Single-family rental rivals to join forces in $1.5B merger

Dive Brief:

American Homes 4 Rent has agreed to merge with American Residential Properties in a $1.5 billion acquisition deal — the latest in a string of single-family-home rental company consolidations, The New York Times reported.
Each share of American Residential Properties will be exchanged for 1.135 shares of American Homes 4 Rent, a value of approximately $19.01 a share, giving the publicly traded real estate investment trusts a combined market valuation of nearly $5.5 billion.
The new, combined company will own more than 47,000 U.S. homes, second only to Blackstone Group’s Invitation Homes inventory of 50,000. American Homes 4 Rent will keep its corporate headquarters in Agoura Hills, CA, and American Residential Properties investors will hold approximately 12.6% of the outstanding shares in the combined company.

Dive Insight:

The overwhelming popularity of renting is projected to continue, and The Urban Institute has said that renter households will increase to almost 48 million in 2020 from 40.7 million in 2010, according to a June report. In addition, Zillow has said that house prices are rising at such a rate, and outpacing income, that the bottom third of the American workforce will be priced out of homeownership in 2016.

However, rents are rising as well, making it difficult for renters to save for a down payment and resulting in renters staying in the rental sector for a longer period.

"American Residential Properties has a high quality portfolio of homes which fit strategically in our markets, offering significant opportunities to capture further operating efficiencies on the combined platform," David Singelyn, chief executive of American Homes 4 Rent, said in a statement.

Rental industry consolidation, driven by the end of the foreclosure crisis and a rise in home prices, started this year with Silver Bay Realty Trust’s purchase of American Home’s 2,400-unit inventory. Cerberus Capital Management then purchased 4,200 homes from BLT Homes, followed by the Colony American Homes/Starwood Waypoint Residential Trust merger.

The rental home industry is mimicking the homebuilder industry, which has also seen consolidation this year. Industry leaders Standard Pacific and The Ryland Group merged to create a new, $5.2 billion company, Taylor Morrison purchased half of Orleans Homebuilders for $166 million. In addition, earlier this year, M/I Homes, Inc., paid an undisclosed amount of cash for Minneapolis-based Hans Hagen Homes, Inc.