Starwood Waypoint Rises in First Day of Trading as a REIT

Barry Sternlicht’s Starwood Waypoint Residential Trust rose 2.6 percent in its first day of trading after becoming the latest single-family home landlord to list shares on an exchange.

The real estate investment trust was spun off from Starwood Property Trust Inc., a commercial-property investment and finance REIT based in Greenwich, Connecticut, following a merger between Waypoint Homes and an affiliate of Sternlicht’s Starwood Capital Group. The shares climbed to $30 in New York on a day the Standard & Poor’s 500 Index lost 2.3 percent.

Corporate landlords have raised more than $20 billion to buy as many as 200,000 homes in the past two years, creating a new institutional asset class out of the traditional mom-and-pop business of single-family rentals, according to Jade Rahmani, an analyst with Keefe Bruyette & Woods Inc. The investors are seeking to profit from rising prices and increased demand for leasing after 4.8 million homeowners lost their properties to foreclosure since 2008, CoreLogic Inc. data show.

“It gives us much larger scale,” Starwood Waypoint Co-Chief Executive Officer Gary Beasley said in a telephone interview from New York. “We anticipate increasing that buying cadence now that our deal is closed.”

Starwood Waypoint controls more than 6,700 homes and non-performing loans, focused in Florida and Texas, with a total value of almost $1.1 billion, according to Beasley. Oakland, California-based Waypoint, founded in 2009 as one of the first corporate single-family landlords, separately owns more than 5,000 homes through 11 funds, which it will continue to manage.

Credit Line

Starwood has been buying $60 million of homes and non-performing loans a month, a pace Beasley said he expects to accelerate when the company closes on a $500 million line of credit. He declined to name the lender because the deal isn’t completed.

The new corporate landlords have had mixed results in the stock market after going public. American Homes 4 Rent, the second-largest single-family landlord with more than 21,000 homes, is up 3.8 percent from its July 31 initial public offering, including reinvested dividends. Silver Bay Realty Trust Corp., based in Minnetonka, Minnesota, and Scottsdale, Arizona-based American Residential Properties Inc. are both trading below their IPO prices.

Loan Modification

Non-performing loans account for about a quarter of Starwood Waypoint’s value, Beasley said. About half of those loans will end up as additional rental properties, while others will be sold or stay in the hands of the current owners after a loan modification, he said.

Sternlicht is chairman of Starwood Waypoint, Starwood Property Trust and Starwood Capital Group, which manages $32 billion of assets.

U.S. home prices climbed 24 percent since bottoming in March 2012, around the time corporate investors started buying in large numbers, according to the S&P/Case-Shiller index of prices in 20 U.S. cities. Investor purchases accounted for about one in five home sales last year, according to the National Association of Realtors.

Blackstone Group LP’s Invitation Homes, the largest single-family rental landlord with more than 41,000 properties, slowed its buying pace as the cost of houses rose, Blackstone President Tony James said last week.

The declining U.S. homeownership rate means there’s still plenty of opportunity for single-family rental investors, Beasley said. The share of Americans who own their homes was

65.2 percent at the end of 2013, down from a high of 69.2 percent in 2004, according to the Census Bureau.

“We still feel that’s going to continue to go down a little bit given the lack of financing availability for end users,” Beasley said.

(Corrects merger description in second paragraph of story published Feb. 3.)
Before it's here, it's on the Bloomberg Terminal.