Whether it is more beneficial for a consumer to rent a property or own a home continues to be a popular topic among housing industry executives because of the distressed inventory that is currently on the open market nationwide, but one company has decided to make an investment towards the rental side of the debate.
Beazer Homes USA, an Atlanta-based homebuilding company, formed a real estate investment trust called Beazer Pre-Owned Rental Homes to acquire, refurbish and lease recently constructed, previously owned single-family homes on a large scale in select markets throughout the country.
According to Beazer, the REIT currently consists of nearly 200 single-family homes in Phoenix and Las Vegas, markets that contain thousands of REO and foreclosed assets. Maricopa County, where Phoenix is located, had 6,781 new foreclosure filings in March, according to RealtyTrac. Meanwhile, one in every 255 housing units filed for foreclosure in Clark County, Nevada during March.
Beazer contributed $20 million towards BPRH, which also received $65 million in cash investments and binding funding commitments from outside investors. In exchange for its contribution to the REIT, Beazer will obtain a non-controlling interest in BPRH.
For creating BPRH and providing future support for the REIT, Beazer will be given common stock equal to 6% of the stock issued during BPRH’s private phase until it has raised $150 million in equity. After BPRH raises an aggregate of $150 million of private equity capital, Beazer will receive 1% of subsequent issuances of the REIT’s common stock prior to an initial public offering.
“We believe our investment in BPRH allows us to unlock the value in our rental homes business and grow it more rapidly than we otherwise could within Beazer,” said Allan Merrill, president and CEO of Beazer Homes. “BPRH’s ability to focus specifically on the rental homes market and attract external capital to scale the business represents a compelling value for our shareholders.”
Patrick Whelan, a residential real estate veteran with over 20 years of experience in various leadership positions including six years as COO at Archstone-Smith Trust, an apartment REIT, will serve as BPRH’s president and CEO.
Beazer’s announcement comes months after the Federal Housing Finance Agency launched an initiative in which qualified investors can acquire distressed assets owned by the government-sponsored enterprises in bulk and convert them into rental units for prospective tenants.
Through the first quarter this year, Fannie Mae has 114,157 single-family REO properties, while Freddie Mac has 59,323 REO homes in its portfolio.
Fannie Mae issued the first bulk public offering in February for 2,500 properties in Atlanta, Chicago, Los Angeles, Las Vegas, Phoenix and four markets in Florida, which according to some unconfirmed reports has already attracted thousands of investors and may continue to grow until the bidding is closed in a few weeks.
