Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment
to this
Form 10-K. x
Indicate
by check mark whether the registrant is an accelerated filer (as defined
in Rule
12b-2 of the Act). Yes
x
No o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes
o
No x
The
aggregate market value of the voting common equity held by non-affiliates
of the
registrant, based on the closing price of such stock on the last business
day of
the registrant’s most recently completed second fiscal quarter (March 31, 2007)
was approximately $366,449,000.
The
number of outstanding shares of the registrant’s common stock on December 4,
2007 was 17,844,250 shares.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions
of the Registrant’s Proxy Statement to be filed with the Commission in
connection with the 2008 Annual Meeting of Stockholders
are
incorporated by reference in Part III of this Form 10-K.
RESOURCE
AMERICA, INC. AND SUBSIDIARIES
INDEX
TO
ANNUAL REPORT
ON
FORM 10-K
PART
I
ITEM
1. BUSINESS
The
following discussion contains forward-looking statements regarding events
and
financial trends which may affect our future operating results and financial
position. Such statements are subject to risks and uncertainties that
could cause our actual results and financial position to differ materially
from
those anticipated in such statements. For a discussion of the risks
and uncertainties to which we are subject, see Item 1A “Risk
Factors.”
General
We
are a specialized asset management company that uses industry specific expertise
to generate and administer investment opportunities in the commercial finance,
real estate and financial fund management sectors. As a specialized
asset manager, we seek to develop investment funds for outside investors
for
which we provide asset management services. We typically maintain an
investment in the investment vehicles we sponsor. As of September 30,
2007, we managed $16.7 billion of assets. As of November 30, 2007, we
managed $17.3 billion of assets.
We
limit our fund development and asset management services to asset classes
in
which we have specific expertise. We believe this strategy enhances
the return on investment we can achieve for our funds. In our
commercial finance operations, we focus on originating small and middle-ticket
equipment leases and commercial notes secured by business-essential equipment,
including technology, commercial and industrial equipment and medical
equipment. In our real estate operations, we concentrate on
investments in multi-family and commercial real estate and real estate mortgage
loans including whole loans, first priority interests in commercial mortgage
loans, known as A notes, subordinated interests in first mortgage loans,
known
as B notes, and mezzanine loans. In our financial fund management
operations, we concentrate on trust preferred securities of banks, bank holding
companies, insurance companies and other financial companies, bank loans,
asset-backed securities.
We
have greatly expanded all three sectors since 2003 and assets under management
have grown from $2.1 billion, excluding our former energy subsidiary, at
September 30, 2003 to $16.7 billion at September 30, 2007. We
distribute our products through numerous channels including a highly proprietary
large broker dealer/financial planner network.
We
attract investment funds through the
sponsorship of investment vehicles, which historically have included public
and
private investment partnerships, TIC programs, a REIT and CDO
issuers. We arrange for the funding of these vehicles through short,
medium and longer-term bank financing, equity investments and, historically,
CDOs. We believe that we have developed a unique combination of
origination channels to provide such funding, including a network of
international and national banks and investment banks both for our short,
medium
and longer-term debt financing (including, historically, our CDOs) and
for
equity financing of RCC, and a national network of independent broker-dealers
for our investment partnerships and TIC programs.
We
believe that current credit market
conditions have created opportunities for us, principally in our commercial
finance business. In commercial finance, we acquired the equipment
leasing division of Pacific Capital Bank in June 2007 and, subsequent to
our
2007 fiscal year end, acquired the equipment leasing division of NetBank
from
the Federal Deposit Insurance Corporation, or the FDIC, out of receivership,
and
the equipment finance subsidiary of Lehman Brothers Bank, FSB. The
two acquisitions subsequent to our fiscal year end increased our commercial
finance assets under management by $0.6 billion, to approximately $1.7
billion
as of November 30, 2007. The equipment leases and notes were acquired
on behalf of our investment partnerships. In real estate, we acquired
a real estate property management group on October 1, 2007, that will allow
us
to directly manage properties held by the real estate investment programs
we
manage. We also, on behalf of an institutional joint venture
partner, purchased a portfolio of mortgage loans from the U.S. Department
of
Housing and Urban Development, or HUD, at a substantial discount. In
our third sector, financial fund management, we completed five collateralized
debt obligation, or CDO, issuances in the second half of fiscal
2007. In addition, one CDO priced subsequent to fiscal 2007 year end
and we expect it to close in December 2007. Of these six
CDOs, three were collateralized loan obligation, or CLO issuances,
including the one we expect to close in December 2007. Due to the
current state of the credit markets we believe that the CDO market in general
will
slow
substantially in 2008 limiting our ability to generate additional assets
under
management through this channel, although, we believe that current market
conditions have had less effect on our ability to sponsor CLOs and,
consequently, we may be able to sponsor CLO vehicles in 2008. Even under
current market conditions, we expect that our financial fund management sector
will provide us with a continuing stream of fee income from existing CDOs
and
funds we manage.
Assets
Under Management
As
of September 30, 2007 and 2006, we
managed $16.7 billion and $12.1 billion of assets, respectively, for the
accounts of institutional and individual investors, Resource Capital Corp.,
or
RCC, a REIT we sponsor and manage, our own account and on warehouse facilities
in the following asset classes (in millions):
|
As
of September 30, 2007
|
As
of
September
30, 2006
|
||||||||||||||||||||||||
|
Institutional
and Individual Investors
|
RCC
|
Company
|
Assets
Held on Warehouse Facilities
|
Total
|
Total
|
||||||||||||||||||||
|
Trust
preferred securities (1)
(4)
|
$ |
5,167
|
$ |
−
|
$ |
−
|
$ |
|
$ |
5,260
|
$ |
4,206
|
|||||||||||||
|
Bank
loans (1)
(5)
|
1,853
|
|
−
|
|
3,106
|
1,926
|
|||||||||||||||||||
|
Asset-backed
securities (1)
|
5,137
|
|
−
|
−
|
5,533
|
4,403
|
|||||||||||||||||||
|
Real
properties (2)
|
|
−
|
−
|
−
|
|
|
|||||||||||||||||||
|
Mortgage
and other real estate-related loans (2)
|
−
|
|
|
−
|
1,122
|
|
|||||||||||||||||||
|
Commercial
finance assets (3)
|
|
|
|
−
|
1,093
|
|
|||||||||||||||||||
|
Private
equity and hedge fund assets (1)
|
|
−
|
−
|
−
|
|
|
|||||||||||||||||||
| $ |
13,521
|
$ |
2,375
|
$ |
|
$ |
|
$ |
16,711
|
$ |
12,090
|
||||||||||||||
|
(1)
|
We
value these assets at their amortized
cost.
|
|
(2)
|
We
value our managed real estate assets as the sum of: the amortized
cost of
our commercial real estate loans; the book value of real estate
and other
assets held by our real estate investment partnerships and
tenant-in-common, or TIC, property interests; the amount of our
outstanding legacy loan portfolio; and the book value of our interests
in
real estate.
|
|
(3)
|
We
value our commercial finance assets as the sum of the book value
of the
equipment and notes and future receivable advances financed by
us.
|
|
(4)
|
The
trust preferred securities are being held on a warehouse line which
is
without recourse to us.
|