Commercial real estate’s multifamily market gets plenty of coverage and analysis for its continued success over the last decade. But the single-family rental market has not received as much attention.
That has changed with the $10.7-billion merger between Blackstone Group’s Invitation Homes and Starwood Waypoint Homes. The combined company will have 82,000 assets in 17 metro areas. The second-largest competitor is reportedly American Homes 4 Rent, with 49,000 locations.
This deal involving Blackstone, one of the world’s largest commercial real estate investors, shows that there is increased interest in this asset class, as homeownership fails to pick up at a rapid pace.
For its part, Invitation Homes had a strong second quarter. Revenues increased 5.1 percent year over year, hitting $242 million. NOI (net-operating income) also increased, by 7.3 percent, reaching $149 million, as did net income. The company’s occupancy rate is at 95.9 percent, and FFO was up 17.9 percent.
Though Starwood Waypoint suffered a $1.1-million net loss during its second quarter, its revenue was up by 7.3 percent year over year. The firm also made an acquisition of just more than 3,000 homes in California growth markets, accounting for about $1 billion in purchases over the period.
Meanwhile, HomeUnion, a real estate investment firm, put out a report on the single-family rental market and how it will perform this year. It says the top five metro areas in terms of cap-rate returns for these types of properties are Cleveland; Columbia, Ohio; Memphis; Philadelphia; and Atlanta.
HomeUnion also pointed out that of the 805,000 new households formed last year, 434,000 were rental properties. It is also confident that this trend will continue, as home-ownership is not expected to spike any time soon.
Part of this has to do with the often-discussed Millennial generation and its hesitancy to become home buyers. This in large part due to them, and downsizing Baby Boomers, looking to move to more urban centers where public transportation and shopping is more convenient and in reach.
However, this does not mean that much of the population does not want a single family home, yet might not be able to afford for several economic reasons.
When big investors, such as a Blackstone and Starwood, make serious multi-billion-dollar mergers, the commercial real estate community should take note. Single-family rental ownership should likely be on its radar screen now.