AMH Bulks Up as Ellington Quits SFR

AGOURA HILLS, CA—The $126-million portfolio acquisition that American Homes 4 Rent has made from Ellington Management Group LLC gets Ellington out of the single-family rental business, Bloomberg reported this past Friday. AMH on Wednesday said it paid about $74.4 million in cash and assumed approximately $51.6 million of debt that matures on July 1, 2019.

“We are pleased to acquire these well-located, high-quality homes that are in our markets,” says David P. Singelyn, CEO of the Agoura Hills, CA-based REIT. “We expect to move quickly to seamlessly integrate these homes and realize the resulting synergies as we continue to grow our business.”

The 900 properties in the Ellington Housing Single-Family Portfolio are located across Arizona, Colorado, Georgia, North Carolina, Tennessee and Texas. The Ellington prtfolio represented AMH's largest acquisition since last July, when it completed the purchase of Beazer Pre-Owned Rental Homes Inc. That buy, which included the assumption of $112.8 million in debt, added 1,372 single-family properties in Arizona, California, Florida and Nevada to AMH's portfolio.

That portfolio ran to 30,877 properties across 22 states as of Sept. 30, 2014, making AMH the second-largest owner of single-family rental assets after the Blackstone Group's Invitation Homes. Some 26,000 of the properties were leased as of that date. A securitization backed by 4,503 of AMH's properties, the company's third in six months, priced this past November.

Earlier that month, AMH reported that total revenues increased 17.1% to $110.4 million for the third quarter from $94.3 million for Q2. The REIT credited strong leasing activity with driving revenue growth, as its total leased portfolio grew by 2,797 SFR homes during the quarter. NOI and core funds from operations also posted increases from Q2.

“The single-family rental concept continues to be validated as we continue to acquire exceptional quality homes, see strong tenant demand for our homes and experience high tenant retention with rental rate increases in excess of 4% to new tenants on re-leasing," Singelyn said at the time.

For Ellington, the sale to AMH reportedly marked an exit from a platform it had launched less than two years earlier. In April of 2013, the Old Greenwich, CT-based investment firm said that it had raised $140 million through a private REIT to buy and renovate foreclosed homes along with acquiring distressed multifamily mortgages.

“We are excited about the housing recovery investment opportunity,” Leo Huang, CEO of Ellington Housing, said at the time. Bloomberg quoted Huang, who joined Ellington from Starwood Property Trust in January 2011, as saying that the firm's “mortgage expertise will help us to target and time markets.” In common with AMH, Ellington saw the opportunities that existed following the housing market's trough in 2012, and joined Blackstone and Colony Capital, which between them had raised a total of more than $5.5 billion by then, in seeking to capitalize on them.