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Invitation Homes reveals IPO details

Blackstone’s single-family rental business could go public in less than two weeks.

Blackstone’s Invitation Homes has publicly revealed details about its initial public offering for the first time in a Friday filing with the Securities and Exchange Commission.

The New York-based alternative investment manager has long been expected to take its single-family rental business public and confidentially filed for an IPO last quarter. In its public SEC filing, Invitation Homes, founded in 2012, said that it owns more than 48,000 homes and had $905 million in revenue for the 12 months ending September 30. A spokeswoman for Blackstone declined to comment.

The IPO could come as soon as the week of January 23, with the firm legally prohibited from an earlier launch, according to one executive familiar with the matter.

“I think this offering is going to be a blow-out in terms of supply and demand,” the executive told PERE.

The Dallas-based firm intends to sell $1.5 billion worth of stock, which could value the future New York Stock Exchange-listed real estate investment trust at about $7.5 billion, The Wall Street Journal first reported last year. Invitation Homes plans to use proceeds from the IPO to repay debts and “for general corporate purposes,” according to the SEC filing.

The company owns and operates the largest portfolio of single-family rental homes in the US based on revenue. The firm’s portfolio is concentrated in the western US and Florida, which generate 72 percent of its revenues. Invitation Homes had occupancy of 96.1 percent in the second quarter and benefits low annual turnover, the company said.

“Our extensive scale enhances diversification, predictability of cash flows and cost savings,” the firm said in its filing. “This local density and scale allows us to achieve greater operational efficiency, reduce operating costs and gain superior local market knowledge.”

The locations of its properties typically have strong demand drivers, high barriers to entry and high rent-growth potential. Home price appreciation in its current markets grew 6.3 percent in the 12 months ending August 31 – 18 percent above the broader US market, the company said.

In its filing, Invitation Homes noted that the overall single-family rental home market has grown in tandem with the decline of US homeownership rates after the global financial crisis, with the number of single-family rental units reaching 15.8 million as of September 30. The market, however, remains highly fragmented, with institutions comprising about one percent of ownership. Job growth and the accelerating formation of new households – the majority of which are expected to be renters – are predicted to continue to drive demand for the property type.

Invitation Homes’ anticipated IPO follows other private equity-backed single-family rental businesses going public. Greenwich, Connecticut-based Starwood Capital Group and Los Angeles-based Colony Capital teamed up last year to merge their single-family rental platforms into Colony Starwood Homes, which is the country’s third-largest landlord, managing about 27,000 homes as of September 30, according to the real estate investment trust’s third-quarter earnings report. The combined entity went public in January 2016.

Overall, single-family rental home REITs bounced back in 2016 after a slow start to the year, with the asset class up almost 27 percent over the year, according to the National Association of REITs.

“It’s great timing,” said the executive familiar with the IPO. “Blackstone looks like it was well-prepared to take advantage of the uplift. This doesn’t happen overnight.”

Blackstone built Invitation Homes using capital from its seventh opportunistic vehicle, Blackstone Real Estate Partners VII, which closed on $13.3 billion in 2012, PERE previously reported. The fund had a 20 percent net internal rate of return as of September 30, according to the firm’s third-quarter earnings report.

The firm managed $361 billion in assets overall as of September 30, including $101.9 billion in real estate.