Front Yard Residential Corporation (“Front Yard” or the “Company”)
(NYSE: RESI) today announced its financial and operating results
for the second quarter of 2020.
Second Quarter 2020 Highlights and Recent
Developments
- Rental revenues increased to $55.1 million for the second
quarter of 2020, up 1.5% over the first quarter of 2020 and up 6.9%
year on year.
- Core Funds from Operations (“FFO”) were $0.18 per diluted
share, an improvement of $0.06 per diluted share over the first
quarter of 2020 and up $0.13 year on year.1
- Adjusted FFO was $0.09 per diluted share for the second quarter
of 2020.1
- Stabilized Rental leased percentage was 98.3%, up from 97.0% as
of March 31, 2020 and 94.1% as of June 30, 2019.
- Blended rent growth of 4.1%, with renewal rent growth of 4.1%
and re-lease rent growth of 4.3%.
- Stabilized Rental Core Net Operating Income (“NOI”) Margin was
61.5%, up from 60.0% in the first quarter of 2020 and up 59.7% in
the second quarter of 2019.1
- Sold 30 non-core homes for proceeds of $5.9 million and a gain
of $0.3 million over carrying value.
- Settled the termination of the previously announced merger
agreement with Amherst Residential, LLC (“Amherst”), pursuant to
which Amherst paid a $25 million termination fee, purchased 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
made available a $20 million committed two-year unsecured loan
facility to Front Yard.
- July rent collections exceeded 99% of Front Yard's trailing
12-month average and Stabilized Rental leased percentage increased
to 98.7% at July 31, 2020.
“We remain focused on the welfare of our residents
and employees during these challenging times,” said George Ellison,
Chief Executive Officer. “At the same time, the strong second
quarter provides proof of the attractiveness and resilience of the
single-family rental sector in general and Front Yard in
particular, and we are proud to report record occupancy levels
coupled with strong rent growth and continued efficiency
improvements.”
|
|
|
|
|
|
1 |
Stabilized Rental Core NOI Margin, Core FFO and
Adjusted FFO are non-GAAP measures. Refer to the Reconciliation of
Non-GAAP Financial Measures section for further information and
reconciliation to GAAP net income. |
Second Quarter 2020 Financial
Results
GAAP net income for the second quarter of 2020 was
$4.0 million, or $0.07 per diluted share, compared to a net loss of
$25.0 million, or $0.47 per diluted share, for the second quarter
of 2019.
GAAP net loss for the six months ended June 30,
2020 was $16.2 million, or $0.29 per diluted share, compared to a
net loss of $43.5 million, or $0.81 per diluted share, for the six
months ended June 30, 2019.
Webcast and Conference Call
The Company will host a webcast and conference call
on Monday, August 10, 2020, at 8:30 a.m. Eastern Time to
discuss its financial results for the second 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 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
Front Yard Residential
CorporationCondensed Consolidated Statements of
Operations(In thousands, except share and per
share amounts)(Unaudited)
|
Three months ended June 30, |
|
Six months ended June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues: |
|
|
|
|
|
|
|
Rental revenues |
$ |
55,128 |
|
|
$ |
51,553 |
|
|
$ |
109,456 |
|
|
$ |
104,178 |
|
Total revenues |
55,128 |
|
|
51,553 |
|
|
109,456 |
|
|
104,178 |
|
Expenses: |
|
|
|
|
|
|
|
Residential property operating
expenses |
18,826 |
|
|
18,968 |
|
|
37,687 |
|
|
37,405 |
|
Property management
expenses |
3,627 |
|
|
3,538 |
|
|
7,798 |
|
|
7,213 |
|
Depreciation and
amortization |
20,242 |
|
|
19,936 |
|
|
40,608 |
|
|
42,321 |
|
Acquisition and integration
costs |
73 |
|
|
651 |
|
|
142 |
|
|
2,862 |
|
Impairment |
654 |
|
|
1,576 |
|
|
889 |
|
|
2,596 |
|
Mortgage loan servicing
costs |
— |
|
|
194 |
|
|
— |
|
|
581 |
|
Interest expense |
