The Board of Directors of Front Yard Residential Corporation
(“Front Yard” or the “Company”) (NYSE: RESI) today issued a letter
to its stockholders with respect to its upcoming annual meeting of
stockholders. The full text of the letter is below:
June 11, 2020
Dear Fellow Front Yard Stockholder:
In a recent letter to Front Yard stockholders,
Altisource Portfolio Solutions S.A. (“ASPS”) announced that it is
conducting a withhold vote campaign with respect to the re-election
of certain of Front Yard’s Board members. As part of its
campaign, we believe that ASPS made inaccurate and misleading
statements about our Company, Board and management. While we do not
believe it is productive to address every inaccuracy or misleading
statement made by ASPS, we do feel it is very important that
stockholders understand the views of Front Yard’s Board and
management.
The Front Yard Board and management team remain
fully committed to and focused on enhancing value for our
stockholders, and we will continue to take actions to achieve this
important objective. The Front Yard Board demonstrated its
commitment to driving stockholder value when, in May 2019, the
Board initiated a comprehensive review of strategic alternatives
available to the Company. As part of that review, the Board
considered a full range of strategic options to maximize
shareholder value, including the potential termination of the asset
management agreement (the “AMA”) with Altisource Asset Management
Corporation (“AAMC”) and internalization of the Company’s asset
management function, a liquidation or partial liquidation of the
Company, strategic sales of portions of the portfolio, formation of
a joint venture or strategic partnership and a sale of the Company.
All options were on the table.
In February 2020, after completing the review of
strategic alternatives, we announced that Front Yard had entered
into a merger agreement with Amherst Residential, LLC (“Amherst
Residential”) whereby Amherst Residential would acquire Front
Yard. The Board unanimously approved the deal because we
believed it would maximize value for our stockholders.
However, the health crisis caused by the coronavirus (COVID-19)
pandemic created a number of risks and uncertainties relating to
the transaction. Given the unprecedented economic conditions
and attendant business risks, the Strategic Review Committee and
Front Yard Board unanimously determined that it was in the best
interests of the Company and its stockholders to terminate the
merger with Amherst Residential and enter into the alternative
transaction that was announced on May 4, 2020, pursuant to which
Amherst Residential agreed to pay a $25 million fee to Front Yard,
purchase shares of Front Yard common stock for $12.50 per share (an
aggregate purchase price of $55 million) and provide a $20 million
committed two-year unsecured loan facility to Front Yard. The
Front Yard Board firmly believes that this alternative transaction
was the best outcome for our stockholders given the circumstances
and in light of the uncertainty, disruption and risks to Front Yard
and its business of continuing to pursue the transaction. The $100
million that Front Yard received in connection with the termination
of the transaction will provide a level of liquidity, stability and
optionality that will help drive value in the future.
While we, like many of Front Yard’s stockholders,
are disappointed that the transaction with Amherst Residential
could not proceed, we are highly focused on continuing the upward
trend in Front Yard’s operational performance – the first quarter
of 2020 was Front Yard’s best ever operational quarter – and we
believe that this trend will continue. We are confident that
Front Yard and the single-family rental industry are
well-positioned for continued success that will build long-term
stockholder value. It is critical that the Board and Front
Yard management team remain focused on the business.
To that end, the Board and Front Yard management
team have been focused on returning to business as usual following
the termination of the Amherst transaction, which included
scheduling and holding the annual meeting of stockholders as near
as possible to the time that Front Yard has held its annual
stockholder meetings in the past. Contrary to ASPS’ claims, Front
Yard complied with all applicable laws related to this year’s
annual meeting of stockholders. Our proxy statement was made
publicly available to stockholders on May 28, 2020, well before the
annual meeting.
Front Yard benefits from a diverse and
highly-qualified Board that is actively engaged and focused on
maximizing value for our stockholders. Our Board consists of eight
members, seven of whom are independent and three of whom have been
added in the past year (and of the new directors, two were selected
in consultation with some of our largest stockholders). Our Board
possesses deep industry experience and a diverse skillset,
including experience in real estate management and investment,
asset finance, transactions, structured products, and developing
strategic relationships.
The Board is focused on continuing to take
significant actions to help drive shareholder value. In fact, over
the last two years, the Board has:
- Increased available liquidity by $100 million in the face of a
financial crisis;
- Overseen significant improvement in operational performance as
illustrated in the Company’s Q1 2020 results;
- Developed scale in attractive markets with favorable long-term
demographics;
- Negotiated an improved Asset Management Agreement with AAMC
that creates a foundation for sustainable growth and includes
flexibility to terminate AAMC and internalize its asset management
function if the Board determines that is best for Front Yard
stockholders;
- Grown the Company’s rental portfolio to 14,442 homes; and
- Internalized our property management function.
We believe Front Yard is on the path to generate
sustained long-term financial and operating performance, and we are
committed to pursuing a course that creates value for all
stockholders. The Board will, however, continue to evaluate
all strategic options to enhance value for Front Yard stockholders,
including the potential termination of the AMA and internalization
of the Company’s asset management function, a potential sale of the
Company and other transactions, strategic investments and/or
dispositions that can optimize returns for our stockholders.
The Front Yard Board has the right to terminate the AMA for
convenience under the terms of the agreement at any time and, as
part of continuing to consider what is in the best interests of
Front Yard stockholders, the Board will consider whether and when
to terminate the AMA.
We thank you for your continued support.
Sincerely,
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Rochelle R.
DobbsChair of the Board of Directors |
Leland
AbramsIndependent Director |
George G.
EllisonDirector and Chief Executive Officer |
Michael A.
EruzioneIndependent Director |
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Leslie
FoxIndependent Director |
Wade
HendersonIndependent Director |
Lazar
NikolicIndependent Director |
George W.
McDowellIndependent Director |
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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 the potential adverse impact on our real-estate
related assets, financing arrangements, operations, business
prospects, customers, employees and third-party service providers;
the impact of any litigation or shareholder activism; 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
manage and maintain adequate liquidity and meet the requirements
under our 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.
FOR FURTHER INFORMATION
CONTACT:Investor RelationsT: 1-704-558-3068E:
IR@fyrhomes.com
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