Private Equity Firms Continue to Enter the SFH Buy-to-Rent Market

From the Wall Street Journal:

Even as home prices recover, private-equity firms continue bulking up on capital to buy homes, renovate them and rent them out. The latest to do so is Thomas J. Barrack Jr.’s Colony Capital LLC, a Los Angeles-based investment firm. On Friday, the company’s housing unit, Colony American Homes, closed on a $500 million line of credit—which could expand up to $1 billion—from J.P. Morgan Chase JPM +1.45% & Co., according to the company…

Colony is buying between 1,000 and 1,500 homes a month in cities from Georgia to California and has so far amassed a portfolio of 15,000 homes at a cost of more than $2 billion since April 2012.

Buy-to-Rent Bonds and IPOs

Two stories from today’s Wall Street Journal focus on the burgeoning buy-to-rent market:

Blackstone, Deutsche Bank in Talks to Sell Bond Backed by Home Rentals
Blackstone Group LP BX -1.40% is in negotiations to bundle monthly rental payments on about 1,500 to 1,700 of its homes. The private-equity giant is among the firms that have spent billions buying homes out of foreclosure, an investment strategy that has helped to bolster demand and strengthen the U.S. housing market.

The bond comprised of the Blackstone homes would be structured and marketed to investors by Deutsche BankAG, DBK.XE -1.72% the people say.

The creation of a new type of security shows that Wall Street’s financial engineering, blamed for deepening the financial crisis, is revving back up.

Some investors and analysts have said they are wary of a bond backed by rental payments, citing the dearth of long-term data on how often tenants living in previously foreclosed homes pay their rent on time.

Also, some investors and analysts have raised concerns about how quickly firms have purchased thousands of homes, and whether they have the management track record and expertise to oversee the maintenance of properties scattered across the country.

Single-Family Rental Firm’s IPO to Test Market
American Homes 4 Rent, founded in 2011 by Malibu, Calif.-based billionaire B. Wayne Hughes, is expected to price shares of its stock Wednesday in a bid to raise $750 million in an initial offering on the New York Stock Exchange. The company is targeting a range of $16 to $18 a share, which would value the company at around $4 billion.

With more than 19,000 homes owned or controlled, American Homes would be largest publicly traded company in the fledgling single-family rental business, which took off after the housing-market crash caused home prices to tank and put hundreds of thousands of bargain-priced foreclosures on the market.