with no defaults.

The real estate debt markets has definitely returned and we continue to observe a significant increase in financing activity from banks, insurance companies and from reconstituted CMBS programs. That said, in recent weeks we have seen some instability in the CMBS market and a general pull-back by these long-term fixed rate lenders as the debt capital markets continue to recalibrate. The retreat of CMBS lenders is certainly a positive for the RSO lending platform, as we originate loans for our own balance sheets, and are not dependent on CMBS for secondary loan trading market. There will be many more borrowers seeking alternatives to CMBS in the near to intermediate term.

RSO benefits from our focus and expertise in directly originating floating-rate loans one likely transitional properties between $10 million and $25 million. Even though there are a large number of capital sources in the market to make new loans, there are relatively few market participants focusing on floating rate loans for the middle markets. RSO will continue to benefit from loan repayments or select additional loan sales as we invest well structured higher yielding assets into our long term locked in financing vehicles.

In addition to our whole loan origination activities, we are also seeking to take advantage of good opportunities to own properties. In the second quarter, we converted two properties with an aggregate loan balance of approximately $35 million to equity. These properties are solid long-term holds with great potential for capital appreciation over time.

RSO is also directly buying real estate on an opportunistic basis, both alone and with institutional partners. In the second quarter, the RSO teamed with one of our institutional partners on a 90:10 basis to acquire a distressed note secured by a 494 unit apartment complex at a substantial discount. We will receive our 10% share of the profits, and are also entitled to a 25% promoted interest over a stated hurdle.

In another opportunistic purchase that closed just yesterday, we acquired a 504 unit multi family apartment complex for $18.6 million. In this instance, RSO has the [ph] loan and we will recognize all of the capital appreciation ourselves. This is a value add opportunity, and there will be additional equity added to the situation as plans to improve the property and measurably increase cash flow are realized. RSO will continue to look for real estate purchases that provide strong current cash flow characteristics, and the possibility of significant value creation and capital appreciation.

With that I’ll turn it back to Jonathan and rejoin you for Q&A at the end of the call.

Jonathan Cohen

Thanks Dave. Now I’d like to review our investment in commercial finance. In January we transformed our previous investment into a new one and now we own our interest through a joint venture we formed with LEAF Financial and Guggenheim Securities. This JV is going well and is building its balance sheet, its proprietary vendor finance programs and its staff. We have been encouraged by the results in building the vendor finance business and are committed to making LFC [ph] into an industry leader.

RSO preferred stock investment has a stated dividend rate of 10%, and earned $1.5 million in dividends during the six months ended June 30, 2011. Remember, we also have warrants to purchase 48% of the business at a nominal price. These warrants give us the upside we are looking for while the coupon gives us the ability to generate a nice current return.

As for our syndicated bank loan business I want to introduce Christopher Allen, our Senior Vice President of Leveraged Loans, who will walk us through our existing portfolio, and our recent purchase of the management piece of Churchill Pacific, which is now Resource Capital Asset Management, or RCAM. Chris.

Christopher Allen

(inaudible) and the Chief Operating Officer of Apidos Capital Management, and worked together with Gretchen Bergstresser, who is the senior portfolio manager.

Resource Capital has direct exposure to bank loans through three CLOs managed by Apidos, and it earns fees on additional bank loans through its ownership of Resource Capital Asset Management, formerly Churchill Pacific Asset Management.

Resource Capital’s three bank loan portfolios have a carrying value of $903.5 million and approximately $929.3 million [ph] in par value. Resource Capital Asset Management has additional assets under management of approximately $1.8 billion. For the most recent quarter, the three CLOs that the company owns produced interest income 23% higher than during the second quarter of 2010. Apidos CLOs have produced annualized equity returns of 24% since the inception for Resource Capital.

The current cash on cash returns based upon our original investment of $79.5 million is approximately 37%. The carrying value of our bank loan portfolio is approximately $61 million representing approximately $0.82 of book value per share so that the return on equity of our bank loan investments is approximately 53% with remaining upside to the gain from accretion from loans and securities that we purchased at a discount in the amount of nearly $22 million.

Overall, in my opinion, the portfolios remain in excellent condition, and very little has changed since last quarter. We remain very diversified across industries. The average position size is about 31 basis points or roughly $1 million. The highest concentrations are in healthcare, business services, chemicals and automotive. Included in the top ten holdings are issuers such as Community Health Systems, SunGard Data Systems, Cablevision and Flextronics. The average rating is between a B2 for Moody’s and a B+ from S&P; strong ratings for loans suitable for CLOs. There is very little triple CCC exposure of less than 5% across the portfolios, just over 2% of second liens and no corporate bonds. We just hold one loan with a par value of 362,000 that was in default at June 30, 2011.

