(Bloomberg)—Amherst Holdings is buying Front Yard Residential Corp., expanding its portfolio of single-family rental homes at a time when Wall Street is betting that more and more Americans won’t be able to afford a mortgage.
Front Yard put itself on the block last year after settling with an activist investor. The landlord, which has more than 15,000 homes, is being acquired for $12.50 a share, according to a statement Tuesday. The deal is valued at $2.3 billion, including debt.
The purchase will give Amherst Residential, a subsidiary of Amherst Holdings, more than 36,000 rental homes. Wall Street firms are increasingly targeting such properties, buying up homes to cater to Americans who may want backyards and picket fences but would struggle to afford a purchase or prefer to rent.
Bloomberg News reported in December that the two firms were in advanced discussions about a deal.
JPMorgan Chase & Co.’s asset management arm recently entered the market, joining sovereign wealth and pension funds in targeting a type of property once shunned by institutional investors.
For decades, Wall Street viewed rental houses as too cumbersome to run efficiently and left the business to mom-and-pop operators. The foreclosure crisis changed that, allowing firms to buy thousands of homes cheaply.
Investors including Blackstone Group Inc. benefited from buying homes in the aftermath of the financial crisis and helped prove that scattered portfolios of rental properties could be managed profitably. Now, with home prices climbing, the bet is that there’s less of a stigma attached to renting a home.
Amherst sponsors and develops companies that help institutional investors underwrite and manage their U.S. real estate investments, according to its website. The firm’s property-management arm, Main Street Renewal, offers single-family rentals across the U.S.
Front Yard, based in Christiansted, U.S. Virgin Islands, launched a strategic review in May as part of a settlement with activist investor Snow Park Capital Partners. Snow Park had argued that Front Yard’s shares were trading at a substantial discount to the value of its assets.
Front Yard has more than $1.6 billion in debt, according to data compiled by Bloomberg. Its market value was about $609 million at the close of trading last Friday in New York.
To contact the reporter on this story: Craig Giammona in New York at [email protected].
To contact the editors responsible for this story: Craig Giammona at [email protected]
Christine Maurus
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