Front Yard Residential Corporation (“Front Yard” or the “Company”)
(NYSE: RESI) today announced its financial and operating results
for the first quarter of 2020.
First Quarter 2020 Highlights and Recent
Developments
- Settled the termination of the previously announced merger
agreement with Amherst Residential, LLC (“Amherst”), pursuant to
which Amherst agreed to pay a $25 million termination fee, 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.
- 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 fourth quarter 2019.1
- March 31, 2020 was Front Yard's best ever Stabilized Rental
leased percentage of 97.0%, up 200 basis points from 95.0% as of
December 31, 2019.
- Blended rent growth of 3.2%, consisting of renewal rent growth
of 4.5% and re-lease rent growth of 1.5%.
- Stabilized Rental Core Net Operating Income (“NOI”) Margin was
60.0%, an improvement of 240 basis points over fourth quarter
2019.1
- Sold 82 non-core homes for proceeds of $12.9 million and a $1.5
million gain over carrying value.
- April rent collections exceeded 99% of Front Yard's trailing
12-month average and Stabilized Rental leased percentage was 97.7%
at April 30, 2020.
“With the termination of the merger agreement, we are highly
focused on continuing the upward trend in Front Yard's operational
performance while mitigating the impact of the COVID-19 pandemic on
our residents, our employees and our results of operations,” stated
George Ellison, Chief Executive Officer. “We believe Front Yard's
business has demonstrated itself to be resilient and is well
positioned for continued success that will build long-term
stockholder value.”________________1 Stabilized Rental Core
NOI Margin and Core FFO are non-GAAP measures. Refer to the
Reconciliation of Non-GAAP Financial Measures section for further
information and reconciliation to GAAP net loss.
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.
Webcast and Conference Call
The Company will host a webcast and conference call on Monday,
May 11, 2020, at 8:30 a.m. Eastern Time to discuss its
financial results for the first quarter of 2020. The live audio
webcast of the conference call and an accompanying supplemental
investor presentation can be accessed on Front Yard’s website at
www.frontyardresidential.com by clicking on the “Investors”
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 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 the potential adverse impact on our real-estate
related assets, financing arrangements, operations, business
prospects, customers, employees and third-party service providers;
the effect of the termination of the Agreement and Plan of Merger
with Amherst on our relationships with our customers, financing
sources, third-party service providers, operating results and
business generally; the impact of the costs of the merger
transaction that will be borne by the Company despite the merger
transaction being terminated; the effect of management’s attention
being diverted from our ongoing business operations prior to the
merger transaction being terminated; the impact of defending any
litigation associated with the termination of the merger
transaction; 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”), Core Funds from Operations
(“Core FFO”), Stabilized Rental Net Operating Income (“Stabilized
Rental NOI”), Stabilized Rental Net Operating Income Margin
(“Stabilized Rental NOI Margin”) and Stabilized Rental Core Net
Operating Income Margin (“Stabilized Rental Core NOI Margin”),
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, Core FFO,
Stabilized Rental NOI, Stabilized Rental NOI Margin and Stabilized
Rental Core NOI Margin for the periods 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 |
|
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 identified for sale.
Stabilized Rental NOI, Stabilized Rental NOI Margin and
Stabilized Rental Core 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 define Stabilized Rental Core NOI Margin as
Stabilized Rental NOI divided by core rental revenues from
Stabilized Rentals, which are rental revenues less tenant
charge-back revenues attributable to our Stabilized Rentals.
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. In addition, Stabilized Rental Core NOI Margin
removes the impact of tenant charge-backs that are included in both
revenues and expenses and therefore have no impact to our net
results of operations. 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 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, Stabilized Rental NOI Margin or Stabilized
Rental Core 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,
Stabilized Rental NOI Margin and Stabilized Rental Core NOI
Margin:
|
|
Three months ended March 31, 2020 |
GAAP net loss |
|
$ |
(20,215 |
) |
|
|
|
Adjustments: |
|
|
Revenues from non-stabilized
properties |
|
32 |
|
Net gain on real estate and
mortgage loans |
|
(1,533 |
) |
Operating expenses on
non-stabilized properties |
|
360 |
|
Depreciation and
amortization |
|
20,366 |
|
Acquisition and integration
costs |
|
69 |
|
Impairment |
|
235 |
|
Interest expense |
|
19,496 |
|
Share-based compensation |
|
1,487 |
|
General and
administrative |
|
7,591 |
|
Management fees to AAMC |
|
3,584 |
|
Other expense |
|
216 |
|
Stabilized Rental NOI |
|
$ |
31,688 |
|
|
|
|
Rental revenues |
|
$ |
54,328 |
|
Less: rental revenues from
non-stabilized properties |
|
32 |
|
Rental revenues from Stabilized Rentals |
|
54,360 |
|
Less: tenant charge-back
revenues from Stabilized Rentals |
|
(1,534 |
) |
Core rental revenues from Stabilized Rentals |
|
$ |
52,826 |
|
|
|
|
Stabilized Rental NOI
Margin |
|
58.3 |
% |
Stabilized Rental Core NOI
Margin |
|
60.0 |
% |
FOR FURTHER
INFORMATION CONTACT: |
Investor Relations |
T: 1-704-558-3068 |
E: IR@fyrhomes.com |
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