Colony Starwood Homes buys $815 million portfolio of single-family rental homes

Investing

When Colony Starwood Homes got out of the non-performing loans business last year and sold off 1,675 non-performing loans for $265 million, the real estate investment trust said that it planned to use the funds from that sale to grow its portfolio of single-family rental homes.

This week, Colony Starwood followed up on that promise and is growing its SFR business by agreeing to buy 3,106 single-family rental homes from GI Partners, a private investment firm based in San Francisco, for $815 million.

From there, the mechanics of the deal get a little complicated.

GI Partners owned the SFR properties in coordination with Waypoint Real Estate Group, which merged with an affiliate of Starwood Capital Group to manage its portfolio of SFR assets, which were later merged with Colony American Homes in 2016 to create Colony Starwood Homes.

Colony Starwood was already managing the properties on behalf of GI Partners, and now, the REIT is buying the properties outright.

According to Colony Starwood, the portfolio is located entirely within the its existing markets, including Southern California, Northern California, Chicago, Atlanta, Tampa, Phoenix, Miami and Orlando.

“This transaction represents another important growth milestone for Colony Starwood Homes, continuing our focus on increasing scale, enhancing market density and realizing incremental operational efficiencies across our platform,” said Fred Tuomi, Colony Starwood’s CEO.

“The GI portfolio acquisition presents an attractive opportunity for the company to efficiently convert a large portfolio of homes from managed to wholly owned assets, all within our current market footprint with concentration in the high growth California market,” Tuomi continued.

For GI Partners, the deal represents the culmination of a six-year journey, the company invested in Waypoint Real Estate Group in 2011.

“We are very pleased with the success of both Waypoint Real Estate Group and our SFR portfolio and believe this transaction will deliver significant value to Colony Starwood Homes and its shareholders,” Hoon Cho, managing director at GI Partners, said. “As an early institutional investor in the SFR industry, we are gratified in playing a role in turning a cottage industry into a permanent asset class within the $30 trillion U.S. housing market.”

Doug Brien, the co-Founder of WREG, added, “We are very pleased with our decision to team up with GI Partners in 2011. Our partnership allowed us to build a great company that was one of the early pioneers in the SFR space, enabling us to assemble the high quality portfolio being sold in this transaction. This sale culminates a very rewarding journey for everyone on the GI/WREG team and all of our investors.”

According to Colony Starwood, the deal is expected to close in the third quarter of 2017.

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