|3 Months Ended|
Mar. 31, 2014
New Residential Investment Corp. (together with its subsidiaries, New Residential) is a Delaware corporation that was formed as a limited liability company in September 2011 for the purpose of making real estate related investments and commenced operations on December 8, 2011. On December 20, 2012, New Residential was converted to a corporation. Newcastle Investment Corp. (Newcastle) was the sole stockholder of New Residential until the spin-off (Note 13), which was completed on May 15, 2013. Newcastle is listed on the New York Stock Exchange (NYSE) under the symbol NCT.
Following the spin-off, New Residential is an independent publicly traded real estate investment trust (REIT) primarily focused on investing in residential mortgage related assets. New Residential is listed on the NYSE under the symbol NRZ.
New Residential intends to elect and qualify to be taxed as a REIT for U.S. federal income tax purposes for the tax year ended December 31, 2013. As such, New Residential will generally not be subject to U.S. federal corporate income tax on that portion of its net income that is distributed to stockholders if it distributes at least 90% of its REIT taxable income to its stockholders by prescribed dates and complies with various other requirements.
New Residential has entered into a management agreement (the Management Agreement) with FIG LLC (the Manager), an affiliate of Fortress Investment Group LLC (Fortress), under which the Manager advises New Residential on various aspects of its business and manages its day-to-day operations, subject to the supervision of New Residentials board of directors. For its services, the Manager is entitled to management fees and incentive compensation, both defined in, and in accordance with the terms of, the Management Agreement. The Manager also manages Newcastle and investment funds that own a majority of Nationstar Mortgage LLC (Nationstar), a leading residential mortgage servicer, and Springleaf Holdings, Inc. (Springleaf), managing member of the Consumer Loan Companies (Note 9).
As of March 31, 2014, New Residential conducted its business through the following segments: (i) investments in Excess MSRs, (ii) investments in servicer advances, (iii) investments in real estate securities, (iv) investments in real estate loans, (v) investments in consumer loans and (vi) corporate.
Approximately 5.3 million shares of New Residentials common stock were held by Fortress, through its affiliates, and its principals as of March 31, 2014. In addition, Fortress, through its affiliates, held options to purchase approximately 15.2 million shares of New Residentials common stock as of March 31, 2014. For recent activities related to Fortresss ownership of New Residentials common stock and options thereon, see Note 18.
The consolidated financial statements for periods prior to May 15, 2013 have been prepared on a spin-off basis from the consolidated financial statements and accounting records of Newcastle and reflect New Residentials historical results of operations, financial position and cash flows, in accordance with U.S. GAAP. As presented in the Consolidated Statements of Cash Flows, New Residential did not have any cash balance during periods prior to April 5, 2013, which is the first date Newcastle contributed cash to New Residential. All of its cash activity occurred in Newcastles accounts during these periods. The consolidated financial statements for periods prior to May 15, 2013 do not necessarily reflect what New Residentials consolidated results of operations, financial position and cash flows would have been had New Residential operated as an independent company prior to the spin-off.
Certain expenses of Newcastle, comprised primarily of a portion of its management fee, have been allocated to New Residential to the extent they were directly associated with New Residential for periods prior to the spin-off on May 15, 2013. The portion of the management fee allocated to New Residential prior to the spin-off represents the product of the management fee rate payable by Newcastle (1.5%) and New Residentials gross equity, which management believes is a reasonable method for quantifying the expense of the services provided by the employees of the Manager to New Residential. The incremental cost of certain legal, accounting and other expenses related to New Residentials operations prior to May 15, 2013 are reflected in the accompanying consolidated financial statements. New Residential and Newcastle do not share any expenses following the spin-off.
The accompanying consolidated financial statements and related notes of New Residential have been prepared in accordance with accounting principles generally accepted in the United States for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under U.S. generally accepted accounting principles have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of New Residentials financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with New Residentials consolidated financial statements for the year ended December 31, 2013 and notes thereto included in New Residentials Annual Report on Form 10-K filed with the Securities and Exchange Commission. Capitalized terms used herein, and not otherwise defined, are defined in New Residentials consolidated financial statements for the year ended December 31, 2013.
Recent Accounting Pronouncements
The FASB has recently issued or discussed a number of proposed standards on such topics as consolidation, financial statement presentation, revenue recognition, financial instruments, hedging, and contingencies. Some of the proposed changes are significant and could have a material impact on New Residentials reporting. New Residential has not yet fully evaluated the potential impact of these proposals, but will make such an evaluation as the standards are finalized.
The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.
Reference 1: http://www.xbrl.org/2003/role/presentationRef