Pretium Partners and Ares Management Acquire US Rental REIT Front Yard Residential Corporation
Posted on 10/19/2020
Front Yard Residential Corporation is a listed company focused on affordable rental homes. A partnership between Pretium Partners, LLC (Pretium) and including funds managed by the Real Estate Equity and Alternative Credit strategies of Ares Management Corporation is buying Front Yard Residential Corporation. The transaction is valued at approximately US$ 2.4 billion, including debt to be assumed or refinanced. At June 30, 2020, Front Yard Residential Corporation controlled 14,460 rental and real-estate-owned properties.
Under the terms of the agreement, Front Yard stockholders will receive US$ 13.50 in cash per share. The per share purchase price represents a premium of approximately 35.5% over Front Yard’s closing share price on October 16, 2020, the last trading day prior to today’s announcement, and 45.4% over Front Yard’s one-month volume-weighted average share price.
Hedge fund Deer Park Road Management Company LP is the largest institutional owner of Front Yard Residential Corporation with 7,682,494 shares, or 13.1% ownership, according to the latest filings.
Founded in 2012, Pretium is a specialized alternative investment management firm focused on residential real estate, mortgage finance, and corporate credit.
Deutsche Bank Securities Inc. is serving as financial advisor to Front Yard and Weil, Gotshal & Manges LLP is serving as Front Yard’s legal counsel.
RBC Capital Markets, LLC is serving as financial advisor to Pretium. BofA Securities is serving as financial advisor to Ares. Sidley Austin is serving as M&A legal counsel, Fried Frank as partnership legal counsel, and Hunton Andrews Kurth as special tax and financing counsel to Pretium. Latham & Watkins is serving as legal counsel to Ares.
Front Yard Residential Corporation is formerly Altisource Residential Corporation.
In August 2020, Front Yard Residential Corporation agreed to terminate their existing asset management agreement with Altisource Asset Management Corporation. Altisource Asset Management Corporation had performed management services for Front Yard, facilitating the Company’s transition from an externally-managed REIT to an internally-managed REIT. In connection with the Termination Agreement, Front Yard will pay an aggregate termination fee of US$ 46 million to Altisource Asset Management Corporation, consisting of an upfront payment of US$ 15,000,000 in cash.