18,916 |
|
|
21,165 |
|
|
38,412 |
|
|
42,675 |
|
Share-based compensation |
936 |
|
|
1,811 |
|
|
2,423 |
|
|
2,930 |
|
General and
administrative |
9,052 |
|
|
7,992 |
|
|
16,643 |
|
|
13,758 |
|
Management fees to AAMC |
3,584 |
|
|
3,556 |
|
|
7,168 |
|
|
7,131 |
|
Total expenses |
75,910 |
|
|
79,387 |
|
|
151,770 |
|
|
159,472 |
|
Net (loss) gain on real estate
and mortgage loans |
(163 |
) |
|
3,842 |
|
|
1,370 |
|
|
12,619 |
|
Operating loss |
(20,945 |
) |
|
(23,992 |
) |
|
(40,944 |
) |
|
(42,675 |
) |
Casualty losses |
(345 |
) |
|
(184 |
) |
|
(632 |
) |
|
(577 |
) |
Insurance recoveries |
12 |
|
|
11 |
|
|
75 |
|
|
538 |
|
Other income (loss) |
25,301 |
|
|
(846 |
) |
|
25,309 |
|
|
(797 |
) |
Net income (loss) before income taxes |
4,023 |
|
|
(25,011 |
) |
|
(16,192 |
) |
|
(43,511 |
) |
Income tax expense |
28 |
|
|
6 |
|
|
28 |
|
|
14 |
|
Net income (loss) |
$ |
3,995 |
|
|
$ |
(25,017 |
) |
|
$ |
(16,220 |
) |
|
$ |
(43,525 |
) |
|
|
|
|
|
|
|
|
Earnings (loss) per
share of common stock - basic: |
|
|
|
|
|
|
|
Earnings (loss) per basic
share |
$ |
0.07 |
|
|
$ |
(0.47 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.81 |
) |
Weighted average common stock
outstanding - basic |
56,272,446 |
|
|
53,714,998 |
|
|
55,107,940 |
|
|
53,672,835 |
|
Earnings (loss) per
share of common stock - diluted: |
|
|
|
|
|
|
|
Earnings (loss) per diluted
share |
$ |
0.07 |
|
|
$ |
(0.47 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.81 |
) |
Weighted average common stock
outstanding - diluted |
56,796,936 |
|
|
53,714,998 |
|
|
55,107,940 |
|
|
53,672,835 |
|
|
|
|
|
|
|
|
|
Dividends declared per common
share |
$ |
— |
|
|
$ |
0.15 |
|
|
$ |
0.15 |
|
|
$ |
0.30 |
|
Front Yard Residential
CorporationCondensed Consolidated Balance
Sheets(In thousands, except share and per share
amounts)
|
June 30, 2020 |
|
December 31, 2019 |
|
(unaudited) |
|
|
Assets: |
|
|
|
Real estate held for use: |
|
|
|
Land |
$ |
397,878 |
|
|
$ |
398,840 |
|
Rental residential properties |
1,718,513 |
|
|
1,707,043 |
|
Real estate owned |
12,684 |
|
|
16,328 |
|
Total real estate held for use |
2,129,075 |
|
|
2,122,211 |
|
Less: accumulated
depreciation |
(244,183 |
) |
|
(206,464 |
) |
Total real estate held for use, net |
1,884,892 |
|
|
1,915,747 |
|
Real estate assets held for
sale |
4,699 |
|
|
14,395 |
|
Cash and cash equivalents |
109,018 |
|
|
43,727 |
|
Restricted cash |
31,994 |
|
|
34,282 |
|
Accounts receivable |
5,199 |
|
|
9,235 |
|
Goodwill |
13,376 |
|
|
13,376 |
|
Prepaid expenses and other
assets |
23,431 |
|
|
22,360 |
|
Total assets |
$ |
2,072,609 |
|
|
$ |
2,053,122 |
|
|
|
|
|
Liabilities: |
|
|
|
Repurchase and loan
agreements |
$ |
1,629,283 |
|
|
$ |
1,644,230 |
|
Accounts payable and accrued
liabilities |
67,309 |
|
|
64,619 |
|
Payable to AAMC |
3,886 |
|
|
5,014 |
|
Total liabilities |
1,700,478 |
|
|
1,713,863 |
|
|
|
|
|
Commitments and
contingencies |
— |
|
|
— |
|
|
|
|
|
Equity: |
|
|
|
Common stock, 0.01 par value,
200,000,000 authorized shares; 58,747,146 shares issued and
outstanding as of June 30, 2020 and 53,933,575 shares issued
and outstanding as of December 31, 2019 |
587 |
|
|
539 |
|
Additional paid-in
capital |
1,245,493 |
|
|
1,189,236 |
|
Accumulated deficit |
(855,085 |
) |
|
(830,602 |
) |
Accumulated other
comprehensive loss |
(18,864 |
) |
|
(19,914 |
) |
Total equity |
372,131 |
|
|
339,259 |
|
Total liabilities and equity |
$ |
2,072,609 |
|
|
$ |
2,053,122 |
|
Front Yard Residential
Corporation Regulation 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”) , Adjusted Funds from Operations (“Adjusted
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, Adjusted FFO, Stabilized Rental NOI, Stabilized Rental NOI
Margin and Stabilized Rental Core NOI Margin for the periods
presented:
FFO, Core FFO and Adjusted 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.