In the current quarter, we took an additional 24,000 to reflect its lower market value. We increased our general reserve $1.7 million as a result of adding three new positions to those that are on our watch list due to near term restructuring concerns, for a total of seven positions totaling $11 million at par. Finally, we sold loans during the quarter resulting in losses of 317,000.

As of June 30, 2011 we had specific reserves of 136,000 and general reserves of 3.4 million as compared to specific reserves of 112,000 and general reserves of 1.7 million for the second quarter.

We continue to forecast a very benign outlook in corporate credit for the next two years.

There were no defaults into June or July, and according to S&P, on August 1, the lagging 12-month default rate for the S&P LSTA index of loans fell to a 42 month low of 77 basis points by principal amount, and 1.21% by issuer. If there are no defaults in August, the rate by principal amount will drop to 33 basis points.

Currently the Apidos last 12-month default rate is 3 basis points. All of our deals have increasing amounts of principal cushion versus last quarter and a year ago.

According to Citi Group’s Global Structured Strategy Report as of March this year, Apidos is 5 out of 48 US CLO managers for having the highest average cushion in its CLOs. During the downturn in March 2009, Apidos had the highest cushion according to the same research.

As we mentioned last quarter, Resource Capital Asset Management also is entitled to the fees earned from managing 5 bank loan portfolios. Since the deal closed in February of this year, we are on track to receive what we estimate to be approximately $33 million over the next several years, and our variance to forecast to date is roughly 50,000.

Going forward we believe that the trend of manager consolidation will continue and that Resource Capital will be a major beneficiary. We regularly review additional acquisition candidates.

The new issue CLO market is becoming much more attractive as well. For the first time in several quarters, secondary loan prices have declined in price, while liability spreads have remained tight. In June, Resource Capital formed Apidos CLO A [ph], and through a warehouse agreement with Citibank began warehousing loans. At June 30, there were no outstanding borrowings on the facility. At the end of July, Apidos had purchased 48 million in bank loans. The facility bears interest at a rate of 3 months LIBOR plus 1%.

Resource Capital intends to purchase the majority of the equity in Apidos CLO A upon closing of the CLO transaction in the fourth quarter of 2011, and we have received significant reserve enquiry from potential investors. With triple-A lending at attractive levels we should have the opportunity to earn pre-tax gross returns in the high teens or low 20s. We have deployed our efforts on behalf of Resource Capital with excellent results and look forward to continuing and expanding that success in the future. Please feel free to contact me if you would like more information on our bank loan activities. Thank you.

Jonathan Cohen

Thanks Chris. Now I will ask Dave Bryant, our CFO to walk us through the financials.

David Bryant

Thank you Jonathan. RSO’s board declared a cash dividend for the second quarter of $0.25 per common share, which approximates to our adjusted net income for the quarter.

Our estimated REIT taxable income for the second quarter of 2011 was $2.9 million or $0.04 per common share diluted. REIT taxable income in the second quarter was impacted by three tax deductions not included in GAAP earnings, namely losses from a real estate joint venture of $6.4 million, a capital loss carryover of 3.5 million utilized during the second quarter, and losses of 1.3 million on the bank loan portfolio.

Combined these 3 non-cash deductions of $11.2 million, each representing timing differences reduced REIT income by $0.16 per share without affecting our liquidity and/or ability to pay the $0.25 dividend, for what is now the seventh consecutive quarter.

We continue to pass all of the critical interest coverage and over collateralization tests in our two real estate CDOs and three bank loan CLOs through July of 2011. The over collateralization and interest coverage tests in each of our real estate CDOs was improved by our cancellation of several previously repurchased bonds on June 21, which added to our equity interest in these securitizations.

Each of these finances performed in generating stable cash flow to RSO in the second quarter. The real estate CDOs produced over $9.9 million and bank loan CLOs generated over $13.5 million of cash flow for the six months ended June 30.

Of note, as of July 29th we have in excess of $176 million in restricted cash, comprised of approximately $68 million and over $118 million in our bank loans and real estate deals respectively. This cash is available for reinvestment in our CLOs and CDOs to generate very attractive spreads over the cost of the associated debt and to support our investment in each structure.

Of our provisions for loan losses of $4.1 million, $2 million is related to bank loans, and $2.1 million is for real estate loans. In real estate loans, 1.4 million was recorded as a valuation adjustment for a property that we acquired by converting what had been a loan during the second quarter. $500,000 was added for a previously impaired whole loan and $100,000 came from the sale of the whole loan after quarter end. While we haven’t locked the converted loan to today’s estimated value of the real estate, we do not expect a loss for the ultimate disposition of that asset.

