Front Yard Residential Corporation (“Front Yard” or the “Company”)
(NYSE:RESI) today announced financial and operating results for the
fourth quarter and full year of 2017.
Fourth Quarter 2017 Highlights and
Recent Developments
- Changed company name to Front Yard Residential
Corporation.
- Acquired 1,957 homes from Amherst Holdings, LLC, increasing the
rental portfolio to 11,975 homes, of which 98% were
stabilized.
- Sold 322 mortgage loans, leaving 111 loans with a carrying
value of $11.5 million at December 31, 2017.
- Sold 325 non-rental REO properties, leaving 490 legacy
properties under evaluation for rental or sale with a carrying
value of $110.1 million at year end 2017.
- Stabilized Rental Net Operating Income Margin was 64.9%,
Stabilized Rental Core Funds from Operations was $0.15 per diluted
share and 93% of stabilized rentals were leased at December 31,
2017.1
Full Year 2017 Highlights
- Increased rental portfolio by 3,372 homes, a 39% increase from
December 31, 2016.
- Increased rental revenue by 155% over 2016 to $123.6
million.
- Disposed of substantially all of the Company's mortgage loans,
reducing the portfolio by 96% from 3,474 loans at December 31, 2016
to 111 loans.
- Sold 1,710 legacy REO properties, reducing the portfolio of
legacy REO properties by 75% from 1,930 properties at December 31,
2016 to 490 at December 31, 2017.
- Completed repurchases of $5.2 million of stock, bringing total
repurchases under the repurchase program to $51.5 million.
- 77% of debt funding over 3.9 years at December 31, 2017
compared to 46% at December 31, 2016.
“Throughout 2017, we continued to deliver on our strategic
objectives. We completed the sale of most of our legacy assets,
achieved strong growth in our rental portfolio and significantly
improved our rental operating metrics,” said Chief Executive
Officer, George Ellison. “We will continue to build on these
achievements and maintain our focus on creating long term
shareholder value.”
________________1 Stabilized Rental Net Operating Income
Margin and Stabilized Rental Core Funds from Operations are
non-GAAP measures. Refer to the Reconciliation of Non-GAAP
Financial Measures section for further information and
reconciliation to U.S. GAAP net loss.
Fourth Quarter and Full Year 2017 Financial
Results
Net loss for the fourth quarter of 2017 totaled $37.5 million,
or $0.70 per diluted share, compared to a net loss of $61.2
million, or $1.14 per diluted share, for the fourth quarter of
2016. Net loss for the year ended December 31, 2017 totaled $185.5
million, or $3.47 per diluted share, compared to a net loss of
$228.0 million, or $4.18 per diluted share, for the year ended
December 31, 2016.
Webcast and Conference Call
The Company expects to host a webcast and conference call on
Thursday, March 1, 2018, at 8:30 a.m. Eastern Time to discuss its
financial results for the fourth quarter and full year of 2017. The
conference call will be webcast live over the internet from the
Company’s website at www.frontyardresidential.com and can be
accessed by clicking on the “Shareholders” link.
About Front Yard Residential Corporation
Front Yard is an industry leader in providing quality,
affordable rental homes to America’s families. Our homes offer
exceptional value in a variety of suburban communities which have
easy accessibility to metropolitan areas. Front Yard's tenants
enjoy the space and comfort that is unique to single-family
housing, at reasonable prices. Our mission is to provide our
tenants with houses they are proud to call home. Additional
information is available at www.frontyardresidential.com.
