Barrack Says Home Investors Have Yet to Figure Out Exit

Institutional landlords building home-rental businesses in the U.S. have yet to figure out the best way to sell their investments as they focus on expansion, said Thomas Barrack Jr., the head of Colony Capital LLC.

“Nobody is worried about an exit,” Barrack, whose firm has purchased more than 15,000 homes, said today in an interview with Bloomberg Television’s Market Makers with Erik Schatzker and Stephanie Ruhle. “We are proving up the business.”

Institutional investors have taken advantage of the U.S. housing market’s collapse to acquire mostly foreclosed houses to rent out as they anticipate a rebound in prices. Deutsche Bank AG has sold the first home-rental bond for Blackstone Group LP, the biggest landlord in the industry, while real estate investment trusts are being formed based on single-family assets, similar to apartment-property companies.

There are about 14 million U.S. single-family houses for rent. Five companies, including Colony, own about 200,000 units, or less than 1.5 percent of that total, Barrack said.

“The name of the game is to turn it into an asset class, just like multifamily,” he said.

Blackstone, based in New York, has spent about $7.8 billion to buy about 41,000 homes since the start of 2012.

American Homes 4 Rent is second, with more than 21,000 houses. The Agoura Hills, California-based company went public in July, the biggest rental-house landlord to complete an initial public offering to date. The shares are little changed from their IPO price of $16.

The single-family landlords that have gone public are trading at about book value, whereas apartment REITs are trading at about 2.5 times book value, Barrack said.

“We will over the next two or three years prove up the fact that the income off these houses is exactly analogous” to multifamily investments, he said.

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