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February 27, 2013 11:48 pm
American Homes 4 Rent said it intends to offer its shares to the public for the first time amid heightened interest in the recovering US housing sector.
The California-based housing landlord will submit its plans with regulators to pursue an initial public offering within 60 days, it said in a statement, but it did not specify how much it plans to raise.
American Homes alongside Blackstone and Colony Capital are the biggest players in the space hoping to professionalise the ‘mom and pop’-dominated industry as investors did with the multifamily apartment sector and turn the single family home rental universe into an investable industry.
American Homes, which formed last year, is one of several companies aiming to acquire and renovate thousands of houses across the US and convert them into rental housing.
Tight credit conditions, strict mortgage requirements and still uncertain job and salary prospects are keeping many Americans from purchasing homes and compelling them to rent.
A jump in demand for family rental homes has driven rents higher and this combined with home prices that are more than 30 per cent below their peak, has piqued the interest of institutional investors in search of yield.
American Homes hopes it will generate revenues through a combination of rental income and appreciation in house prices. The company could not be reached for comment.
American Homes picked up a $600m investment from the Alaska Permanent Fund last year, a $45bn fund that invests royalties the state collects from oil companies.
Blackstone has spent upwards of $3bn on 17,000 houses while Colony has spent around $1bn on more than 8,000 in some of the country’s hardest hit housing markets.
Minnesota-based Silver Bay Realty Trust, which also seeks to purchase, renovate and rent out homes, has seen its shares rise more than 14 per cent since it raised $245m in a December offering. At the end of last year, American Residential Properties in Arizona said it will file with regulators to go public in the first three months of 2013.
While investors have achieved success in acquiring and managing large properties such as multifamily apartment blocks, analysts have questioned their ability to find economies of scale in the management of a dispersed portfolio of thousands of individual homes across geographies.
“There are 12 publicly traded multifamily apartment Reits that have a proven record of managing rental housing, they have access to financing and many if not all are investment grade rated. So then, why are they not running out to buy these assets?” said Jeff Langbaum, senior Reit analyst at Bloomberg Industries.
“Most likely it’s because this is a major management intensive business. This is the issue that these larger funds . . . are going to have to address.”
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