OREANDA-NEWS. Altisource Residential Corporation (“Residential” or the “Company”) (NYSE:RESI) today reported financial and operating results for the second quarter of 2016.

Recent Developments and Second Quarter 2016 Highlights

  • Increased single-family rental (“SFR”) portfolio during the quarter by 13% over the prior quarter to 3,977 homes, including 3,010 rented properties, 273 listed and ready for rent and 694 properties under leasehold renovation and unit turn.
  • Stabilized rentals grew to 3,112 properties with 97% leased.
  • Completed the sale of 895 non-performing loans (“NPLs”) in June 2016 with an unpaid principal balance (“UPB”) of $213.1 million, or approximately 17% of the total remaining UPB in Residential’s loan portfolio.
  • Sold 910 real estate owned (“REO”) properties, representing an increase of 33% over the 686 REO properties sold in the first quarter of 2016.
  • Achieved average rent increases of approximately 6% on lease renewals.
  • Declared and paid a second quarter 2016 dividend of $0.15 per share.
  • Moved substantially all remaining Ocwen-serviced NPLs away from Ocwen as of August 1, 2016.
  • Entered into a non-binding letter of intent to purchase between 4,000 and 4,500 SFR properties from an unrelated third party, subject to due diligence, negotiation of definitive transaction documents, financing arrangements and other factors.

“We are encouraged by the continued execution of our strategic objectives,” said Chief Executive Officer, George Ellison.  “In the second quarter, we continued to grow our single-family rental portfolio with high-yielding properties while improving our operating metrics, opportunistically selling more NPLs and REO properties and identifying potential asset acquisitions capable of substantially increasing our portfolio in line with our targeted high yields.”

Strategic Update

During the second quarter of 2016 and thereafter, Residential has continued to pursue its objective of becoming one of the top single-family REITs serving working class American families and their communities with a view to providing robust returns on equity and long-term growth for investors. Among others, important steps taken recently to achieve these objectives include the following:

  • Residential has had continued success executing upon its diversified single-family acquisition strategy and capitalizing on the compelling market opportunity to acquire high-yielding single-family homes at attractive prices. During the second quarter of 2016, Residential increased the size of its rental portfolio by 446 properties to bring the rental portfolio to 3,977 properties at June 30, 2016, representing an increase of 13% over the prior quarter. The Company has developed and employed internal proprietary models, which it believes gives it an advantage in identifying and purchasing rental properties with optimal rental return metrics in areas that have attractive occupancy levels and rental margins.

    As discussed above, in July 2016, the Company entered into a non-binding letter of intent to acquire between 4,000 and 4,500 single-family rental properties from an unrelated third party, which is subject to continuing due diligence, negotiation of definitive transaction documents, financing arrangements and other factors. This transaction, which is targeted to achieve yields similar to Residential’s current single-family rental assets, would be expected to close in the third or fourth quarter of 2016 and would utilize a substantial portion of Residential’s free cash as of the end of the second quarter. Residential is also considering other large single-family rental portfolio purchases available in the market. There can be no assurance that Residential will be able to successfully negotiate and consummate any of these potential transactions on a timely basis or at all.

  • Residential continued its efforts to sell certain NPLs to take advantage of attractive market pricing, successfully completing the sale of 895 NPLs and bringing the total NPLs sold in bulk transactions to 1,973 for the first six months of 2016. The Company has also accelerated the sale of non-rental REO properties with 910 of such properties sold during the second quarter as compared to 686 properties sold in the first quarter of 2016, representing a 33% increase. The Company expects that NPL sales and non-rental REO property sales will allow it to recycle capital to purchase pools of stabilized rental homes at attractive yields, to repurchase common stock or to utilize the proceeds for such other purposes as the Company may determine.
  • Residential’s lenders continue to support its strategy. In March 2016, Residential increased the size of its repurchase facility with Credit Suisse from $275.0 million to $350.0 million and extended the facility for an additional year to March 2017 and, in April 2016, it increased the size of its loan facility with Nomura from $200 million to $250 million and extended the facility for an additional year to April 2017.

The Company believes the foregoing developments are highly positive in driving its strategy of building long-term stockholder value through the creation of a large portfolio of single-family rental homes that it targets operating at a best-in-class yield.