Forward-looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, regarding management’s beliefs, estimates, projections,
anticipations and assumptions with respect to, among other things,
the Company’s financial results, future operations, business plans
and investment strategies as well as industry and market
conditions. These statements may be identified by words such as
“anticipate,” “intend,” “expect,” “may,” “could,” “should,”
“would,” “plan,” “estimate,” “seek,” “believe” and other
expressions or words of similar meaning. We caution that
forward-looking statements are qualified by the existence of
certain risks and uncertainties that could cause actual results and
events to differ materially from what is contemplated by the
forward-looking statements. Factors that could cause the Company's
actual results to differ materially from these forward-looking
statements may include, without limitation, our ability to
implement our business strategy; our ability to make distributions
to stockholders; our ability to complete potential transactions in
accordance with anticipated terms and on a timely basis or at all;
the Company's ability to integrate newly acquired rental assets
into the portfolio; difficulties in identifying single-family
properties to acquire; the impact of changes to the supply of,
value of and the returns on single-family rental properties; the
Company’s ability to acquire single-family rental properties
generating attractive returns; the Company’s ability to sell
residential mortgage assets or non-rental real estate owned on
favorable terms or at all; the Company’s ability to predict costs;
the Company’s ability to effectively compete with competitors;
changes in interest rates; changes in the market value of
single-family properties; the Company’s ability to obtain and
access financing arrangements on favorable terms or at all; the
Company’s ability to apply the net proceeds from financings or
asset sales to acquire target assets in a timely manner or at all;
the Company’s ability to retain the exclusive engagement of
Altisource Asset Management Corporation; the failure of Altisource
Portfolio Solutions S.A. and its affiliates to effectively perform
their obligations under various agreements with the Company; the
failure of Main Street Renewal, LLC to effectively perform under
its property management agreement with the Company; the failure of
the Company’s mortgage loan servicers to effectively perform their
servicing obligations under their servicing agreements; the
Company's failure to qualify or maintain qualification as a REIT;
the Company’s failure to maintain its exemption from registration
under the Investment Company Act of 1940, as amended; the impact of
adverse real estate, mortgage or housing markets; the impact of
adverse legislative or regulatory tax changes and other risks and
uncertainties detailed in the "Risk Factors" and other sections
described from time to time in the Company's current and future
filings with the Securities and Exchange Commission. In addition,
financial risks such as liquidity, interest rate and credit risks
could influence future results. The foregoing list of factors
should not be construed as exhaustive.
The statements made in this press release are current as of the
date of this press release only. The Company undertakes no
obligation to publicly update or revise any forward-looking
statements or any other information contained herein, whether as a
result of new information, future events or otherwise.
Front Yard Residential
Corporation |
Consolidated Statements of
Operations |
(In thousands, except share and per share
amounts) |
|
|
Three Months EndedDecember 31, |
|
Year Ended December 31, |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
Rental revenues |
$ |
34,917 |
|
|
$ |
24,321 |
|
|
$ |
123,597 |
|
|
$ |
48,563 |
|
Change in unrealized
gain on mortgage loans |
(33,039 |
) |
|
(40,603 |
) |
|
(190,856 |
) |
|
(195,909 |
) |
Net realized gain on
mortgage loans |
10,947 |
|
|
5,484 |
|
|
84,024 |
|
|
85,990 |
|
Net realized gain on
sales of real estate |
14,781 |
|
|
22,784 |
|
|
76,913 |
|
|
117,617 |
|
Interest income |
152 |
|
|
72 |
|
|
493 |
|
|
497 |
|
Total
revenues |
27,758 |
|
|
12,058 |
|
|
94,171 |
|
|
56,758 |
|
Expenses: |
|
|
|
|
|
|
|
Residential property
operating expenses |
16,652 |
|
|
18,952 |
|
|
71,741 |
|
|
70,167 |
|
Real estate
