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RESI Shareholders Group Issues Letter to Fellow Altisource Residential Shareholders

NEW YORK, May 2, 2016 /PRNewswire/ -- RESI Shareholders Group owning approximately 2.5% of the outstanding shares of Altisource Residential Corporation ("RESI") RESI, +0.45% today issued a letter to RESI shareholders in connection with its campaign to elect three highly-qualified directors at the June 1, 2016 Annual Meeting of RESI.

May 2, 2016

Dear Fellow RESI Shareholder:



RESI Shareholders Group ("RESI Shareholders Group," "RSG" or "we"), an independent shareholder group owning approximately 2.5% of the outstanding shares of Altisource Residential Corporation ("RESI" or the "Company"), is dedicated to restoring value for RESI's shareholders, the true owners of the Company. The Company's Board of Directors (the "Board") must be immediately reconstituted to ensure that the interests of RESI's shareholders are appropriately represented in the boardroom and that the Board takes the necessary steps to help the Company's shareholders realize the true value of their investment.

RESI's conflicted and commercially unsuccessful Board continues to deny reality in a futile effort to retain control to the detriment of RESI shareholders while operating the Company for the benefit of entities related to former Chairman William Erbey, which continue to harvest RESI for fees. The Board has ignored the obvious conflicts and its own embarrassing performance since RESI's inception, which includes a cumulative loss of value of approximately $360 million.

RSG's nominees are committed to evaluating and pursuing all alternatives to restore value for RESI shareholders. Meanwhile, the incumbent Board is committed to a strategy that transfers value to its external manager, Altisource Asset Management Corporation ("AAMC"), and its external services provider, Altisource Portfolio Solutions S.A. ("ASPS"), neither of which has any incentive to increase RESI's share price.

Given the incumbent Board's track record of value destruction, we find it particularly disingenuous that the Company is putting forth the canard that RSG is only looking for a wholesale liquidation that would depress prices.

First, RESI management's OWN business plan involves the liquidation of RESI's non-performing loans and real estate owned. [1]

Second, our slate is open to evaluating ALL alternatives for the proceeds from these sales and for creating value for RESI shareholders as opposed to the incumbent leadership team, which is intent on reinvesting capital into its unproven strategy that only serves to benefit AAMC and ASPS.

Third, as long-term investors in RESI, RSG members benefit from the maximization of value of RESI, not from the fees it generates for others.

Finally, we note that the Company has confused the intent of our significant share purchases after what RESI terms "the diversification of its acquisition strategy." Far from being supportive of the strategy, the significant share price decline after the disastrous strategy shift caused RESI shares to trade at a significant discount to tangible book value and net asset value, creating an attractive investment opportunity for members of RSG. We have only resorted to this proxy contest after the Board has failed to act to restore value.

Why Change Is Needed:

Massive drain of RESI shareholder value to Erbey-related entities:

  • RESI shareholder LOSSES since inception = approximately$360 million.
  • AAMC, ASPS and Ocwen Financial Corporation ("Ocwen") PAYMENTS since inception = approximately $300 million.
  • Regulatory Issues: William Erbey, the former Chairman of RESI and founder of Ocwen, was forced to resign as Chairman of RESI, AAMC, ASPS and Ocwen in connection with the Consent Order entered into by Ocwen with the New York Department of Financial Services (which also involved Ocwen paying a civil monetary penalty in the amount of $150 million and $50 million as restitution). On May 2, 2016 ASPS was downgraded by Piper Jaffray citing high legal and regulatory risks associated with ASPS, including a New York Department of Financial Services pricing study and an SEC investigation regarding inter-company pricing. [2]

Deeply troubling conflicts of interest in the boardroom:

  • 80% of the Company's directors have direct or indirect connections to AAMC and ASPS that make us question their ability to independently act in the best interests of RESI shareholders.

Misaligned interests between external manager AAMC and RESI shareholders:

  • Of the three fees that AAMC is entitled to under its asset management agreement with RESI, not one is tied to RESI's share price performance.

Board's commitment to a failed strategy that has destroyed shareholder value:

  • The Board apparently believes in maintaining the status quo while casually ignoring its responsibility for the staggering $1.3 billion collapse in RESI's market cap since the share price peaked in early 2014, a period in which home prices have continued to appreciate.
  • The incumbent Board recently slashed RESI's dividend by approximately 73% and advised that the dividend will continue to be volatile [3] – an indication of uncertainty and an apparent lack of confidence in its strategy.
  • RESI's stock price is down 38.1% since the Company's abrupt shift in strategy to the outright purchase of single-family rental ("SFR") units.
  • RESI trades at approximately 56.5% of tangible book value.

Our nominees can restore investor confidence and recover value for RESI shareholders:

  • Our nominees are committed to halting the current failed strategy and returning significant amounts of capital to shareholders.
  • Our nominees are committed to fully and fairly exploring all strategic alternatives available to the Company.

Our nominees represent the best interests of RESI shareholders, not its external managers. The manner in which the Company is being operated has left us no choice but to run a proxy contest seeking control of the Board to align the interests of the Board and management team with the interests of RESI shareholders.

Destruction of Shareholder Value at RESI

The Company previously raised approximately $1.2 billion of equity in the public markets with a strategy of purchasing deeply discounted sub–performing...