Starwood Waypoint Residential Trust (SWAY) and Colony American Homes (CAH), two of the largest single-family rental home companies in the United States based on portfolio volume, have announced the signing of a definitive merger agreement, combining the two companies in a stock-for-stock transaction.
SWAY, based in Oakland, California, is one of the largest publicly traded owners and operators of single-family rental homes in the United States with about 12,500 homes in eight states. CAH is a Scottsdale, Arizona-based company that specializes in acquisition, ownership, renovation, leasing and management of single-family residential homes in the United States and has one of the country's largest single-family rental portfolios with 19,000 homes.
The combined company, which will be managed internationally, is expected to own and manage more than 30,000 single-family homes nationwide and have an asset value of about $7.7 billion when the transaction closes, according to the announcement. The companies are expected to achieve estimated annualized cost synergies of between $40 million and $50 million by merging.
"This merger is a transformative event for SWAY and for our industry," said Barry Sternlicht, Chairman and CEO of Starwood Capital Group, partner of SWAY. "Combining two best-in-class teams, with a superior portfolio of homes in carefully selected geographic markets, positions us to deliver long-term capital appreciation for our shareholders while earning compelling current yields at or above those currently achievable in other major real estate asset classes."
"We believe this merger demonstrates the power of scale and consolidation and really crystallizes the long-term durability of the single-family rental industry."
Sternlicht and Thomas J. Barrack, Jr., Executive Chairman of Colony Capital, will serve as non-executive Co-Chairmen of the merged company's Board of Trustees, according to the announcement. Fred Tuomi, President and COO of CAH, will serve as CEO of the new merged company, while SWAY CEO Doug Brien will serve as president and COO. The CFO of CAH, Arik Prawer, will retain that role with the combined company. The merged company's corporate headquarters will be in Scottsdale, Arizona, where CAH's headquarters is currently located. The new company will maintain a significant presence in Oakland, California, where SWAY's headquarters is located, according to the announcement.
"We believe this merger demonstrates the power of scale and consolidation and really crystallizes the long-term durability of the single-family rental industry; this combination of CAH and SWAY truly redefines this asset class, and the opportunity in front of us is immense," Barrack said.
CAH shareholders will receive an aggregate of nearly 65 million shares of SWAY in exchange for all shares of CAH. When the transaction is compete, existing SWAY shareholders and the former owner of the SWAY manager will own about 41 percent of the merged company's shares combined, and former CAH shareholders will own about 59 percent of the merged company's shares. The shares were allocated based on each company's net asset value, according to the announcement. The transaction is expected to close in the first quarter of 2016.
Click here to see the complete announcement about the merger.