depreciation and amortization |
16,313 |
|
|
14,237 |
|
|
61,601 |
|
|
27,027 |
|
Acquisition fees and
costs |
119 |
|
|
1,033 |
|
|
778 |
|
|
9,339 |
|
Selling costs and
impairment |
9,422 |
|
|
7,910 |
|
|
40,108 |
|
|
57,913 |
|
Mortgage loan servicing
costs |
1,011 |
|
|
6,635 |
|
|
10,683 |
|
|
34,595 |
|
Interest expense |
14,617 |
|
|
16,808 |
|
|
59,582 |
|
|
53,868 |
|
Share-based
compensation |
1,315 |
|
|
794 |
|
|
4,139 |
|
|
1,287 |
|
General and
administrative |
2,338 |
|
|
1,949 |
|
|
10,994 |
|
|
10,556 |
|
Management fees to
AAMC |
3,924 |
|
|
4,941 |
|
|
17,301 |
|
|
19,175 |
|
Total
expenses |
65,711 |
|
|
73,259 |
|
|
276,927 |
|
|
283,927 |
|
Operating
loss |
(37,953 |
) |
|
(61,201 |
) |
|
(182,756 |
) |
|
(227,169 |
) |
Losses resulting from
natural disasters |
— |
|
|
— |
|
|
(6,021 |
) |
|
— |
|
Insurance recoveries
related to natural disasters |
463 |
|
|
— |
|
|
3,349 |
|
|
— |
|
Other expense |
— |
|
|
— |
|
|
— |
|
|
(750 |
) |
Loss
before income taxes |
(37,490 |
) |
|
(61,201 |
) |
|
(185,428 |
) |
|
(227,919 |
) |
Income tax (benefit)
expense |
(16 |
) |
|
3 |
|
|
26 |
|
|
109 |
|
Net
loss |
$ |
(37,474 |
) |
|
$ |
(61,204 |
) |
|
$ |
(185,454 |
) |
|
$ |
(228,028 |
) |
|
|
|
|
|
|
|
|
Loss per share
of common stock – basic: |
|
|
|
|
|
|
|
Loss per basic
share |
$ |
(0.70 |
) |
|
$ |
(1.14 |
) |
|
$ |
(3.47 |
) |
|
$ |
(4.18 |
) |
Weighted average common
stock outstanding – basic |
53,447,950 |
|
|
53,800,457 |
|
|
53,493,523 |
|
|
54,490,979 |
|
Loss per share
of common stock – diluted: |
|
|
|
|
|
|
|
Loss per diluted
share |
$ |
(0.70 |
) |
|
$ |
(1.14 |
) |
|
$ |
(3.47 |
) |
|
$ |
(4.18 |
) |
Weighted average common
stock outstanding – diluted |
53,447,950 |
|
|
53,800,457 |
|
|
53,493,523 |
|
|
54,490,979 |
|
|
|
|
|
|
|
|
|
Dividends declared per
common share |
$ |
0.15 |
|
|
$ |
0.15 |
|
|
$ |
0.60 |
|
|
$ |
0.75 |
|
Front Yard Residential
Corporation |
Consolidated Balance Sheets |
(In thousands, except share and per share
amounts) |
|
|
December 31, 2017 |
|
December 31, 2016 |
Assets: |
|
|
|
Real estate held for
use: |
|
|
|
Land |
$ |
322,062 |
|
|
$ |
220,800 |
|
Rental
residential properties |
1,381,110 |
|
|
926,320 |
|
Real
estate owned |
64,036 |
|
|
289,141 |
|
Total
real estate held for use |
1,767,208 |
|
|
1,436,261 |
|
Less:
accumulated depreciation |
(73,655 |
) |
|
(27,541 |
) |
Total
real estate held for use, net |
1,693,553 |
|
|
1,408,720 |
|
Real estate assets held
for sale |
75,718 |
|
|
133,327 |
|
Mortgage loans, at fair
value |
11,477 |
|
|
460,444 |
|
Mortgage loans held for
sale |
— |
|
|
108,036 |
|
Cash and cash
equivalents |
113,666 |
|
|
106,276 |
|
Restricted cash |
47,822 |
|
|
22,947 |
|
Accounts receivable,
net |
19,555 |
|
|
34,931 |
|
Prepaid expenses and
other assets |
12,758 |
|
|
10,166 |
|
Total
assets |
$ |
1,974,549 |
|
|
$ |
2,284,847 |
|
Liabilities: |
|
|
|
Repurchase and loan
agreements |
$ |
1,270,157 |
|
|
$ |
1,220,972 |
|
Other secured
borrowings |
— |
|
|
144,099 |
|
Accounts payable and
accrued liabilities |
55,639 |
|
|
51,442 |
|
Related party
payables |
4,151 |
|
|
5,266 |
|
Total
liabilities |
1,329,947 |
|
|
1,421,779 |
|
|
|
|
|
Commitments and
contingencies |
— |
|
|
— |
|
|
|
|
|
Equity: |
|
|
|
Common stock, $0.01 par
value, 200,000,000 authorized shares; 53,447,950 and53,667,631
shares issued and outstanding as of December 31, 2017 and
2016,respectively |
534 |
|
|
537 |
|
Additional paid-in
capital |
1,181,327 |
|
|
1,182,245 |
|
Accumulated
deficit |
(537,259 |
) |
|
(319,714 |
) |
Total
equity |
644,602 |
|
|
863,068 |
|
Total liabilities and equity |
$ |
1,974,549 |
|
|
$ |
2,284,847 |
|
|
Front Yard Residential
CorporationRegulation G Requirement:
Reconciliation of Non-GAAP Financial Measures(In
thousands, except share and per share
amounts)(Unaudited)
In evaluating Front Yard’s financial performance, management
reviews Stabilized Rental Net Operating Income Margin (“Stabilized
Rental NOI Margin”) and Stabilized Rental Core Funds from
Operations (“Stabilized Rental Core FFO”), which exclude certain
items from Front Yard’s U.S. GAAP (generally accepted accounting
principles) results. Stabilized Rental NOI Margin and Stabilized
Rental Core FFO are non-GAAP performance measures that Front Yard
believes are useful to assist investors in gaining an understanding
of the trends and operating metrics for Front Yard’s core business.
