Single-Family REITs May See More M&A
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Pre-merger, Starwood Waypoint’s portfolio includes more than 17,000 single-family rentals, in markets such as Dallas/Fort Worth, and nonperforming loans.
NEW YORK CITY—To date the single-family rental REIT sector has seen just one consolidation of note: the union ofStarwood Waypoint Residential Trust and Colony American Homes, which will create a company with an aggregate asset value of $7.7 billion. However, in view of activist investor Land and Buildings now putting pressure on American Residential Properties Inc., analysts atKeefe, Bruyette & Woods say that other such deals may be in the offing. The KBW report raises anew a possibility that has come up for discussion more than once in the past few months.
Given the “continued languishing stock performance” among SFR REITs specifically, and with both privatizations and shareholder activism increasing among REITs in general, “we believe similar activist campaigns are possible in the case of SFR REITs and other REITs in our coverage where a disconnect between NAV and stock price is apparent,” according to KBW analysts. In the SFR sector, KBR sees mergers structured on an NAV-for-NAV basis similar to the SWAY-CAH deal as a possibility, “given current valuation discounts and that existing shareholders may need to accept shares in other SFR REITs for companies to achieve the scale benefits that may eventually allow the names to trade closer to NAV.”…
