Single-Family REITs Struggle to Manage Costs

Digested from “Blackstone Bides Time for Home-Rental REIT as Stocks Sag”
Bloomberg Business (8/18/15) Perlberg, Heather, and Gittelsohn, John

Four publicly traded real-estate investment trusts (REITs) — American Homes 4 Rent, American Residential Properties Inc., Silver Bay Realty Trust Corp. and Starwood Waypoint Residential Trust — are struggling to meet investor expectations because they are, in essence, still learning how to run their businesses. Each REIT is trading below its initial public offering (IPO) value, even as the rental market flourishes amid growing demand.

Part of the trouble is that the REITs are still trying to manage costs — especially those related to turnover — under the watchful eye of investors, which allows little room for error. Some REITs are attempting to correct course to gain more capital. Silver Bay is selling assets to pay off debt and repurchase stock, and an investor has urged American Residential Properties to do something similar or sell the company.  

Meanwhile, private companies such as Blackstone Group LP’s Invitation Homes continue to retool their portfolios to meet their strategic goals without the inquisitive oversight of investors.

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