Home-rental firm buys competitor

Indianapolis Business Journal

A company that has purchased hundreds of homes in Johnson County to rent is growing.

American Homes 4 Rent, the largest publicly traded U.S. single-family-home landlord, has agreed to acquire a smaller competitor, American Residential Properties Inc., in a deal valued at $1.5 billion, including debt. The combined company will own more than 47,000 homes in 22 states and will have a stock-market value of $5.5 billion, according to a statement.

The company’s second-biggest market will be the Indianapolis area, after Dallas. In and around Indianapolis, American Homes 4 Rent owns more than 3,000 rental houses, including more than 300 in Johnson County. In the past few years, the company has been purchasing homes that are 11 to 12 years old and cost $100,000 to $400,000.

Opportunities for investors to buy foreclosures or other discounted properties have diminished as home prices surged more than 30 percent from a low in 2012. Single-family-home landlords, which own rental houses scattered across the country, have been consolidating and buying real estate in bulk so they can operate more efficiently. Scale is critical to enable companies to drive returns and achieve a low cost of capital, Jade Rahmani, an analyst with Keefe Bruyette & Woods, said in a note to clients this week.

“The opportunity to grow efficiently in our markets has slowed,” David Singelyn, CEO of American Homes 4 Rent, said on a conference call with investors to discuss the transaction. “There is no way to effectively operate this business without scale.”

As of Sept. 30, the California-based company owned 38,377 single-family properties, about four times as many as American Residential, according to the statement. As of Dec. 31, 2014, American Homes 4 Rent had 2,675 houses in the Indianapolis area valued at $403.2 million. American Residential Properties owned 538 houses in the area that it had spent about $38 million to acquire.

The deal is the latest in a string of recent transactions in the industry. In September, Starwood Waypoint Residential Trust and Colony American Homes, two of the largest U.S. single-family home landlords, said they would merge. Silver Bay Realty Trust Corp. purchased almost 2,400 houses from The American Home for $263 million in April, and American Homes 4 Rent bought more than 1,300 properties from Beazer Pre-Owned Rental Homes Inc. in July 2014.