06/23/2014 | By Allen Kenney
The executive team of single-family housing REIT American Residential Properties (NYSE: ARPI), president and COO Laurie Hawkes and chairman and CEO Stephen Schmitz, joined REIT.com for a video interview during REITWeek 2014: NAREIT’s Investor Forum, held in New York.
American Residential acquired 700 homes in the first quarter of the year. Schmitz talked about the pace of transactions in the quarter and the likelihood it would hold up going forward.
“We think that’s a well-measured pace,” Schmitz said.
Schmitz said like any other real estate investment, identifying properties in the right location is a critical component of American Residential’s strategy.
“Whether a family is renting a home or purchasing a home, they all want to live in the best communities with the best schools, close to work and shopping and those things,” he said.
Schmitz described the level of demand for single-family rentals in the current market as “excellent.” He pointed out that constrained supply of new properties, improved job growth and increased new household formations are boosting demand in American Residential’s target markets.
On top of the strong demand fundamentals, Hawkes said the company is generating “extremely strong” rent growth. In part, the rent growth can be attributed to the enhancements the company has made on the operations side of the business, she said.
“Essentially, we find that operations continue to improve,” Hawkes said. “We have better pricing power relative to purchasing products through our national purchasing programs. The efficiencies continue to grow.”
Hawkes also touted the company’s “hub-and-spoke system,” which centralizes as much of the firm’s operations at its headquarters as possible.
“We get to control the costs, we get to have control over the quality, most importantly, and the timing,” she said.
In terms of the capital markets, Hawkes indicated that securitization is playing a large role in funding the growth of the business. She said she expects the firm’s cost of funding to drop “considerably.”
Finally, the executives discussed the learning curve for investors and industry analysts trying to familiarize themselves with the single-family housing sector. A “paradigm shift” in opinions toward renting a home versus buying one has changed the way investors look at the sector, according to Schmitz.
“It caused investors to really drill down and take a much harder look at the business model,” he said.