Background

Resource America went public in 1986 as a specialty finance company that bought commercial mortgages at a discount. It also held some energy assets like gas wells and pipelines. It built up Fidelity Leasing and in 2000 sold it to ABN Amro for $583 million, approximately twice the net assets of the lease portfolio, a significant premium. Later, REXI IPO 'd its energy assets by selling shares of Atlas America in 2004 and then spun off its remaining shares the next year. In 2005, REXI also created Resource Capital Corporation, a real estate investment trust (REIT) that trades separately under the ticker RSO. Overall, REXI has a very good track record of accumulating assets on the cheap and selling them at good prices, with solid gains for shareholders.

Today, REXI manages assets across a broad range of categories and earns attractive spreads on structured finance pools. We believe that while some of these pools may experience problems, REXI has modest liability, which is more than discounted in the stock price. In addition to substantial excess assets outlined later, we estimate that REXI has earnings power of over $1 per share, though it will not reach this level in 2009; the company's guidance is $0.50 to $0.70 per share. REXI operates in three segments: financial fund management (FFM), which manages various types of asset-backed securities; real estate,

Figure 9.2 Resource America Assets under Management, Q1 2005 to Ql 2009

Source: REXI earnings releases.

Figure 9.2 Resource America Assets under Management, Q1 2005 to Ql 2009

Source: REXI earnings releases.

which invests in and manages multifamily and commercial real estate; and commercial finance, which is comprised of LEAF Financial, a small equipment leasing business. We believe that the combined value of these businesses, when added to the value of other investments and what's on the balance sheet, is multiples of the current market price. REXI 's upside is very high when the markets eventually recover.

Figure 9.2 shows the growth of REXI 's assets under management over time. One can see that the company grew its assets rapidly when times were good, and now that capital markets are closed it's managing the funds and earning fees for doing so.

Real Estate 101

Real Estate 101

This book makes it easy to not only buy a home, but figure out everything that you need to do, even get a loan. In simple and easy to understand language, it talks about where you should buy a home, what to look for in a home, how to find a home, how to get an agent, how to get a mortgage and more. This is a step by step process that you, a new home buyer, can use to purchase a home.

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