Starwood Capital Group, a real estate firm led by Barry Sternlicht, is planning to buy the management unit of Waypoint Homes Inc. as part of a single-family rental business expansion, according to three people with knowledge of the deal.
The purchase will include only the management unit of Oakland, California-based Waypoint and not the company’s homes, said one of the people, who asked not to be identified because the agreement is private. Waypoint’s management will operate Starwood’s housing-rental business, the people said.
Starwood Property Trust Inc. (STWD), a real estate investment trust managed by an affiliate of Sternlicht’s Greenwich, Connecticut-based Starwood Capital, said in a regulatory filing last week that a letter of intent was signed for the acquisition of an outside manager following a potential spinoff of single-family properties into a new REIT. Starwood Property has spent $358 million to buy 4,329 homes, and owns 1,551 nonperforming home loans with a face value of $408.3 million that may be a source of more rental properties for the spinoff, according to the filing, which didn’t identify the manager.
Waypoint, which owns more than 4,500 homes, was founded in 2009 as one of the first large-scale single-family rental operators. It has struggled to raise capital to buy more properties this year. It filed in May for an initial public offering, then delayed the stock sale. The shares of other single-family REITs have fallen from their IPO prices.
Waypoint Chief Executive Officer Gary Beasley declined to comment, citing restrictions under the company’s IPO filing. Boyd Fellows, Starwood Property’s president, also declined to comment on the purchase.
Private-equity firms, hedge funds and REITs have raised about $20 billion to purchase as many as 200,000 homes to rent, creating a new institutional real estate asset class in what has been a historically mom-and-pop business, according to Jade Rahmani, a Keefe, Bruyette & Woods Inc. analyst.
“We expect the large single-family rental companies to experience growth over the next 12 to 24 months with introduction of leverage and consolidation of smaller players as potential drivers,” Rahmani said in a Sept. 10 report.
Investors began buying rental houses in bulk after values fell as much as 35 percent from their 2006 peak. Demand for rentals has risen among people who lost their homes to foreclosure or can’t qualify for a mortgage.
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