Key Takeaways: This morning the WSJ reported that Blackstone would be acquiring private SFR operator Home Partners of America, Inc. for $6 billion, or roughly ~$350k per home (vs. ~$308k per home for Best Idea Long AMH and ~$360k per home for Long Bias INVH). The move follows Blackstone's preferred investment in Canadian-based Tricon last year, and marks a sizeable re-entry into direct ownership of the asset class after building INVH post-GFC and taking it public. We would recommend also reading Neil Howe's piece HERE for additional context around the growth of SFR and our long thesis. At a high level this acquisition signals increasing institutional interest in the asset class amidst record low homes inventory, accelerating ROC on SFR rental rates, favorable demographic changes and population migration towards lower-cost/more business-friendly states primarily across the Sunbelt.
A few takeaways:
- It appears Home Partners is primarily an acquiror of homes versus an acquiror/builder model such as AMH - all else the same, the massive capital support Blackstone throws behind this platform raises the level of competition (along with CPPIB, Nuveen, JPM Asset Management, Brookfield, etc.) for acquiring already scarce home inventory. Controlling lots and developing on balance sheet with short lead times on "cash-to-cash" is a massive strategic advantage heading into 2022/2023
- The market selection is largely consistent with what you would expect vis-a-vis AMH and INVH - Albuquerque, Atlanta, Austin, Charlotte, Dallas, Denver, Fort Meyers, Houston, Miami, Oklahoma City and Phoenix to name a few
- Institutional penetration into the U.S. SFR market stands at just ~2%, or 300k rental homes, inclusive of the ~130k assets owned between AMH and INVH. About 85% of the SFR rental market is owned by "mom and pop" investors with 10 or fewer homes. This is indicative of the significant long-term roll-up opportunity in the space, drawing parallels with the self-storage space in the early-to-mid 2000s
- Finally, Home Partners offers renters an option to buy assets at a pre-set price with 30 days notice, a model the REITs have not yet pursued. This option could provide an interesting exit option for the REITs on non-core assets or for the purpose of exiting certain submarkets
Please call or e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
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