(Bloomberg)—Home Partners of America, a single-family home rental company backed by KKR & Co. and BlackRock Inc., has explored an initial public offering with banks including Goldman Sachs Group Inc. and Morgan Stanley, according to people with knowledge of the matter.
The company is considering offering shares as early as next year, said some of the people, who asked not to be named because the matter is private. An IPO isn’t guaranteed.
A representative for Home Partners of America declined to comment. Goldman Sachs and Morgan Stanley representatives didn’t immediately respond to requests for comment on the discussions.
Chicago-based Home Partners of America has purchased over $2 billion in properties and leased them to more than 12,500 people who have the opportunity to buy the homes through a right-to-purchase program, according to its website. It was formerly known as Hyperion Homes Inc. and backed by Lewis Ranieri, the former Salomon Brothers banker who was a pioneer of mortgage securitization.
Home Partners differentiates itself from other single-family landlords by offering a right-to-purchase contract. Customers choose homes from for-sale listings that meet the company’s specs. Home Partners then buys the property and rents it out, giving the tenant the right to purchase in the future at a predetermined price.
In a recent loan securitization backed by about 1,800 of the company’s homes, 44 percent of tenants had a right-to-purchase contract, according to a report from Moody’s Investors Service.
Home Partners is eyeing an IPO as single-family landlords report mixed results. High property prices and a low inventory of homes for sale have increased demand for rental houses, especially as older millennials grow out of apartments and start families. Positive macroeconomic trends have led to an influx of capital into closely held companies with single-family rental portfolios, including Amherst Holdings LLC, Cerberus Capital Management LP and Pretium Partners LLC.
“The U.S. single-family housing market has begun to slow on lower affordability related to increases to interest expense,” JMP Securities LLC analysts wrote in a Nov. 6 note. But single-family landlords “are positioned well from a cash-flow growth perspective as more families are pushed toward renting over owning.”
Still, investors have punished the industry’s biggest players for failing to wring greater efficiencies from their sprawling property portfolios. Shares in the biggest landlord, Invitation Homes Inc., which Blackstone Group LP took public in 2017, have fallen 8.1 percent this year, and American Homes 4 Rent, the second-largest, has dropped 6.3 percent, underperforming the Bloomberg U.S. REIT index, which is down 1.8 percent.
To contact the reporters on this story: Gillian Tan in New York at [email protected]; Patrick Clark in New York at [email protected] To contact the editors responsible for this story: Alan Goldstein at [email protected] Daniel Taub, Steve Dickson
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