Blackstone’s Invitation Homes Unchanged in Trading Debut

  • Stock closes at $20 Wednesday, where IPO shares were priced
  • House-rental REIT has a market value of about $6 billion

Blackstone’s Invitation Homes Goes Public

Invitation Homes Inc., the Dallas-based real estate investment trust backed by Blackstone Group LP, ended the day unchanged in its trading debut, after pricing the shares in its IPO in the top half of the marketed range.

Shares of the house-rental REIT closed at $20 each at 4 p.m. in New York, giving the company a market valuation of about $6 billion. The stock is listed on the New York Stock Exchange under the ticker INVH.

Invitation Homes and its publicly listed peers have been able to take advantage of increased demand for rental properties. Single-family homes appeal in particular to young families who want space and a backyard but may not have the credit, down payment or inclination to purchase. 

Families with children were more than twice as likely to rent a single-family home than an apartment, according to the National Multifamily Housing Council. Amid tight mortgage standards and rising prices, the homeownership rate in the U.S. is hovering near a 51-year low, according to Census data.

Invitation Homes raised $1.54 billion in its initial public offering, selling 77 million shares for $20 each, according to a statement Tuesday, after offering them for $18 to $21 apiece.

The company is one of a newer breed of Wall Street landlords that cropped up after the financial crisis and housing crash, when large swaths of property could be snapped up at depressed prices. It now oversees about 50,000 homes across the U.S.

Some of the company’s peers rushed to go public several years ago, only to have their stocks beaten down by investors who doubted the nascent industry’s ability to find renters for so many discrete properties.

‘Superior’ Portfolio

For investors wanting to bet on the rental market for single-family houses, Invitation Homes’ portfolio is “superior” to its peers, John Pawlowski, senior associate with Green Street Advisors, wrote in a Jan. 26 note.

The company may benefit from having waited longer than some of its competitors to tap public markets, Pawlowski said. Potential investors now have more proof points for Invitation Homes than were available for rivals like Silver Bay Realty Trust Corp., which went public in 2012. Silver Bay trades more than 5 percent below its IPO price of $18.50.

“Investors like to see a track record of high occupancy levels, good solid margins and compelling rent growth,” Pawlowski said.

High Occupancy

Invitation Homes touts 95 percent occupancy rates for its portfolio, according to the deal prospectus. It’s also just edged out its peers on a net operating income basis, according to a note by Bloomberg Intelligence analyst Colin Winrow. Invitation Homes has a NOI margin of 63.8 percent for its portfolio, with its next-best peer, Colony Starwood, coming in at 63.4 percent.

In the company’s roadshow video, Invitation Homes touted its local, on-the-ground management teams, as well as a shortage of affordable homes in areas near good schools, as justifications for its edge over peers. Almost three-quarters of the $688 million in revenue in the first nine months of 2016 came from the Western U.S. and Florida, according to the prospectus. The net loss for that period was $51.6 million.

The company’s homes are more geographically concentrated than American Homes 4 Rent, its largest public peer, Winrow wrote in a report on the company. While that may help lower costs like maintenance, “Invitation Homes’ more mature, high-rent portfolio may continue to see lower growth,” he wrote.

Blackstone waited until it built out a concentrated portfolio -- mostly in the western U.S. and Florida -- and started refining its management strategy to cut costs and reduce turnaround times.

Deutsche Bank AG, JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc. and Wells Fargo & Co. led the offering. Blackstone will continue to hold a majority stake in Invitation Homes following the IPO, the prospectus shows.

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

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