Front Yard Residential Corporation (“Front Yard” or the “Company”)
(NYSE: RESI) announced today that the Company and Altisource Asset
Management Corporation (“AAMC”) have agreed to terminate their
existing asset management agreement (the “AMA”) pursuant to which
AAMC has performed management services for Front Yard, facilitating
the Company’s transition from an externally-managed REIT to an
internally-managed REIT.
On August 13, 2020, the parties entered into a
termination and transition agreement (the “Termination Agreement”),
which provides for the termination of the AMA following a
transition period and governs the acquisition by Front Yard of the
operations of AAMC related to the management of Front Yard’s
business (the “Internalization”). Front Yard’s board of directors
anticipates a smooth and timely transition of all functions
necessary to complete the Internalization pursuant to an agreed
upon transition plan specified in the Termination Agreement.
In connection with the Termination Agreement, Front
Yard will pay an aggregate termination fee of $46 million to AAMC,
consisting of an upfront payment of $15,000,000 in cash,
$15,000,000 in cash on the date that the parties mutually agree
that the transition is complete (which will be no later than
February 9, 2021) (the “Termination Date”) and $16,000,000 in cash
or common stock of the Company, at the Company’s election, on the
Termination Date. During the transition period, the Company will
continue to pay AAMC the base management fee provided for in the
existing AMA (equal to $3,584,000 per quarter as contemplated by
the existing AMA) and a pro rata portion of the base management fee
for any partial calendar quarter during such period, until such
time as Front Yard determines that the transition has been
completed.
In addition, in connection with the
Internalization, Front Yard will acquire, at its election, either
the equity interests or assets of AAMC’s Indian subsidiary, the
equity interests of AAMC’s Cayman Islands subsidiary, the right to
solicit and hire designated AAMC employees that currently oversee
the management of Front Yard’s business and other assets of AAMC
that are used in connection with the operation of Front Yard (the
“Acquired Assets”). The purchase price for the Acquired Assets is
$8,200,000, consisting of an upfront payment of $3,200,000 in cash
and $5,000,000 in cash or common stock of the Company, at the
Company’s election, on the Termination Date.
“The Board believes this transaction best positions
Front Yard for long-term success, while better aligning the
interests of the Company’s management, board of directors and
stockholders,” said Rochelle Dobbs, Chair of Front Yard’s Board of
Directors. “We believe that this is the appropriate time to
internalize asset management and we anticipate this change will
provide Front Yard with strategic, operational and financial
benefits that are expected to enhance stockholder value going
forward.”
“The termination of the asset management agreement
will enhance flexibility and resources as Front Yard continues to
improve operations,” said George Ellison, Front Yard’s Chief
Executive Officer. “Importantly, we believe the internalization
will provide a more efficient structure which should position Front
Yard well as we continue to build on our strong first two quarters
of 2020.”
AAMC has agreed to immediately reinstate George
Ellison and Robin Lowe in their roles as co-Chief Executive Officer
and Chief Financial Officer of AAMC, respectively, and has
reinstated their base compensation retroactively from June 9,
2020.
Additional details on the transaction can be found
in the Company’s Current Report on Form 8-K that will be filed with
the Securities and Exchange Commission (the “SEC”) and, when
available, will be viewable on the SEC’s website (www.sec.gov).
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 complete the transition plan; 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 were borne by the Company despite the merger
transaction being terminated; the effect of management’s attention
being diverted from our ongoing business operations and costs
associated with shareholder activism; the impact of defending any
litigation; 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; risks
related to our engagement of Altisource Asset Management
Corporation as our asset manager; 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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