Fannie Enters Single-Family Rental Arena

DALLAS—As the Blackstone Group's Invitation Homes business prepares to launch an initial public offering that could be the largest since the fall of 2015, Fannie Mae has signaled its willingness to play ball in the single-family rental arena. The GSE will guarantee up to $1 billion in debt from the Blackstone unit, according to terms of an agreement revealed in an SEC filing earlier this week.

Fannie and Wells Fargo Bank have committed to a 10-year, fixed-rate mortgage loan collateralized by some of Invitation Homes' 48,431 single-family properties, the largest such portfolio in the US. It will be funded by the issuance and sale of mortgage-backed certificates that carry Fannie's guarantee of timely payment.

Invitation Homes plans to enter into the securitization after completing its IPO of 77 million common shares that will be priced between $18 and $21 per share, an offering that could raise over $1.5 billion. “This transaction helps us gather data and test the market to ensure we are delivering the right solutions that meet the increasing demand for single-family rental housing across all demographics,” a Fannie spokesperson told the Wall Street Journal on Wednesday.

The WSJ reported that Fannie's bet on the SFR sector represents a change from the stance taken by the Federal Housing Finance Agency in 2012, when it blocked Freddie Mac from financing bulk buys of foreclosed homes on grounds that the GSE's cheap debt would make it difficult for banks to compete. The Freddie guarantee “signals a belief that homeownership will remain out of reach for many Americans,” according to the WSJ.

It comes at a time when the ownership rate has reached in lowest level since the 1960s, and as the S&P CoreLogic Case-Shiller US National Home Price NSA Index has reached an all-time high of 185.06. In its registration statement, Invitation Homes notes that John Burns Real Estate Consulting expects home price appreciation to continue, and says that the number of SFR units increased 35% over a 10-year period ending Sept. 30, 2016 to 15.8 million.

Invitation Homes' SEC filing also notes that pricing on SFR stock is still attractive compared to multifamily. “Home prices in Invitation Homes' markets are still 11% below 2006 pricing levels as measured by the Case Shiller Index, while multifamily property prices are 36% above '06 levels in these same markets based on the Green Street Advisors Apartment Commercial Property Price Index,” according to the Blackstone unit's registration statement. “Home price appreciation growth was 5.5% year-over-year for the United States on average as of September '16, while home prices in Invitation Homes' markets grew at 6.2% on average for the same period.”

DALLAS—As the Blackstone Group's Invitation Homes business prepares to launch an initial public offering that could be the largest since the fall of 2015, Fannie Mae has signaled its willingness to play ball in the single-family rental arena. The GSE will guarantee up to $1 billion in debt from the Blackstone unit, according to terms of an agreement revealed in an SEC filing earlier this week.

Fannie and Wells Fargo Bank have committed to a 10-year, fixed-rate mortgage loan collateralized by some of Invitation Homes' 48,431 single-family properties, the largest such portfolio in the US. It will be funded by the issuance and sale of mortgage-backed certificates that carry Fannie's guarantee of timely payment.

Invitation Homes plans to enter into the securitization after completing its IPO of 77 million common shares that will be priced between $18 and $21 per share, an offering that could raise over $1.5 billion. “This transaction helps us gather data and test the market to ensure we are delivering the right solutions that meet the increasing demand for single-family rental housing across all demographics,” a Fannie spokesperson told the Wall Street Journal on Wednesday.

The WSJ reported that Fannie's bet on the SFR sector represents a change from the stance taken by the Federal Housing Finance Agency in 2012, when it blocked Freddie Mac from financing bulk buys of foreclosed homes on grounds that the GSE's cheap debt would make it difficult for banks to compete. The Freddie guarantee “signals a belief that homeownership will remain out of reach for many Americans,” according to the WSJ.

It comes at a time when the ownership rate has reached in lowest level since the 1960s, and as the S&P CoreLogic Case-Shiller US National Home Price NSA Index has reached an all-time high of 185.06. In its registration statement, Invitation Homes notes that John Burns Real Estate Consulting expects home price appreciation to continue, and says that the number of SFR units increased 35% over a 10-year period ending Sept. 30, 2016 to 15.8 million.

Invitation Homes' SEC filing also notes that pricing on SFR stock is still attractive compared to multifamily. “Home prices in Invitation Homes' markets are still 11% below 2006 pricing levels as measured by the Case Shiller Index, while multifamily property prices are 36% above '06 levels in these same markets based on the Green Street Advisors Apartment Commercial Property Price Index,” according to the Blackstone unit's registration statement. “Home price appreciation growth was 5.5% year-over-year for the United States on average as of September '16, while home prices in Invitation Homes' markets grew at 6.2% on average for the same period.”