Thomas Barrack Jr.’s Colony American Homes Inc., which has bought almost 10,000 U.S. single-family rental houses since starting last year, filed to raise as much as $260 million in an initial public offering.
The Scottsdale, Arizona-based landlord, which is buying foreclosed homes and converting them into rentals, plans to offer 20 million shares at $11.50 to $13 each, according to a regulatory filing today. It had a portfolio of 9,931 homes as of the end of last month, in states including Arizona, California, Colorado, Delaware and Florida, the company said.
Colony American is joining companies including Silver Bay Realty Trust Corp. and American Residential Properties Inc. in going public to take advantage of investor demand for the burgeoning homes-for-lease asset class. There are 14 million rental homes in the country with an average price of $200,000, valuing the industry at about $2.8 trillion, according to a report from Goldman Sachs Group Inc. last month.
“Institutional investors currently represent less than 1 percent of single-family housing purchases,” Colony American said in the filing. “We believe the size of the market, its historical ownership structure and current highly attractive acquisition dynamics present us with the opportunity to lead the institutionalization of the single-family rental market in the United States.”
Home-rental firms are helping to boost prices in areas hard-hit by the real estate crash by draining the market of inventory as low mortgage rates and improving employment fuel housing demand. There were 2.16 million homes available for sale last month, the fewest for any April since 2001, according to the National Association of Realtors.
Home prices rose 10.9 percent in the 12 months through March, the biggest gain in seven years, the S&P/Case-Shiller index of 20 U.S. cities showed today.
Colony, part of Barrack’s Colony Capital LLC, has purchased homes at an average cost of $163,000, including the purchase price and estimated upfront renovations, according to today’s filing. It spent about $250 million per month from February through April.
The company expects to have about $860 million in cash available after the share sale.
Credit Suisse Group AG, Morgan Stanley and Bank of America Corp. are the lead underwriters for the offering. The company will trade under the symbol CAHS.