Single-Family REITs Merge in $1.5 Billion Deal

American Homes 4 Rent (NYSE: AMH) and American Residential Properties, Inc. (NYSE: ARPI) said on Dec. 3 that the single-family rental REITs had come to an agreement on a merger valued at roughly $1.5 billion.

Under the terms of the deal, American Homes 4 Rent will issue 38 million common shares to American Residential stockholders and assume or repay $800 million of American Residential’s debt. Each share of American Residential common stock and each limited partnership unit in its operating partnership will be exchanged for 1.135 common shares or limited partnership units of American Homes 4 Rent.

The stock trade represents a premium of nearly 20 percent over the volume weighted average closing price of American Residential common stock during the 20 trading days ending on Dec. 2.

In a video interview with REIT.com filmed last month during REITWorld 2015, Stephen Schmitz, chairman and CEO of American Residential, discussed the strategic options of REITs in the single-family home rental business. On the heels of the merger in September between Starwood Waypoint Residential Trust (NYSE: SWAY) and Colony American Homes, Inc., Schmitz said the sector showed signs of being ready for more consolidation.

“I think you will see more of that as deals start to make sense—in terms of who are good operators, who has homes where, where is there overlap, where can a deal be done that benefits both shareholders,” he said.

In a release accompanying the Dec. 3 announcement, Schmitz and American Homes 4 Rent CEO David Singelyn highlighted the benefits of combining forces.

“This merger provides American Residential Properties stockholders with a premium for their shares and the opportunity to benefit from participation in the upside potential of an efficient, larger platform that is well positioned in high growth markets and that will benefit from operating synergies,” Schmitz said.

“American Residential Properties has a high-quality portfolio of homes which fit strategically in our markets, offering significant opportunities to capture further operating efficiencies on the combined platform,” Singelyn said. “Moving ahead, we look forward to creating additional value for the shareholders of the combined company while strengthening our position as a premier company in the single-family rental sector.”