CHARLOTTESVILLE, VA—Still constituting a small base, the number of publicly traded single-family REITs nonetheless has tripled in the past 18 months. And the half dozen in existence today may soon have company. SNL Financial reported earlier this week that Colony American Homes and the Blackstone Group’s Invitation Homes are considering IPOs in the near future.
Publicly traded or no, single-family REITs have looked to securitizations, in part to lower their cost of capital. Charlottesville, VA-based SNL says at least five securitizations have been completed in the single-family rental sector as of June 20, with Colony American most recently making its second such transaction last month. It was collateralized by a $558.5-million loan backed by 3,727 properties. Further, Altisource Residential Corp. recently amended its master repurchase agreement to facilitate a securitization transaction, SNL says.
The research firm notes that analysts have highlighted the importance of the securitization strategy as a capital cost advantage for single-family REITs. In a June 2 report about American Homes 4 Rent, analysts from FBR Capital Markets & Co. noted that the company’s securitization will lower its capital cost, allowing it to purchase properties and increase funds from operations and dividends, in addition to allowing it to begin its process of consolidation to create a barrier for other players.
Bearing out what the analysts foresaw, AMH on Tuesday said it had acquired Beazer Pre-Owned Rental Homes from Atlanta-based Beazer Homes USA in a $263-million deal. The acquisition adds 1,300 homes across four states to AMH’s portfolio.
The FBR analysts wrote that AMH’s recently completed securitization, with expectations of more to come, “is an under-appreciated catalyst for the stock. We expect future securitizations should have similar, if not better, terms helping to drive returns to shareholders.”
During the short life of the single-family REIT sector, the trusts have focused on acquiring portfolios, according to an SNL report. “The companies reported more than $783 million worth of acquisitions in the first quarter, compared to about $425 million in the fourth quarter of 2013 and almost $2.9 billion for full year 2013.”
However, the New York Times reported last week that institutional players in the single-family space have also been looking to divest. Having bought more than 386,000 single-family homes since 2011, klafrger owners are turning to managing the portfolios they’ve already massed.
The NYT reported that Waypoint Real Estate Group, among the first companies to raise money from private investors to buy foreclosed homes, “is quietly shopping as many as 2,000 houses in California that it acquired in the last few years in several private investment funds,” citing sources familiar with the company’s plans. “The homes, which are largely rented, are being shown to other companies backed by investor money that have also scooped up distressed houses in states including Arizona, California, Florida, Georgia, Illinois and Nevada.”
Which is not to say that Waypoint is exiting the sector. It manages more than 7,000 homes via the REIT it formed last year with Starwood Capital Group, Starwood Waypoint Residential Trust. And as GlobeSt.com reported earlier this week, the REIT is continuing to scoop up nonperforming loans, having just closed on a $117-million pool of 1,441 such loans.