On the bank loan portfolio, We increased our reserves by $2 million of which $1.7 million was related to 2 positions with credit concerns, both of which are performing. We do not see the credit concerns in these two loans as a continuing trend with respect to that portfolio. Overall I would characterize our credit as stable to improving and importantly all of our real estate loans both legacy and newly underwritten loans are performing.

Our leverage is 3.4 times. When we treat our TruPS issuances which have a remaining term of 25 years as equity and no covenants as equity, our leverage is 2.9 times.

Focusing on real estate we began 2010 approximately 2.3 times levered in our CRE CDOs. After giving affect to the debt repurchases throughout 2010 and to 2011 operations, we ended the June 2011 quarter a mere 1.5 times levered on our real estate portfolio.

Our GAAP book value per share was $5.84 at June 30th; the change from Q1 resulted primarily from reduced mark-to-market adjustments first on our CMBS portfolio of $0.07 per share and second a decrease on our cash flow hedges of $0.06. The dividend of $0.25

per share was offset by earnings of $0.13 and a $0.01 per share improvement from our drip [ph].

At June 30, 2011, our equity is allocated as follows. Real estate loans and CMBS 66%, commercial finance 29%; and 5% in other investments.

With that my formal remarks are completed, and I’ll turn the call back to Jonathan Cohen.

Jonathan Cohen

Thanks Dave. We are excited to reap the benefits of new opportunities that we have already seized and to take advantage of even more opportunities as we have started to do so already. We look forward to sharing the results and any color on them with you in future periods. Now we will open up the call to any questions. Thanks.

Question-and-Answer Session


(Operator instructions) Your first question comes from the line of Steve Delaney with JMP Securities. Please proceed.

Steve Delaney – JMP Securities

Thank you. Good morning everyone.

Jonathan Cohen

Good morning Steve.

Steve Delaney – JMP Securities

Congrats on the success on building the origination pipeline.

Jonathan Cohen

Thank you.

Steve Delaney – JMP Securities

My first question had to do with the realized investment gains in the quarter. I think it was 3.7 million, you described the impairment of about 4 million on the – I think those were 2007 CMBS. Can you give us a little background on what securities were involved in the realized investment gains?

Jonathan Cohen

For the most part that was securities that we bought in the downturn in 2009 and in May and June, sold in what was near the peak of the CMBS market.

Steve Delaney – JMP Securities

Right. Okay. So taking some gains out of that legacy portfolio?

Jonathan Cohen

Yes, and now a lot of the securities are a lot cheaper now, so now we are looking at them again.

Steve Delaney – JMP Securities

And using your wealth lines for that?

Jonathan Cohen

Either using the wealth or we have room in some of the CDOs.

Steve Delaney – JMP Securities

Correct. Okay, and then I just want to clarify a couple of things when Dave was going through, so I believe I heard him say that of the 187 million or so of cash in the structures, was the number 118 million in the two CRE CDOs?

David Bryant

It was in the real estate CDOs 118 million Steve.

Jonathan Cohen

Even I want to point out that part of our lag in putting our cash here, a lot of the loans that we closed in this quarter closed towards the end of the quarter. so we didn’t really pick up much interest income from them, and then we have pending really this week, and last week and the week before, probably about I think 40 some odd 15 million of new loans that they have originated.

So when you look at it, our investment book and our investment income in the next quarter should be a lot heavier from the real estate side.

Steve Delaney – JMP Securities


Jonathan Cohen

A lot of that cash will be used within the CDOs.

Steve Delaney – JMP Securities

Given that you have got a pipeline of about 200 million against that 118 million, are you starting to look at other funding sources that would allow you to continue to fund once you have pretty much used up your free cash and the CDOs?

Jonathan Cohen

Yes, we are in the final sort of final finals with a bunch of facilities that will enable us to use – continue to grow that business significantly after over the next like three months, four months, as we finish off the cash that is in those CDOs, we will be able to continue to grow the business. Remember that one of the parts of the business that has come back, which we like is that people pay off their loans, and we can replace them because we do get acquisition – because we do get origination and deeds [ph] and occasionally some sort of upside through the sale of a property.

Steve Delaney – JMP Securities

Okay and then one last thing guys, sorry to be tedious with these numbers, but just wanted to get it straight.

Jonathan Cohen

Go ahead, of course, Steve.

Steve Delaney – JMP Securities

The second quarter loan loss provision, the 4.1, Bryant did I hear you correct, included in there is the 2 million increase in the bank loan provision is included in that 4.1?

