By a News Reporter-Staff News Editor at Investment Weekly News -- Drive Shack Inc. (NYSE:DS; the "Company") announced that it has entered into definitive agreements with its external manager, FIG LLC (the "Manager"), an affiliate of Fortress Investment Group LLC, to internalize the Company's management function. In connection with the termination of the existing management agreement, the Company will make a one-time cash payment of $10.7 million to the Manager. The internalization will become effective on January 1, 2018.
The transaction was negotiated and unanimously approved by a special committee (the "Special Committee") comprised entirely of independent and disinterested members of the board of directors of the Company (the "Board"), and the Special Committee was advised by independent counsel.
Sarah L. Watterson, the Company's Chief Executive Officer & President stated, "This is an incredibly exciting event within the Company's overall transformation. While the external management structure has served the Company well for over 15 years, given the Company's tremendous growth plan developing and operating Drive Shack venues and optimizing our American Golf properties, we believe shifting to an internalized management structure today is the right move for our business."
Key Mechanics of the Internalization: The Company's Management Team Will Not Change. Wesley R. Edens, who is a Principal and Co-Founder of Fortress Investment Group LLC, will remain the Chairman of the Board. Furthermore, members of the executive team, who were previously employed by the Manager, will become employees of the Company, including (i) Ms. Watterson, (ii) Lawrence A. Goodfield, Jr., Chief Financial Officer, Chief Accounting Officer & Treasurer, and (iii) Sara A. Yakin, Chief Operating Officer. In addition, certain other professionals who previously provided services to the Company on behalf of the Manager will continue to fill similar roles as employees of the Company or its subsidiaries. The Company and the Manager Entered into a Transition Services Agreement. For a transition period, the Manager has agreed to continue to provide the Company with certain services and personnel related mainly to information technology, legal, compliance, accounting and tax. These services will be provided to the Company at cost.
Key Potential Benefits of the Internalization: Cost Savings Opportunity. The Company targets savings of more than $2 million per year following the internalization. Potential for Expanded Institutional Investor Base. Following the internalization, the Company will have a structure that is more comparable to its leisure and entertainment peers. Continued Manager Support and Principal Involvement. The Company will receive support from the Manager for certain functions throughout the duration of the transition services agreement. Furthermore, Mr. Edens, the Company's largest shareholder, will remain the Chairman of the Board.
Keywords for this news article include: Drive Shack Inc., Investment and Finance.
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