American Homes 4 Rent, the second-largest buyer of single-family rental houses, plans to raise money by offering investors a chance to share in property-value appreciation as well as rental income.
The company, which was founded by billionaire B. Wayne Hughes and raised $811.8 million in a July initial public offering including an overallotment, plans to sell preferred shares that will increase in value as its rental homes appreciate, according to a filing made yesterday with the U.S. Securities and Exchange Commission. American Homes proposes to raise $100 million, a placeholder amount that’s used to calculate fees and may change.
The participating shares “have an initial liquidation preference of $25 per share, which may be increased by an additional Home Price Appreciation Amount” that takes into account prices in the company’s 20 largest markets, the Agoura Hills, California-based company said in the filing.
Real estate investment trusts, hedge funds and private-equity firms have raised at least $18 billion to buy more than 100,000 rental houses in the last two years, taking advantage of housing prices that fell as much as 35 percent from their 2006 peak and rising demand from people who can’t afford to purchase a property.
While home prices have been increasing at their fastest pace since 2006, shares of the single-family rental REITs have fallen since their IPOs as the companies struggle to show they can make money leasing individual residences scattered around the country.
American Homes 4 Rent, the largest owner of single-family rentals after Blackstone Group LP’s Invitation Homes unit, fell 1.3 percent to $15.84 yesterday. The shares were priced at $16 each on July 31.