Stabilized Rental NOI Margin and Stabilized Rental Core FFO should
be viewed in addition to, and not in lieu of, Front Yard’s reported
results under U.S. GAAP.
The following provides related definitions of, and a
reconciliation of Front Yard’s U.S. GAAP results to, Stabilized
Rental NOI Margin and Stabilized Rental Core FFO for the periods
presented:
Stabilized Rental: We define a property as
stabilized once it has been renovated and then initially leased or
available for rent for a period greater than 90 days. All other
homes are considered non-stabilized. Homes are considered
stabilized even after subsequent resident turnover. However, homes
may be removed from the stabilized home portfolio and placed in the
non-stabilized home portfolio due to renovation during the home
lifecycle or because they are held for sale.
Stabilized Rental Net Operating Income (“Stabilized
Rental NOI”) and Stabilized Rental NOI Margin: Stabilized
Rental NOI is a non-GAAP supplemental measure that we define as
rental revenues less residential property operating expenses of the
stabilized rental properties in our rental portfolio. We define
Stabilized Rental NOI Margin as Stabilized Rental NOI divided by
rental revenues.
We consider Stabilized Rental NOI and Stabilized Rental NOI
Margin to be meaningful supplemental measures of operating
performance because they reflect the operating performance of our
stabilized properties without allocation of corporate level
overhead or general and administrative costs, acquisition fees and
other similar costs and provide insight to the ongoing operations
of our business. These measures should be used only as supplements
to and not substitutes for net income or loss or net cash flows
from operating activities as determined in accordance with GAAP.
These net operating income measures should not be used as
indicators of funds available to fund cash needs, including
distributions and dividends. Although we may use these non-GAAP
measures to compare our performance to other real estate investment
trusts (“REITs”), not all REITs may calculate these non-GAAP
measures in the same way, and there is no assurance that our
calculation is comparable with that of other REITs. While
management believes that our calculations are reasonable, there is
no standard calculation methodology for Stabilized Rental NOI
Margin, and different methodologies could produce materially
different results.
The following table provides a reconciliation of net loss as
determined in accordance with U.S. GAAP to Stabilized Rental NOI
and Stabilized Rental NOI Margin:
|
|
Three Months EndedDecember 31,
2017 |
GAAP net loss |
|
$ |
(37,474 |
) |
|
|
|
Adjustments: |
|
|
Change in unrealized
gain on mortgage loans |
|
33,039 |
|
Net realized gain on
mortgage loans |
|
(10,947 |
) |
Net realized gain on
sales of real estate |
|
(14,781 |
) |
Interest income |
|
(152 |
) |
Non-stabilized rental
and REO operating expenses |
|
4,390 |
|
Real estate
depreciation and amortization |
|
16,313 |
|
Acquisition fees and
costs |
|
119 |
|
Selling costs and
impairment |
|
9,422 |
|
Mortgage loan servicing
costs |
|
1,011 |
|
Interest expense |
|
14,617 |
|
Share-based
compensation |
|
1,315 |
|
General and
administrative |
|
2,338 |
|
Management fees to
AAMC |
|
3,924 |
|
Insurance recoveries
related to natural disasters |
|
(463 |
) |
Income tax benefit |
|
(16 |
) |
Stabilized Rental NOI |
|
$ |
22,655 |
|
|
|
|
Rental revenues |
|
$ |
34,917 |
|
Stabilized Rental NOI
Margin |
|
64.9 |
% |
|
|
|
|
Stabilized Rental FFO and Stabilized Rental Core
FFO: Funds from Operations (“FFO”) is a supplemental
performance measure of an equity REIT used by industry analysts and
investors in order to facilitate meaningful comparisons between
periods and among peer companies. FFO is defined by the National
Association of Real Estate Investment Trusts (“NAREIT”) as GAAP net
income or loss excluding gains or losses from sales of property,
impairment charges on real estate and depreciation and amortization
on real estate assets adjusted for unconsolidated partnerships and
jointly owned investments.
