Leading Proxy Advisory Firm Recommends Stockholders Vote FOR Lazar
Nikolic and Jeffrey Pierce, Who Possess Deep REIT and Single-Family
Market Experience As Well As Additive Ownership Perspectives
ISS Believes Change is Warranted on Front Yard’s Board Given the
Company’s Long-Term Underperformance, Ineffective Strategy and Weak
Corporate Governance
ISS Highlights That Since George Ellison Became Front Yard’s CEO
and Initiated its Transition to a Single-Family Rental REIT, the Company
Has Failed to Gain Adequate Scale While Incurring Too Much Debt and
Generating Insufficient Income – Resulting in Negative Returns
In Addition to Sharing Concerns About the Incumbent Board’s
Independence and Qualifications, ISS Notes That George Ellison’s Roles
as CEO of Front Yard and AAMC May Pose Conflicts of Interest
Snow Park Urges Stockholders Seeking Checks-and-Balances and a
Path to NAV Realization to Vote FOR All Three of Its Highly-Qualified,
Independent Nominees on the BLUE Proxy Card
NEW YORK–(BUSINESS WIRE)–Snow Park Capital Partners, LP (together with its affiliates, “Snow
Park” or “we”) today announced that Institutional Shareholder Services
Inc. (“ISS”), a leading proxy advisory firm, has endorsed its case for
change at Front Yard Residential Corporation (NYSE: RESI) (“Front Yard”
or the “Company”). ISS recommends that stockholders vote the BLUE
proxy card FOR the election of Snow Park’s highly-qualified and
independent nominees – Lazar Nikolic and Jeffrey Pierce – to Front
Yard’s Board of Directors (the “Board”) at the Company’s upcoming annual
meeting on May 23, 2019. ISS also recommends that stockholders WITHHOLD
votes from management’s incumbent director nominees Rochelle Dobbs and
Wade Henderson, two current members of the governance committee who have
failed to address Front Yard’s anti-stockholder restrictions and
policies.
Stockholders who agree that greater urgency is needed to effect change
at Front Yard should vote the BLUE
proxy card to elect Snow Park’s full slate of nominees that also
includes Leland Abrams, a sizable stockholder of the Company with
significant experience when it comes to the fundamentals, operating
realities and portfolio management dynamics of the single-family
residential market. For information pertaining to our case for change
and voting resources, please visit www.RenewRESI.com
today.
In its full report, ISS affirmed Snow Park’s criticisms of Front Yard’s
poor long-term performance, numerous strategic lapses, and weak
corporate governance. ISS concluded that stockholders should vote on the BLUE
proxy card:1
-
“The dissident has presented a compelling case that board change is
warranted. Since [George] Ellison’s succession as CEO, the board has
overseen value destruction driven by RESI’s transition to a fully
single-family rental-focused REIT, a process in which it has been
unable to gain sufficient scale, has taken on too much debt, and has
been unable to derive a sufficient return on acquisitions. These
factors, along with a governance structure that is disconnected from
the interests of shareholders, justifies the addition of at least two
dissident nominees.” -
“ISS measured TSR from Ellison’s succession as CEO in mid-2015 (which
will also approximate initiation of the strategy shift for purposes of
this analysis) through March 29, 2019 (the unaffected date), as well
as over the trailing one, three, and five years. ISS compared the
returns to the FTSE NAREIT All Equity REITs Index and to those of
peers (AMH and INVH – identified by both RESI and the dissident as
RESI’s closest public peers) […] RESI delivered negative returns
and underperformed the comparators over all four measurement periods.” -
“That RESI has contended with four activist situations over the period
is emblematic of the disconnect between the board and the investor
base. It is clear from this alone that the actions of the board
have been misaligned with the priorities of shareholders.”
With respect to structural issues that Snow Park believes evidences the
need for a new strategy at Front Yard, ISS noted:
-
“G&A expenses (plus management fees paid to AAMC) were 17.8 percent of
revenue in Q1 FY2019 (on revenue of $52.6 million), an increase from
16.3 percent in Q1 FY2018 (on revenue of $39.8 million). […] G&A
expenses (plus management fees)/revenue, on both a quarterly and
annual basis, have remained elevated relative to the ratios posted by
[AMH] and INVH, which were 3.4 percent and 5.7 percent in
FY2018, respectively […] even though RESI identifies reasons for the
increase in the ratio from Q1 FY2018 to Q1 FY2019, it is concerning in
light of the 32.3 percent increase in revenue.” -
“RESI’s balance sheet weakness is confirmed by the extent to
which its interest expense/revenue ratio is outsized relative to peers.
