Thursday, June 06, 2013

New Listing. Coming Soon!

Yesterday, Colony American Homes Inc. delayed its planned initial public offering due to "market conditions." Colony American would have been the third IPO since December 2012 for real estate investment trusts (REITs) that exclusively buy, lease and manage single family homes.  Reuters has some details on the deal.

Colony American is affiliated with Los Angeles private equity firm Colony Capital.   It's been a rough couple of weeks for REITs and other high yielding stocks and bonds, which I'm sure played into Colony's decision.  I am curious whether rising interest rates and lack of housing supply helped spook investors. 

The following is from Colony American's S-11 and details its holdings and expected cash:
Colony American Homes, Inc. is a market leader in the acquisition, ownership, renovation, leasing and management of single-family properties in the United States. Our growing portfolio consisted of 9,931 homes as of April 30, 2013, which we believe is one of the largest portfolios of single-family homes in the United States. We are externally managed by CAH Manager, LLC, or our Manager, a subsidiary of Colony Capital, LLC, a leading real estate private equity firm that has established 44 investment vehicles and raised over $20 billion of equity capital since its founding in 1991.
As of April 30, 2013, our portfolio consisted of 8,764 wholly owned homes and 1,167 homes owned in a joint venture, which are concentrated in attractive sub-markets within Arizona, California, Colorado, Delaware, Florida, Georgia, Nevada, Pennsylvania and Texas, offering us significant operating efficiencies and economies of scale. Our portfolio is comprised of homes acquired from a variety of sourcing channels by means of various types of transactions, including trustee auctions, Multiple Listing Service, or MLS, short sales, “mini-bulk” portfolios ranging from five to 500 homes, government-sponsored entities, or GSEs, and real estate owned, or REO, from banks. Our strategy is to continue to grow our portfolio in our existing sub-markets and also to strategically expand our footprint to additional markets where conditions support attractive investment returns.
The estimated total cost basis for our wholly owned homes as of April 30, 2013 was $1.4 billion, inclusive of acquisition and actual and estimated upfront renovation costs. The average total cost basis per home, inclusive of acquisition and actual and estimated upfront renovation costs, was approximately $163,000, representing an average estimated investment cost per square foot of approximately $92. For vacant homes, through April 30, 2013, we have incurred, on average, actual and estimated upfront renovation costs of approximately $20,000 per home. In the period from May 1, 2013 through May 17, 2013, we acquired 879 homes with an estimated total cost basis of $151 million, inclusive of actual and estimated upfront renovation costs. In addition to our portfolio of owned properties, as of May 17, 2013, we had 1,437 homes under contract, representing a total purchase price of $226 million. Including homes acquired and under contract through May 17, 2013, we expect to have a portfolio of 12,247 homes with an estimated total cost basis for our wholly owned homes of approximately $1.8 billion, as of May 17, 2013.
Upon completion of this offering and our use of existing cash balances to fund acquisitions through May 17, 2013, we expect to have approximately $860 million in cash available for future acquisitions and working capital. In addition, we currently have no outstanding indebtedness, but are in the process of negotiating to obtain a credit facility to provide us with additional capital to support further growth in our business.
I wouldn't doubt that the market felt $860 million is a significant sum with which to buy homes in a rebounding housing market.   

I would not bet against Colony Capital, and believe this delay is nothing but a speed bump.  Colony American owns 12,247 single family rental homes, and I am still convinced these, along with other institutional investor owned homes, are now permenant rentals.

No comments: