Dec 21 (Reuters) - Activist hedge fund Snow Park Capital Partners LP is preparing a slate to replace directors on the board of residential real estate investment trust (REIT) Altisource Residential Corp., people familiar with the matter said on Thursday.
The move follows private talks in which Snow Park unsuccessfully pushed Altisource Residential to revisit its portfolio management agreement with its external manager, Altisource Asset Management Corp, the sources said.
Snow Park has told Altisource Residential that the agreement with Altisource Asset Management erodes shareholder returns and causes Altisource Residential’s stock to trade at a substantial discount to the value of its real estate, the sources added.
Snow Park could announce its challenge to Altisource Residential’s board later on Thursday, the sources said, asking not to be identified ahead of any announcement. It was not immediately clear how many board directors Snow Park planned to nominate, or how big its stake in Altisource was.
Altisource Residential did not respond to a request for comment.
Based in the U.S. Virgin Islands, Altisource Residential is a REIT focused on renting out single-family homes, largely in middle-income U.S. neighborhoods. It has a portfolio of more than 10,000 homes in several regional markets, including Atlanta, Memphis and Houston.
Altisource Residential, which has a market capitalization of $615 million, has recently divested other parts of its portfolio, including distressed mortgages and non-rental housing properties.
Altisource Residential’s management agreement with Altisource Asset Management provides the latter with a payment equal to 2 percent of the REIT’s invested capital, plus additional payments tied to performance. A portion of the payments can be made in stock as opposed to cash.
Snow Park wants Altisource Residential to also review other legacy agreements, including its deal with Altisource Portfolio Solutions SA, a Luxembourg-based real estate services company.
Altisource Residential’s stock has struggled in recent years, dropping by about two thirds since its highs in early 2014. The company has been using the proceeds from the sale of non-performing real estate loans to snap up single-family homes.
This is not the first time Altisource Residential has faced the threat of a proxy contest. In 2016, it agreed to add two new independent directors to its board to settle a dispute with RESI Shareholders Group, a consortium of activist investors that owned about 2.5 percent of the company’s shares and also sought to challenge its board. (Reporting by Carl O‘Donnell in New York; Editing by Stephen Coates)