Blackstone Said to Plan Invitation Homes IPO for First Half 2017

  • Rally in shares of home-rental companies presents opportunity
  • Landlord is biggest in industry, with about 50,000 houses

Blackstone Group LP expects to take its Invitation Homes unit public in the first half of next year, capitalizing on a rally in U.S. single-family rental landlords to list the biggest company in the industry, according to two people familiar with the matter.

The size and exact timing of an initial public offering haven’t been decided, said the people, who asked not to be named because the process is private. A Blackstone spokeswoman declined to comment. Invitation Homes referred questions to the parent company.

Invitation Homes, which would go public as a real estate investment trust, oversees about 50,000 houses across the U.S. Blackstone built the company in the aftermath of the housing crash, making the largest investment among big buyers that snapped up properties at depressed prices to institutionalize the business of leasing single-family homes. Their bet depended on unprecedented demand for rentals from Americans who lost residences to foreclosure and those unable to get mortgages as banks tightened credit.

QuickTake: Private Equity’s Real Estate Empire

The largest investors have spent the past couple years making more targeted acquisitions, streamlining their operations and selling homes that no longer fit their business models, while smaller firms have consolidated. Invitation Homes is the first to start offering residents a shot at owning their houses.

Shares of U.S. home-rental companies have rallied this year as earnings improve and apartment owners lose favor with investors. American Homes 4 Rent, the No. 2 single-family landlord, with about 48,000 houses, has gained 26 percent year to date, including reinvested dividends. Colony Starwood Homes, the third-largest, with about 31,100 properties, is up 44 percent. Silver Bay Realty Trust Corp., the first of the group to go public, has gained 12 percent this year.

Apartment Swoon

Apartment companies, against which the single-family landlords often compete for investors, are the worst performers among REITs in 2016 as multifamily construction adds supply and limits rent gains. Equity Residential, the biggest U.S. apartment REIT, cut its revenue forecast last month when new lease rates in New York and San Francisco fell short of expectations because of an increase in inventory in those cities.

“REIT investor interest in the single-family rental sector has grown recently, thanks largely to improved operating results, particularly as apartment fundamentals weaken,” Dave Bragg, a managing director at Green Street Advisors, said in a note to investors last month.

Blackstone bided its time taking Invitation Homes public after the first few single-family landlords failed to deliver strong shareholder returns, having gone public before finding renters for many of their homes. Jon Gray, global head of real estate at Blackstone, said in April 2015 that the company expected to take Invitation Homes public within the next two years.

“Companies should be built privately,” John Bartling, chief executive officer of Invitation Homes, said last August. “Unless you can communicate it and forecast it well, you’re going to struggle with investors.”

Peter Grauer, chairman of Bloomberg LP, the parent of Bloomberg News, is a non-executive director at Blackstone.

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