Front Yard Residential Corporation (“Front Yard” or the “Company”)
(NYSE: RESI) announced today that the Company and Amherst
Residential, LLC (“Amherst”) have agreed to terminate the
previously announced merger agreement pursuant to which Amherst
would have acquired Front Yard, and the parties have entered into a
settlement agreement with respect to the termination.
In connection with the termination of the merger agreement,
Amherst has agreed to pay a $25 million fee to Front Yard, purchase
4.4 million shares of Front Yard common stock in a primary issuance
at $12.50 per share for an aggregate purchase price of $55 million
and provide a $20 million committed two-year unsecured loan
facility to Front Yard.
“While we are disappointed that the transaction with Amherst
will not close, we believe that we have reached an outcome that
will allow the Company to focus on delivering long-term shareholder
value while putting it in a strong financial position going
forward,” said George Ellison, Front Yard’s Chief Executive
Officer. “We are pleased that the business performed well in the
first quarter, which has continued into April.”
- Rental revenues increased to $54.3 million for the first
quarter of 2020, up 4.3% over the fourth quarter of 2019.
- The first quarter of 2020 was Front Yard's best ever
operational quarter with Core Funds from Operations (“FFO”) of
$0.12 per diluted share, an improvement of $0.07 per diluted share
over the fourth quarter 2019.1
- March 31, 2020 was Front Yard's best ever stabilized leased
percentage of 97.0%, up 200 basis points from 95.0% as of December
31, 2019.
- April rent collections exceeded 99% of Front Yard’s trailing
12-month average and stabilized leased percentage increased to
97.7% at April 30,
2020.________________1 Core FFO
is a non-GAAP measure. Refer to the Reconciliation of Non-GAAP
Financial Measures section for further information and
reconciliation to GAAP net loss.
“We are pleased to have reached an agreement with Front Yard on
an alternate transaction that builds on our long relationship with
the Front Yard team,” said Sean Dobson, Chairman of the Board and
Chief Executive Officer, Amherst Holdings, LLC. “The unprecedented
global health crisis has made the integration of the organizations
too operationally complex and uncertain at this time, and we
believe this equity investment is the best path forward for both
companies’ investors, employees and stakeholders. In our thorough
due diligence, we have become even more impressed with Front Yard’s
management team and the strength of their platform. We are proud to
continue our partnership as a long-term shareholder, and with our
investment we are confident that Front Yard is well positioned to
capitalize on positive industry fundamentals, deliver a return on
our investment and achieve long-term growth.”
First Quarter 2020 Financial Results
GAAP net loss for the first quarter of 2020 was $20.2 million,
or $0.37 per diluted share, compared to a net loss of $18.5
million, or $0.35 per diluted share, for the first quarter of
2019.
About Front Yard
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 that 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,” “target,” “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. These risks and uncertainties include:
our ability to successfully implement our strategic initiatives and
achieve their anticipated impact; our ability to implement our
business strategy; risks and uncertainties related to the COVID-19
pandemic, including as related to adverse economic conditions on
real estate-related assets and financing conditions; our ability to
make distributions to stockholders; our ability to integrate newly
acquired rental assets into the portfolio; the ability to
successfully perform property management services at the level
and/or the cost that we anticipate; the failure to identify
unforeseen expenses or material liabilities associated with
acquisitions through the due diligence process prior to such
acquisitions; 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; our ability to
acquire single-family rental properties generating attractive
returns; our ability to sell non-core assets on favorable terms or
at all; our ability to predict costs; our ability to effectively
compete with competitors; changes in interest rates; changes in the
market value of single-family properties; our ability to obtain and
access financing arrangements on favorable terms or at all; our
ability to deploy the net proceeds from financings or asset sales
to acquire assets in a timely manner or at all; our ability to
maintain adequate liquidity and meet the requirements under its
financing arrangements; our ability to retain the exclusive
engagement of Altisource Asset Management Corporation; the failure
of our third party vendors to effectively perform their obligations
under their respective agreements with us; our failure to qualify
or maintain qualification as a REIT; our failure to maintain our
exemption from registration under the Investment Company Act of
1940, as amended; the results of our strategic alternatives review
and risks related thereto; the impact of adverse real estate,
mortgage or housing markets; the impact of adverse legislative,
regulatory or 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 (“SEC”). 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.
