Will they, or won't they? The question of whether Invitation Homes will buy about 2,000 single-family rentals from Starwood Capital Group is up in the air. A Bloomberg report recently said that the properties would be valued for $400,000 each, with the money going to Starwood REIT, which purportedly has faced redemptions and needs the capital.
Neither company commented and the report said the deal hasn't been finalized and may not actually happen.
Supposedly, Starwood has been in the market to unload units that it had picked up when prices were close to their peak. A "small number" are being sold to Pretium Partners, which had sold 2,300 homes to Starwood for more than $1 billion in 2021.
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A May Starwood financial filing indicated a $79,846,000 impairment "based on the excess of the carrying amount of the asset over its fair value."
"The impairment charge was a result of updates to the undiscounted cash flow assumptions for such assets where the Company's expected holding period for these assets changed due to an increased probability of a near-term disposition," the filing said.
It does sound like any move afoot would be to get out from under the previous purchase of properties that would ultimately become overpriced.
A Green Street quick take on the topic said the properties in question are rumored to be in the Sun Belt, with concentrations in Tampa, Phoenix, Vegas, Houston and Atlanta. A Starwood disclosure indicated that the houses average 2,150 square feet, with 3.6 bedrooms and 2.4 bathrooms.
But according to Green Street, even with Starwood selling the properties for less than they initially paid, the deal doesn't sound good for Invitation Homes. The firm's report estimates that Starwood had paid about $455,000 for each property at a low-to-mid-3% cap rate.
Even at the $400K prices, that would be a mid-4% cap rate, far from a good deal. And "the pricing strikes us as rich in an environment where INVH is looking to acquire one-off homes from its homebuilder partners in the mid-to-high-5% yield range."
But INVH trades at an implied per-house $355,000 valuation, "acquiring a lower quality portfolio at the rumored price tag would be value destructive," Green Street writes.
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