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Single-Family Rental REITs Continue Tapping Capital Markets

More Than $340 Million Raised in Two Offerings; New Player Files its IPO
May 22, 2013
The ranks of public or soon-to-be public companies that own portfolios of for-rent single-family homes swelled this week as one new firm registered for an initial public offering, another firm completed its IPO and yet a third completed a follow-on offering.

American Residential Properties Inc. completed its initial public offering of 13.7 million shares of its common stock raising gross proceeds of about $288 million. As of March 31, the Scottsdale, AZ-based firm owned 2,531 homes acquired since 2008 and was managing 600 additional homes.

Meanwhile Waypoint Homes Realty Trust registered for an IPO filing seeking to raise $100 million. The Oakland, CA-based firm is managed by Waypoint Real Estate Group (WREG) and has acquired more than 3,500 single-family homes since 2009. WREG's legacy funds had commitments for more than $700 million of equity and debt capital to acquire, renovate and improve single-family homes.

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US Masters Residential Property Fund closed its latest public offering raising $68.5 million. The current raising took the market capitalization of this Sydney, Australia-based fund to more than $370 million, all of it being used to buy single-family homes in the New York City metropolitan market, where it has already bought more than 1,060 homes.

"The U.S. housing market has reached a critical turning point," said Alan Dixon, managing director and CEO of Dixon Advisory USA, the managing entity of US Masters. "For the first time since 2006, U.S. house prices have begun to increase steadily."

"We believe this dynamic will continue into 2013 and beyond, as the U.S. housing market enters a new positive cycle," Dixon said. "The positive results from the capital raising demonstrate the continued strong investor confidence in our strategy."

American Residential and US Masters Residential Property Fund are only the second and third REITs solely focused on single-family rentals to complete public offerings. The first was Minnesota-based Silver Bay Realty Trust, which as of March 31 (the end of its first full quarter as a public company) had acquired nearly 5,000 homes.

However, several other firms are waiting in the wings.

Having stoked a strongbox with about $2.2 billion in privately raised funds, fast-growing Colony American Homes Inc., is planning an initial public offering of common stock to raise at least $100 million more. The Santa Monica, CA-based owner of single-family rental property is being spun-off into a real estate investment trust by Thomas Barrack's Colony Capital.

Starwood Property Trust, an already publicly traded commercial real estate REIT, is considering the possibility of spinning off its single-family residential rental holdings into a separate company.

American Homes 4 Rent -- led by Wayne Hughes, who founded Public Storage, announced it will go public this year, using net proceeds from its planned IPO to acquire and renovate additional single-family homes.

The seven firms mentioned so far have amassed a combined housing stock of more than 34,150 homes. They could all be eclipsed if publicly traded Blackstone Group were to spin off its single-family rental holdings. Blackstone's Invitation Homes is sitting on more than 25,000 homes acquired in bulk portfolio sales.

Together these public or soon-to-be-public firms control more than 59,150 homes across the U.S. The primary markets the firms are targeting for investment include California (particularly the Inland Empire), Phoenix, Atlanta, Florida (particularly Tampa and Orlando), Texas (Dallas and Houston), Las Vegas and New York City.

While an insignificant amount compared to the total housing stock of more than 76 million single-family homes in the U.S., these 59,150 single-family rentals present added competition to the multifamily rental segment. That total is larger than the multifamily rental stock in 10 states: Alaska, Delaware, Idaho, Maine, Montana, North and South Dakota, Vermont, West Virginia and Wyoming.

Here is a breakdown of the public firms owning the largest number of single-family rental homes.

  • Blackstone Group (Invitation Homes), 25,000 homes

  • American Homes 4 Rent, 10,000

  • Colony American, 9,931

  • Silver Bay Realty Trust, 5,370

  • Waypoint, 3,552

  • American Residential Properties, 2,531

  • Starwood Property Trust, 1,706

  • US Masters Residential Property Fund, 1,063

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