Forward-looking statements speak only as of the date hereof and,
except as required by law, we undertake no obligation to update or
revise these forward-looking statements. For additional information
regarding these and other risks faced by us, refer to our public
filings with the SEC, available on the Investors section of our
website at www.frontyardresidential.com and on the SEC’s website
at www.sec.gov.
Front Yard Residential
CorporationCondensed Consolidated Statements of
Operations(In thousands, except share and per
share amounts)(Unaudited)
|
Three months ended March 31, |
|
2020 |
|
2019 |
Revenues: |
|
|
|
Rental revenues |
$ |
54,328 |
|
|
$ |
52,625 |
|
Total revenues |
54,328 |
|
|
52,625 |
|
Expenses: |
|
|
|
Residential property operating
expenses |
18,861 |
|
|
18,437 |
|
Property management
expenses |
4,171 |
|
|
3,675 |
|
Depreciation and
amortization |
20,366 |
|
|
22,385 |
|
Acquisition and integration
costs |
69 |
|
|
2,211 |
|
Impairment |
235 |
|
|
1,020 |
|
Mortgage loan servicing
costs |
— |
|
|
387 |
|
Interest expense |
19,496 |
|
|
21,510 |
|
Share-based compensation |
1,487 |
|
|
1,119 |
|
General and
administrative |
7,591 |
|
|
5,766 |
|
Management fees to AAMC |
3,584 |
|
|
3,575 |
|
Total expenses |
75,860 |
|
|
80,085 |
|
Net gain on real estate and
mortgage loans |
1,533 |
|
|
8,777 |
|
Operating loss |
(19,999 |
) |
|
(18,683 |
) |
Casualty losses |
(287 |
) |
|
(393 |
) |
Insurance recoveries |
63 |
|
|
527 |
|
Other income |
8 |
|
|
49 |
|
Loss before income taxes |
(20,215 |
) |
|
(18,500 |
) |
Income tax expense |
— |
|
|
8 |
|
Net loss |
$ |
(20,215 |
) |
|
$ |
(18,508 |
) |
|
|
|
|
Loss per share of
common stock - basic: |
|
|
|
Loss per basic share |
$ |
(0.37 |
) |
|
$ |
(0.35 |
) |
Weighted average common stock
outstanding - basic |
53,943,434 |
|
|
53,630,204 |
|
Loss per share of
common stock - diluted: |
|
|
|
Loss per diluted share |
$ |
(0.37 |
) |
|
$ |
(0.35 |
) |
Weighted average common stock
outstanding - diluted |
53,943,434 |
|
|
53,630,204 |
|
|
|
|
|
Dividends declared per common
share |
$ |
0.15 |
|
|
$ |
0.15 |
|
Front Yard Residential
CorporationCondensed Consolidated Balance
Sheets(In thousands, except share and per share
amounts)
|
March 31, 2020 |
|
December 31, 2019 |
|
(unaudited) |
|
|
Assets: |
|
|
|
Real estate held for use: |
|
|
|
Land |
$ |
398,643 |
|
|
$ |
398,840 |
|
Rental residential properties |
1,713,406 |
|
|
1,707,043 |
|
Real estate owned |
12,147 |
|
|
16,328 |
|
Total real estate held for use |
2,124,196 |
|
|
2,122,211 |
|
Less: accumulated
depreciation |
(224,985 |
) |
|
(206,464 |
) |
Total real estate held for use, net |
1,899,211 |
|
|
1,915,747 |
|
Real estate assets held for
sale |
8,298 |
|
|
14,395 |
|
Cash and cash equivalents |
32,299 |
|
|
43,727 |
|
Restricted cash |
31,796 |
|
|
34,282 |
|
Accounts receivable |
7,025 |
|
|
9,235 |
|
Goodwill |
13,376 |
|
|
13,376 |
|
Prepaid expenses and other
assets |
21,485 |
|
|
22,360 |
|
Total assets |
$ |
2,013,490 |
|
|
$ |
2,053,122 |
|
|
|
|
|
Liabilities: |
|
|
|
Repurchase and loan
agreements |
$ |
1,637,466 |
|
|
$ |
1,644,230 |
|
Accounts payable and accrued
liabilities |
60,766 |
|
|
64,619 |
|
Payable to AAMC |
4,140 |
|
|
5,014 |
|
Total liabilities |
1,702,372 |
|
|
1,713,863 |
|
|
|
|
|
Commitments and
contingencies |
— |
|
|
