External manager is owned by Freedom Mortgage CEO
Cherry Hill Mortgage Investment Corp. has revealed plans to sever ties with its current external manager and transition into an internally managed real estate investment trust (REIT).
This would mean terminating the existing management agreement with Cherry Hill Mortgage Management, which is owned by Freedom Mortgage CEO Stanley Middleman.
This decision, recommended by a special committee of Cherry Hill’s board of directors, comes after the board had been exploring “strategic alternatives” for the real estate investment trust (REIT) since April.
The board has authorized company officers to take the necessary steps to implement this change, though no specific timeline has been provided.
Cherry Hill, which primarily invests in mortgage servicing rights (MSRs) and agency mortgage-backed securities (MBS), reported a portfolio of $19.6 billion in MSRs and $1.1 billion in MBS book value as of March 31, 2024.
The company posted a net income of $9.7 million for the first quarter of 2024, with $1.75 million paid in fees and compensation to its external manager during the same period.
The special committee, composed of independent and disinterested board members, determined that internalization would be in the best interests of the company and its stockholders after consulting with independent legal and financial advisors.
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While the internalization plan is moving forward, Cherry Hill said that its special committee continues to “explore other strategic alternatives.”
“There can be no assurance that the exploration of strategic alternatives will result in any transaction or other strategic outcome other than the internalization,” the company said in a media release.
Cherry Hill stated it does not intend to disclose further developments regarding the internalization or strategic review process until either is completed or when disclosure becomes necessary or legally required.
This strategic shift could potentially impact Cherry Hill’s operational efficiency and cost structure, though the full implications remain to be seen as the company transitions to an internally managed model.
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