A 2021 Update on Ocwen Altisource’s Firesale of Front Yard Residential

Bill Erbey’s Front Yard Residential and the Pretium Partnership negotiated the sale following the collapse of the Amherst sale due to the pandemic.

Pretium, Ares Close $2.5B Acquisition of Front Yard Residential

The deal makes Pretium the second-largest owner and operator of single-family rentals in the U.S. and is the SFR industry’s first public-to-private transaction.
JAN 13, 2021 | REPUBLISHED BY LIT: MAR 13, 2021

Front Yard Residential Corp. has been taken private as the $2.5 billion acquisition by Pretium and Ares Management Corp. closed this week, making Pretium the second-largest owner and operator of single-family rental properties in the U.S. The closing also marked the SFR industry’s first public-to-private transaction.

Pretium, an alternative investment management firm focused on residential real estate, mortgage finance and corporate credit that has more than $18 billion of assets under management, adds Front Yard’s portfolio of more than 14,500 rental homes to its portfolio that now spans more than 55,000 properties. Front Yard’s assets were mainly scattered across the Sunbelt along with several Midwestern states such as Indiana and Minnesota. About three-quarters of the properties are in markets where Pretium already operates allowing it to expand its scale and improve operating efficiencies in those areas.

Pretium will manage the venture and partner with Ares to further optimize and expand Front Yard’s portfolio of assets. The all-cash deal, which includes a group of Pretium investors and funds managed by the Real Estate Equity and Alternative Credit strategies at Ares, was announced in October. The parties amended the merger agreement in late November, boosting the amount of stock paid out to Front Yard stockholders from $13.50 per share in cash to $16.25 per share in cash, valuing the company at $2.5 billion instead of $2.4 billion as stated in October.

The revised transaction price represents a 63 percent premium over Front Yard’s closing share price on Oct. 16, 2020, up significantly from the approximately 36 percent premium over the Oct. 16 closing price. Front Yard and the Pretium partnership negotiated the amendment after Front Yard received an unsolicited binding proposal from an unaffiliated third party to acquire all the outstanding shares of Front Yard common stock. The amended deal still calls for the Pretium partnership to assume or refinance Front Yard debt.

George Ellison, Front Yard CEO, said in November the company and its board of directors believed it was the best way to maximize cash value to the Front Yard stockholders. After Monday’s closing, Ellison said in a prepared statement Pretium and Ares were the perfect partners to take Front Yard to the next level. He cited the firms’ extensive operating and investment experience combined with the depth and breadth of their real estate platforms to grow Front Yard’s business.

Don Mullen, Pretium chairman & CEO, said in prepared remarks the partnership looks forward to leveraging its operating platform and scale to capitalize on opportunities in the growing SFR market. He said there is urgency among institutional investors to deploy capital to the asset class because of its record-high occupancy rates, stable cash-flow characteristics and potential for continued capital appreciation.

Front Yard, which had been listed on the NYSE until this week’s deal closing, had previously struck a deal, announced last February, to be acquired by Amherst Holdings subsidiary Amherst Residential for $2.3 billion. The agreement fell apart in May.


RBC Capital Markets LLC, served as financial advisor to Pretium. BofA Securities served as financial advisor to Ares. Sidley Austin served as M&A legal counsel, Fried Frank as partnership legal counsel, and Hunton Andres Kurth as special tax and financing counsel to Pretium. Latham & Watkins served as legal counsel to Ares.

Deutsche Bank Securities Inc. served as financial advisor to Front Yard and Weil, Gotshal & Manges LLP served as Front Yard’s legal counsel.

More Players Enter Field

The pandemic, which ended Front Yard’s initial planned sale, is spurring investments in the SFR industry by major players like Blackstone, Nuveen Real Estate and JPMorgan Chase & Co.’s asset management since the COVID-19 crisis began last March.

On the same day in October when the original merger deal was announced by Pretium, Ares and Front Yard, global real estate investment management firm Rockpoint Group said it had formed a $250 million joint venture with Resicap, a major SFT owner and operator. Rockpoint and Resicap’s plan calls for the JV to acquire, renovate and lease 4,500 and 5,000 homes in suburban neighborhoods of the Southeast, Florida and Texas.

Also in October, Nuveen announced it was investing up to $400 million in a new SFR startup called Sparrow, which will initially focus on properties in Arizona, Florida and Texas.

In November, multifamily firm RangeWater Real Estate, formerly known as Pollack Shores Real Estate Group, launched Storia, a new build-to-rent single-family platform. The firm plans to deploy about $800 million over the next 18 months by building about 15 communities in Sunbelt metros where it already operates.

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Altisource Scores $652M Single-Family Portfolio

The REIT picked up properties in six southern states and than doubled the size of its rental-home holdings.
OCT 5, 2016 | REPUBLISHED BY LIT: MAR 13, 2021

Christiansted, U.S. Virgin Islands—A massive portfolio of single-family rental houses—some 4,262 units in the South—has traded for $652 million. The buyer, Altisource Residential LP, is an operating partnership controlled by Altisource Residential Corp., a publicly traded REIT headquartered in the U.S. Virgin Islands. Amherst Holdings LLC of Austin, Texas, was the seller.

Altisource Residential acquired a 100 percent equity interest in the portfolio. As part of the transaction, an Amherst-sponsored entity is providing seller financing equal to 75 percent of the purchase price. Amherst will remain the property manager for the portfolio through its subsidiary, Main Street Renewal LLC.

The transaction more than doubles the size of Altisource Residential’s single-family rental portfolio, according to the buyer. It also enhances its presence in new and existing target markets, including Florida, Texas, Georgia, Tennessee, North Carolina and South Carolina.

Altisource Residential continues to make the transition to a 100 percent single-family rental REIT and “to capitalize on attractive single-family rental economics,” said George Ellison, the company’s CEO, in a statement. “These high-yielding properties are an excellent fit for the [our] brand and expand our geographic reach in strategic markets.” The company’s goal is to have 10,000 rental homes by the end of 2016.

For Amherst’s part, said CEO Sean Dobson, “We are creating turnkey opportunities for investors globally to gain access to large portfolios of professionally managed and financed rental homes.” Amherst received legal counsel from Skadden, Arps, Slate, Meagher & Flom LLP and Mayer Brown LLP. Nomura Securities International Inc. served as the financial advisor.

A 2021 Update on Ocwen Altisource’s Firesale of Front Yard Residential
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