American Homes 4 Rent, the real estate investment trust founded by self-storage billionaire B. Wayne Hughes, fell in its first day of trading after raising $705.9 million in an initial public offering.
The shares slipped 2.5 percent to $15.60 in New York trading today. The Agoura Hills, California-based company sold 44.1 million shares for $16 each, according to data compiled by Bloomberg, at the low end of the offering range of $16 to $18.
The company, the largest in the U.S. homes-for-rent market after Blackstone Group LP, is going public at a time when investors are cooling on the fledgling industry. American Homes 4 Rent raised almost 44 percent less than the $1.25 billion amount estimated in an initial propectus by the company in June.
While American Homes 4 Rent has the benefit of strong leadership under Hughes and a diverse portfolio of almost 18,000 properties, it’s uncertain whether single-family owners can make money over the long term on par with other types of landlords, Dave Bragg, an analyst at Green Street Advisors Inc., said this week before the IPO. The two other REITs that have gone public - - Silver Bay Realty Trust Corp. and American Residential Properties Inc. -- are trading below their offering price.
American Homes 4 Rent and competitors such as New York-based Blackstone, which has invested more than $5 billion in about 30,000 houses, are betting they can build an institutional real estate class from U.S. single-family rental homes, which are mostly owned by mom and pop businesses.
Shares of other public single-family rental REITs have fallen as the companies have failed to show a profit, in part because they are acquiring houses faster than they can fill them with tenants. Silver Bay, based in Minnetonka, Minnesota, began trading in December at $18.50 a share and closed today at $16.10. American Residential Properties of Scottsdale, Arizona, went public in May at $21 and fell to $17.29 today.
Goldman Sachs Group Inc., Bank of America Corp., FBR & Co., JPMorgan Chase & Co. and Wells Fargo & Co. led the offering.