Interest expense was 40.9 percent of revenue in Q1 FY2019, an increase
from 40.4 percent in Q1 FY2018 – the figures for RESI, [AMH], and INVH
in FY2018 were 42.1 percent, 11.5 percent, and 22.3 percent,
respectively.” -
“While RESI’s rental property occupancy rate for Q1 FY2019 was in line
with the historical rates for AMH and INVH, RESI has not been
able to generate comparable returns. In FY2018, RESI posted
$183.0 million in revenue, equating to 8.7 percent of its $2.1 billion
year-end balance for real estate held for use (taken on a gross basis
before depreciation to better reflect the purchase price) – the ratio
was 11.7 percent for [AMH] and 9.5 percent for INVH.”
In its assessments of Front Yard’s board-level issues and corporate
governance weaknesses, ISS concluded:
-
“There are also concerns about board independence, as the CEO
and two other directors, chair Dobbs and director McDowell, had
overlapping terms of employment at Bank of America […] RESI
does not appear to contest the dissident’s assertion regarding their
relationships […] it is unclear how a collective of three directors
steeped in Bank of America culture is a value add for the board of an
SFR REIT.” -
“It is worth noting that [George] Ellison is not only a shareholder of
both RESI and AAMC […] but he is the CEO of both entities, which
arguably poses greater potential for a conflict of interest (and
opportunity for it to manifest).” -
“RESI has failed to provide shareholders with the ability to
amend the bylaws, which constitutes a material governance failure and
represents a flagrant disregard for shareholders’ rights. The
board’s decision not to opt out of MUTA, even if only to generate some
goodwill among its shareholder base during this proxy contest, serves
to magnify this concern.”
Jeffrey Pierce, Founder and Managing Partner of Snow Park, commented:
“We are very pleased that ISS supports Snow Park’s case for change at
Front Yard and recommends stockholders vote the BLUE
proxy card to elect Lazar Nikolic and myself. The thorough
assessment of Front Yard issued by ISS reaffirms nearly all of the
strategic lapses, structural issues and governance failures that Snow
Park has been highlighting in recent weeks. Notably, ISS appears to
share Snow Park’s core view that Front Yard’s current growth-centric
business plan has been – and remains – severely hindered by excessive
debt, extremely high expenses and an inability to generate sufficient
revenue from acquired properties. If elected, Snow Park’s
highly-qualified and independent nominees will work to reverse the
Company’s trajectory of negative returns by bringing important
checks-and-balances to the boardroom and pushing for a full strategic
review that assesses alternative paths to value creation.
We also agree with ISS that stockholders who feel a greater sense of
urgency is needed to effect change at Front Yard should consider voting
on the BLUE proxy card FOR
Snow Park’s full slate of three nominees that includes Leland Abrams, a
sizable stockholder of the Company with significant experience when it
comes to the fundamentals, operating realities and portfolio management
dynamics of the single-family residential market. Given that Front Yard
has destroyed approximately $500 million in stockholder wealth in recent
years and the Company still has no credible plan for realizing
management’s stated Net Asset Value of $17.50 per share,2 we
believe the case for meaningful and timely change could not be clearer.
Although Front Yard has repeatedly shown it is willing to misrepresent
the Company’s dire state and mischaracterize Snow Park’s interests, we
encourage our fellow stockholders to focus on the
facts as they relate to the incumbent Board’s poor track record,
unaddressed conflicts and lack of vision. Stockholders have two
distinct choices this year: either place more trust in the hands of the
incumbent Board that has already presided over an approximately 50%
decline in share price in recent years OR vote to install owners with
real alignment of interests and additive experience in the boardroom to
ensure all paths to maximizing value are impartially evaluated. All
three members of Snow Park’s slate want nothing more than to apply their
expertise and knowledge towards delivering the value that Front Yard’s
long-suffering stockholders deserve.”
We urge Front Yard stockholders to vote FOR all three of Snow Park’s
highly-qualified, independent nominees – stockholders Leland Abrams,
Lazar Nikolic and Jeffrey Pierce – on the BLUE
proxy card and to return it in your postage-paid envelope provided. If
you have already voted Front Yard’s proxy card, you can change your vote
by providing a later dated BLUE proxy card.
Should you have any questions or need assistance with voting, please
contact Saratoga Proxy Consulting LLC at (888) 368-0379 or (212)
257-1311 or by email at [email protected].
PROTECT YOUR INVESTMENT. PLEASE SIGN, DATE, AND MAIL
THE BLUE PROXY CARD TODAY!
VISIT WWW.RENEWRESI.COM
TODAY.
About Snow Park
Snow Park Capital Partners, LP is a privately-held investment manager
that specializes in investing in publicly-traded real estate securities
across the capital structure. Based in New York City and founded by
Jeffrey Pierce, the firm focuses on producing strong risk-adjusted
returns for a diverse investor base of public institutions, private
entities and qualified individual clients.
1 Permission to quote ISS was neither sought nor obtained.
Emphases added.
2 A NAV of $17.50 was set forth in Front Yard’s February 2019
earnings call transcript
Contacts
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John Ferguson /
Joe Mills, 212-257-1311
[email protected]
/ [email protected]
For
Media:
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Greg Marose / Ashley Areopagita, 347-343-2999
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