American Homes 4 Rent Said to Fire Employees After LossJohn Gittelsohn and Heather Perlberg
American Homes 4 Rent yesterday fired a group of workers, with a focus on acquisition and construction staff, after the housing landlord reported a fiscal second-quarter loss, according to a person with knowledge of the terminations.
The company, owner of almost 20,000 single-family homes, has cut about 15 percent of its workforce this year, including an earlier round of terminations before its initial public offering last month, said the person, who asked not to be identified because the information is private. The Malibu, California-based company, which raised $705.9 million in the IPO, had a net loss of $14 million, or 15 cents a share, on revenue of $18.1 million in the quarter ended June 30, according to a statement this week.
Single-family landlords have struggled to turn a profit while acquiring homes faster than they can fill them with tenants. Hedge funds, private-equity firms and real estate investment trusts have raised more than $18 billion to purchase more than 100,000 rental houses in the past two years. American Homes 4 Rent, founded by B. Wayne Hughes, is the largest single-family landlord after Blackstone Group LP’s Invitation Homes, which has spent more than $5 billion on 32,000 homes.
American Homes 4 Rent executives Peter Nelson, Jack Corrigan, Sara Vogt-Lowell and Janice Stack didn’t respond to e-mails and telephone messages seeking comment on the firings.
The company’s shares fell 0.3 percent to $16.02 at the close. They traded as low as $15.65 after the firings were reported. Trading began July 31 at $16 a share.
Craig Smith, 55, a property-compliance inspector from Columbus, Ohio, said he received a termination notice after nine months with American Homes 4 Rent. Smith, who earned about $50,000 a year, said he saved the company money by finding more than $7,000 in invoice errors last month alone.
“It’s a complete shock,” he said in a phone interview. “I was out working and they called me to the office and told me I was cut.”
Single-family landlords are seeking to take advantage of prices that fell as much as 35 percent from their 2006 peak and increased demand for rentals. The U.S. homeownership rate is at its lowest level in 18 years, and more than 7 million homes have been sold for a loss or lost to foreclosure since 2007, according to RealtyTrac.
House-rental companies have started to shift their focus from high-speed acquisitions to filling their properties with tenants as they try to become profitable, said Jade Rahmani, an analyst with Keefe Bruyette & Woods Inc. in New York.
“There’s clear evidence by public companies of ramping renovation and lease-up operations, which will lead to higher occupancy trends,” Rahmani, who has outperform ratings on single-family rental investment companies Colony Financial Inc. and Silver Bay Realty Trust Inc., said in a telephone interview. “The questions of the day are: How do you fund future growth, and how big do you need to be?”
He has no rating on American Homes 4 Rent.
The company had 684 employees, according to a July filing. That included 244 employees dedicated to property management, marketing, leasing, financial and administrative functions; 262 people overseeing renovations; and 178 people working to identify, inspect and acquire homes.
The landlord is slowing its property purchases, with plans to spend as much as $100 million a month on 800 to 1,000 additional homes, Corrigan, the company’s chief operating officer, said on an Aug. 21 earnings conference call.
“As far as being able to put money to work, I mean we could easily ramp back up to $300 million-a-month pace if we have clarity that we would have that capital available,” he said. “But we don’t want to get too far out over our skis.”
American Homes 4 Rent owned 19,825 properties for an investment of $3.4 billion as of July 31, according to its earnings statement. About 56 percent of the company’s homes were leased as of June 30.
The company had $921.4 million of cash and cash equivalents as of the end of June.
American Homes 4 Rent raised $75 million in additional stock sales along with last month’s IPO. The IPO’s underwriters also plan to exercise an option to buy 6.6 million more shares for $106 million, Chief Executive Officer David Singelyn said on the earnings call. The company had planned to raise $1.25 billion in its IPO, according to an initial prospectus in June.