Strong demand for rental housing in the aftermath of the property crash isn't a new story, but it's got plenty of room to run, according to CoreLogic. The company expects more than 1.25M of household formations next year, with most of those wanting to rent at a time when vacancy rates are at or near 30-year lows.
As a result, they say, look for rental rates to continue to outpace the level of inflation.
And while multifamily mortgage originations should rise next year, CoreLogic sees single-family originations falling 10% - mostly due to lower refinance volume as interest rates go north.
That didn't take long. Just days after Jonathan Litt went public with his campaign against the American Residential Properties (NYSE:ARPI) board, the company sells itself to American Homes 4 Rent (NYSE:AMH).
ARPI owners will receive 1.135 shares of AMH for each share of ARPI they own. That's equal to $19.01 per share based on current prices. It's an 8.7% premium to yesterday's closing price of $17.49, and a near 20% premium to the average closing price over the past 20 days.
Litt pegs the NAV of ARPI at closer to $24 per share. A 7.4% owner of the stock, he's not yet been heard from on this deal.
Jonathan Litt's Land and Buildings disclosed a 7.4% stake in American Residential Properties (NYSE:ARPI) on Friday, and today pens a letter to the company threatening to nominate its own slate of board members if a clear path to NAV realization isn't outlined or achieved.
Said NAV is thought to be $24 per share, according to Litt, versus Friday's close of $16.71. At issue, says Litt, is scale - ARPI owns more than 1K homes in only 4 of the more than 17 MSAs in which it operates, and more than 300 in only 10 of those markets. Given the company's already high debt level and struggling stock price, exactly how is it, asks Litt, that APRI expects to raise the money with which to achieve a critical mass of properties in all of its markets?
With M&A (and the quick scale-up and cost savings that come with it) in the air, Silver Bay Realty (SBY +1.7%), American Homes 4 Rent (AMH +2.6%), and American Residential Properties (ARPI +2.2%) are also on the move.
"Companies should be built privately," says John Bartling, CEO of Blackstone's (BX -2%) Invitation Homes. “Unless you can communicate it and forecast it well, you’re going to struggle with investors as they try to determine how to forecast your earnings.”
Indeed. The stock prices of four publicly traded home-rental companies - American Homes 4 Rent (NYSE:AMH), Silver Bay Realty (NYSE:SBY), American Residential Properties (NYSE:ARPI), and Starwood Waypoint (NYSE:SWAY) - all trade below their IPO prices of a few years ago and below their NAV, according to Morgan Stanley. “They had to grow under a microscope and have generated less income so far than investors expected," says KBW's Jade Rahmani. "They should basically be looked at as startups.”
With nearly 50K properties, Blackstone appears to be in no rush to take Invitation Homes public, though the P-E firm's real estate head Jon Gray hinted in April the company could be ready in 12-24 months.
Silver Bay (SBY +2.4%) jumped out of the gates in today's session after last night announcing a big boost in its buyback authorization - suggesting management is a believer in the stock's apparent discount to NAV.
Others in the sector are also sporting gains: American Homes 4 Rent (AMH +1.1%), American Residential (ARPI +2.6%), Starwood Waypoint (SWAY +2.5%).