Resource Capital to Issue Shares – Analyst Blog

Resource Capital Corp. (RSO), a real estate investment trust (REIT) that invests in commercial real estate debt and other commercial finance assets, has recently announced plans to offer 7.5 million common shares at $5.25 each to raise cash. The company will also grant the underwriters an option to purchase an additional 1.1 million shares to cover any over-allotments. Deutsche Bank Securities Inc., a part of Deutsche Bank (DB) and J.P. Morgan Securities Inc., a part of JPMorgan Chase & Company (JPM) are acting as joint book-running managers for the public offering.

 

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. The company expects to raise total proceeds (after the underwriting discount but before expenses) of approximately $37.2 million, excluding the over-allotment options. Resource Capital intends to utilize the proceeds to increase its liquidity and for general corporate purposes.

 

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 (commercial mortgage backed securities) 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., a wholly owned subsidiary of Resource America Inc. (REXI), an asset management company involved in financial fund management, real estate and commercial finance.