David Bryant


Steve Delaney – JMP Securities

Okay, and that you said was sort of a one relating…

Jonathan Cohen

And that was just a very odd restructuring situation that surprised people, and we felt based on the accounting and the situation that it was more prudent to book a reserve, even though who knows what really happens there.

Steve Delaney – JMP Securities

Okay. Well thanks a lot for the comments and good job on getting this pipeline built up.

Jonathan Cohen

Thanks Steve.


Your next question comes from the line of Lee Cooperman with Omega Advisors. Please proceed.

Lee Cooperman – Omega Advisors

Yes, hi. Thank you very much. Good morning to you.

Jonathan Cohen

Good morning.

Lee Cooperman – Omega Advisors

Thanks for the comprehensive rundown. I have kind of question along the final line, you mentioned the commitment to the dividend, which has been steadfast, and you have lived up to that commitment, but you are really saying for the rest of 2011, which really the year is more than half over, question, if your dividend was limited in 2012 to your expected cash earnings, and not the dollar, but cash earnings, how much lower are cash earnings then your present dollar dividend is expected to be? Or possibly do you expect cash earnings in 2012 to be in line with the present dividend?

Jonathan Cohen

No, we wouldn’t keep the dividend here if we didn’t expect at this point that the cash earnings would be $1. And we have 235 million that we have to put up

in order to get the cash earnings of the company on a basic, we are on $0.13, but we had $0.25 of adjusted to get it to that $0.25, you need to put that $235 million out, and stop selling investments during the quarter. so we expect when we model out to get to $1 and stay there.

Lee Cooperman – Omega Advisors

I think I heard what you said, but I want to make sure, you expect by the time you employ this capital in 2012 you will be earning enough money and cash to maintain the dollar dividend?

Jonathan Cohen

Yes, exactly Lee. The reason I didn’t say 2011 is because as we put out the money, of course, interest rates of the 10-year bond have gone from when I first started talking like 4% [ph], now they are at whatever 7% [ph]. and it becomes harder and harder to put out money at 9% or 10% or 8% unlevered, so really there are swing factors, but right now as we model out the dividend is good to go at $1.

Lee Cooperman – Omega Advisors

Thank you. Good luck. You have done a very good job relative to your peer group.

Jonathan Cohen

Thanks Lee.


(Operator instructions) Your next question comes from the line of Gabe Poggi with FBR. Please proceed.

Jack – FBR

Hi, good morning guys. It is Jack [ph] for Gabe.

Jonathan Cohen

Hi Jack.

Jack – FBR

First question is, could you please comment on how much equity you expect to contribute to the new Apidos CLO transaction?

Jonathan Cohen

It is really up in the air now, because we do have enquiries from other outside investors, who also want to participate in the equity. So, it could be as much as $30 million to $40 million eventually. We have 10 million or 15 million or 20 million that is already up on the line that is accumulating assets. So it will probably be another $15 million or $20 million, nothing that would cause us to raise capital in the marketplace.

Jack – FBR

Great, thanks. And then switching gears a little bit on the two properties you took back in the quarter, could we get a little more color there in terms of if there is cash flowing, and maybe just a little bit more about those situations?

David Bloom

Sure. This is Dave Bloom. The two properties were actually very strong performers from a cash perspective. We originated them ourselves, and when we originated them we put in some pretty hefty triggers for renewals that required substantial delevering and some fees to the extent that that the parties didn’t make it. We were more than happy to step in and take these properties.

These are great opportunities and over time we will really do extremely well. I think it was the structuring of the heavy triggers for extension that allowed us to walk in. in one such situation we also had substantial personal recourse that we were able to use to get the property and were happy to have them in portfolio.

Jonathan Cohen

I just want to add, this is Jon. As we look at the book of Resource Capital, we are trying to take 10% or more and be opportunistic and actually own real estate. We just bought another property that was sort of an opportunistic value add apartment situation that we thought was coming in very low in terms of pricing. We were doing things that were opportunistic to build book value over time for our shareholders, and this is a great example of even though, the accounting made you book a loss on one of the loans, really when we look at it with a few little tweaks and all the great cash flow from the properties, these are incredible situations that will enable us to build value, and we’re looking forward to that.

Jack – FBR

Great. Thanks a lot guys.

Jonathan Cohen

Thanks Jack.


And at this time we have no further questions. I would now like to turn the call back over Jonathan Cohen for any closing remarks.

Jonathan Cohen

Well, thank you very much, and we look forward to next quarter.


Ladies and gentlemen that concludes today’s conference. Thank you for your participation and you may now disconnect. Have a great day.

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