— |
|
|
|
|
|
Equity: |
|
|
|
Common stock, $0.01 par value,
200,000,000 authorized shares; 54,112,374 shares issued and
outstanding as of March 31, 2020 and 53,933,575 shares issued and
outstanding as of December 31, 2019 |
541 |
|
|
539 |
|
Additional paid-in
capital |
1,190,018 |
|
|
1,189,236 |
|
Accumulated deficit |
(859,080 |
) |
|
(830,602 |
) |
Accumulated other
comprehensive loss |
(20,361 |
) |
|
(19,914 |
) |
Total equity |
311,118 |
|
|
339,259 |
|
Total liabilities and equity |
$ |
2,013,490 |
|
|
$ |
2,053,122 |
|
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 Funds from Operations (“FFO”) and Core Funds from
Operations (“Core FFO”), which exclude certain items from Front
Yard’s results under U.S. generally accepted accounting principles
(“GAAP”). These metrics 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. These non-GAAP measures 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 FFO and Core
FFO for the period presented:
FFO and Core FFO: FFO is a supplemental
performance measure of an equity real estate investment trust
(“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 FFO is a meaningful supplemental measure of our
overall operating performance 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 FFO an appropriate supplemental performance measure as 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, FFO provides a measure of our
returns on our investments in real estate assets. However, because
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 FFO as a measure of our performance is limited.
Our Core FFO begins with FFO and is adjusted for share-based
compensation; acquisition and integration costs; non-cash interest
expense related to deferred debt issuance costs, amortization of
loan discounts and mark-to-market adjustments on interest rate
derivatives; and other non-comparable items, as applicable. We
believe that 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 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. Because Core FFO,
similar to FFO, captures neither the changes in the value of the
homes nor the level of capital expenditures to maintain them, the
utility of Core FFO as a measure of our performance is limited.
Although management believes that FFO and Core FFO increase our
comparability with other companies, these measures may not be
comparable to the FFO or Core FFO of other companies because 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 FFO and Core FFO:
|
|
Three months ended March 31, 2020 |
GAAP net loss |
|
$ |
(20,215 |
) |
|
|
|
Adjustments to
determine FFO: |
|
|
Depreciation and
amortization |
|
20,366 |
|
Impairment |
|
235 |
|
Net gain on real estate and
mortgage loans |
|
(1,533 |
) |
FFO |
|
(1,147 |
) |
|
|
|
Adjustments to
determine Core FFO: |
|
|
Acquisition and integration
costs |
|
69 |
|
Non-cash interest expense |
|
2,743 |
|
Share-based compensation |
|
1,487 |
|
Other adjustments |
|
3,447 |
|
Core FFO |
|
$ |
6,599 |
|
|
|
|
Weighted average common stock
outstanding - basic and diluted |
|
53,943,434 |
|
FFO per share - basic and
diluted |
|
$ |
(0.02 |
) |
Core FFO per share - basic and
diluted |
|
$ |
0.12 |
|
|
|
|
|
|
FOR FURTHER INFORMATION CONTACT: |
Investor Relations |
T: 1-704-558-3068 |
E: IR@fyrhomes.com |
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