Our Adjusted FFO begins with Core FFO and is
adjusted for cash paid for leasing commissions and recurring
capital expenditures. We believe that Adjusted 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 Core FFO and is further helpful as it
provides a consistent measurement of the costs to maintain the
condition of our properties as well as costs to obtain residents.
Because Adjusted FFO, similar to FFO and Core FFO, does not capture
the changes in the value of the homes, the utility of Adjusted FFO
as a measure of our performance is limited.
Although management believes that FFO, Core FFO and
Adjusted FFO increase our comparability with other companies, these
measures may not be comparable to the FFO, Core FFO or Adjusted 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 and/or Adjusted FFO or may utilize
metrics other than or in addition to Core FFO or Adjusted FFO.
The following table provides a reconciliation of
net income as determined in accordance with U.S. GAAP to FFO, Core
FFO and Adjusted FFO:
|
|
Three months ended June 30, 2020 |
Net income |
|
$ |
3,995 |
|
|
|
|
Adjustments to
determine FFO: |
|
|
Depreciation and
amortization |
|
20,242 |
|
Impairment |
|
654 |
|
Net loss on real estate and
mortgage loans |
|
163 |
|
FFO |
|
25,054 |
|
|
|
|
Adjustments to
determine Core FFO: |
|
|
Acquisition and integration
costs |
|
73 |
|
Non-cash interest expense |
|
3,675 |
|
Share-based compensation |
|
936 |
|
Non-ordinary legal and
professional fees (1) |
|
5,358 |
|
Merger termination fee |
|
(25,000 |
) |
Other adjustments (2) |
|
208 |
|
Core FFO |
|
10,304 |
|
|
|
|
Adjustments to
determine Adjusted FFO: |
|
|
Recurring capital
expenditures |
|
(4,728 |
) |
Leasing commissions |
|
(671 |
) |
Adjusted FFO |
|
$ |
4,905 |
|
|
|
|
Weighted average common stock
outstanding – basic |
|
56,272,446 |
|
FFO per share – basic |
|
$ |
0.45 |
|
Core FFO per share –
basic |
|
$ |
0.18 |
|
Adjusted FFO per share –
basic |
|
$ |
0.09 |
|
|
|
|
Weighted average common stock
outstanding – diluted |
|
56,796,936 |
|
FFO per share – diluted |
|
$ |
0.44 |
|
Core FFO per share –
diluted |
|
$ |
0.18 |
|
Adjusted FFO per share –
diluted |
|
$ |
0.09 |
|
|
|
|
|
|
|
(1) |
Relates to non-operational and non-ordinary legal
fees, such as costs associated with Front Yard's strategic review
initiative, shareholder activism, negotiation of the asset
management agreement or similar matters. For the second quarter of
2020, consists primarily of legal and professional fees related to
the merger with Amherst that was ultimately not consummated. |
(2) |
Includes casualty losses, insurance recoveries and
other non-recurring income and expense items that management has
determined are not representative of Front Yard's core ongoing
operations. |
Stabilized Rental: A home is 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 may become non-stabilized due to a first-time
renovation subsequent to acquisition, casualty event that makes it
unsafe or uninhabitable, or because the home has been identified
for sale and no longer leased.
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 income 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 June 30, 2020 |
Net income |
|
$ |
3,995 |
|
|
|
|
Adjustments: |
|
|
Revenues from non-stabilized
properties |
|
(26 |
) |
Net loss on real estate and
mortgage loans |
|
163 |
|
Operating expenses on
non-stabilized properties |
|
351 |
|
Depreciation and
amortization |
|
20,242 |
|
Acquisition and integration
costs |
|
73 |
|
Impairment |
|
654 |
|
Interest expense |
|
18,916 |
|
Share-based compensation |
|
936 |
|
General and
administrative |
|
9,052 |
|
Management fees to AAMC |
|
3,584 |
|
Income tax expense |
|
28 |
|
Other income |
|
(24,968 |
) |
Stabilized Rental NOI |
|
$ |
33,000 |
|
|
|
|
Rental revenues |
|
$ |
55,128 |
|
Less: rental revenues from
non-stabilized properties |
|
(26 |
) |
Rental revenues from Stabilized Rentals |
|
55,102 |
|
Less: tenant charge-back
revenues from Stabilized Rentals |
|
(1,431 |
) |
Core rental revenues from Stabilized Rentals |
|
$ |
53,671 |
|
|
|
|
Stabilized Rental NOI
Margin |
|
59.9 |
% |
Stabilized Rental Core NOI
Margin |
|
61.5 |
% |
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