We believe that the FFO of our stabilized rental portfolio
(“Stabilized Rental FFO”) is a meaningful supplemental measure of
the operating performance of our stabilized rental portfolio
because historical cost accounting for real estate assets in
accordance with GAAP assumes that the value of real estate assets
diminishes predictably over time, as reflected through
depreciation. Because real estate values have historically risen or
fallen with market conditions, management considers Stabilized
Rental FFO an appropriate supplemental performance measure because
it excludes historical cost depreciation, impairment charges and
gains or losses related to sales of previously depreciated homes
from GAAP net income. By excluding depreciation, impairment and
gains or losses on sales of real estate, Stabilized Rental FFO
provides a measure of returns on our investments in stabilized real
estate assets. However, because Stabilized Rental FFO excludes
depreciation and amortization and captures neither the changes in
the value of the homes that result from use or market conditions
nor the level of capital expenditures to maintain the operating
performance of the homes, all of which have real economic effect
and could materially affect our results from operations, the
utility of Stabilized Rental FFO as a measure of our performance is
limited.
Our Stabilized Rental Core FFO begins with Stabilized Rental FFO
and is adjusted for share-based compensation, acquisition fees and
costs, non-cash interest expense related to deferred debt issuance
costs and other non-comparable items, as applicable. We believe
that Stabilized Rental Core FFO, when used in conjunction with the
results of operations under GAAP, is a meaningful supplemental
measure of our operating performance for the same reasons as
Stabilized Rental FFO and is further helpful as it provides a
consistent measurement of our performance across reporting periods
by removing the impact of certain items that are not comparable
from period to period.
Although management believes that FFO and Stabilized Rental Core
FFO increase our comparability with other companies, these measures
may not be comparable to the FFO or core FFO of other companies
because 1) we apply FFO and Stabilized Rental Core FFO to only our
stabilized rental portfolio and 2) other companies may adopt a
definition of FFO other than the NAREIT definition, may apply a
different method of determining core FFO or may utilize metrics
other than or in addition to core FFO.
The following table provides a reconciliation of net loss as
determined in accordance with U.S. GAAP to Stabilized Rental Core
FFO:
|
|
Three Months EndedDecember 31,
2017 |
GAAP net loss |
|
$ |
(37,474 |
) |
|
|
|
Adjustments to
determine Stabilized Rental FFO: |
|
|
Change in unrealized
gain on mortgage loans |
|
33,039 |
|
Net realized gain on
mortgage loans |
|
(10,947 |
) |
Net realized gain on
sales of real estate |
|
(14,781 |
) |
Interest income |
|
(152 |
) |
Non-stabilized rental
and REO operating expenses |
|
4,390 |
|
Real estate
depreciation and amortization |
|
16,313 |
|
Selling costs and
impairment |
|
9,422 |
|
Mortgage loan servicing
costs |
|
1,011 |
|
Insurance recoveries
related to natural disasters |
|
(463 |
) |
Other expenses |
|
4,796 |
|
Stabilized Rental FFO |
|
5,154 |
|
|
|
|
Adjustments to
determine Stabilized Rental Core FFO: |
|
|
Conversion fees |
|
90 |
|
Non-cash interest
expense |
|
1,097 |
|
Share-based
compensation |
|
738 |
|
Other adjustments |
|
694 |
|
Stabilized Rental Core FFO |
|
$ |
7,773 |
|
|
|
|
Weighted average common
stock outstanding - basic and diluted |
|
53,447,950 |
|
Stabilized Rental Core
FFO per share - basic and diluted |
|
$ |
0.15 |
|
FOR FURTHER INFORMATION
CONTACT:Robin N. LoweChief Financial OfficerT:
+1-345-815-9919E: Robin.Lowe@AltisourceAMC.com
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