Second Quarter 2016 Financial Results

Net loss for the second quarter of 2016 was $63.5 million, or $1.16 per diluted share, compared to net income of $13.1 million, or $0.23 per diluted share, for the second quarter of 2015. Net loss for the six months ended June 30, 2016 was $109.2 million, or $1.99 per diluted share, compared to net income of $25.5 million, or $0.44 per diluted share, for the six months ended June 30, 2015.

 
Altisource Residential Corporation
Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
 
  Three months
ended June
30, 2016		   Three months
ended June
30, 2015		   Six months
ended June
30, 2016		   Six months
ended June
30, 2015
Revenues:              
Rental revenues $ 8,581     $ 2,140     $ 14,652     $ 3,540  
Change in unrealized gain on mortgage loans (71,702 )   42,209     (114,154 )   103,343  
Net realized gain on mortgage loans 8,180     19,272     20,912     34,654  
Net realized gain on mortgage loans held for sale 15,950     254     50,147     405  
Net realized gain on real estate 39,125     12,404     68,526     23,012  
Interest income 104     240     216     480  
Total revenues 238     76,519     40,299     165,434  
Expenses:              
Residential property operating expenses 18,003     16,857     36,204     29,316  
Real estate depreciation and amortization 4,040     1,344     7,641     2,342  
Acquisition fees and costs 1,523     513     3,104     877  
Selling costs and impairment 11,842     8,839     38,433     23,530  
Mortgage loan servicing costs 8,444     16,246     20,168     34,512  
Interest expense 10,470     13,398     26,886     25,041  
General and administrative 3,640     1,056     6,600     6,223  
Change in unrealized gain on mortgage loans 5,050     5,151     9,576     20,051  
Total expenses 63,012     63,404     148,612     141,892  
Other (expense) income (750 )   —     (750 )   2,000  
(Loss) income before income taxes (63,524 )   13,115     (109,063 )   25,542  
Income tax expense 4     23     123     26  
Net (loss) income $ (63,528 )   $ 13,092     $ (109,186 )   $ 25,516  
               
(Loss) earnings per share of common stock - basic:              
(Loss) earnings per basic share $ (1.16 )   $ 0.23     $ (1.99 )   $ 0.45  
Weighted average common stock outstanding - basic 54,616,221     57,208,273     54,998,171     57,204,602  
(Loss) earnings per share of common stock - diluted:              
(Loss) earnings per diluted share $ (1.16 )   $ 0.23     $ (1.99 )   $ 0.44  
Weighted average common stock outstanding - diluted 54,616,221     57,407,845     54,998,171     57,407,253  
               
Dividends declared per common share $ 0.15     $ 0.55     $ 0.45     $ 1.18  
 
 
Altisource Residential Corporation
Consolidated Balance Sheets
(In thousands, except share and per share amounts)
(Unaudited)
 
  June
30, 2016		   December
31, 2015
Assets:      
Real estate held for use:      
Land $ 81,905     $ 56,346  
Rental residential properties (net of accumulated depreciation of $13,337 and $7,127, respectively) 332,037     224,040  
Real estate owned 311,642     455,483  
Total real estate held for use, net 725,584     735,869  
Real estate assets held for sale 225,682     250,557  
Mortgage loans at fair value 707,445     960,534  
Mortgage loans held for sale 4,058     317,336  
Cash and cash equivalents 228,341     116,702  
Restricted cash 14,483     20,566  
Accounts receivable, net 47,378     45,903  
Related party receivables —     2,180  
Prepaid expenses and other assets 1,822     1,126  
Total assets $ 1,954,793     $ 2,450,773  
       
Liabilities:      
Repurchase agreements $ 740,485     $ 763,369  
Other secured borrowings 160,392     502,599  
Accounts payable and accrued liabilities 42,322     32,448  
Related party payables 5,489     —  
Total Liabilities 948,688     1,298,416  
       
Commitments and contingencies —     —  
       
Equity:      
Common stock, $.01 par value, 200,000,000 authorized shares; 54,465,184 shares issued and outstanding as of June 30, 2016 and 55,581,005 shares issued and outstanding as of December 31, 2015 545     556  
Additional paid-in capital 1,190,011     1,202,418  
Accumulated deficit (184,451 )   (50,617 )
Total equity 1,006,105     1,152,357  
Total liabilities and equity $ 1,954,793     $ 2,450,773