InvestmentsReal Estate

Massive rental shakeup: Starwood Waypoint, Colony American announce merger

Combined company will own and manage 30,000 single-family rental homes

Two of the nation’s largest owners of single-family rental homes announced a merger, stating that their combined businesses are an indication of the strength and stability of the single-family rental business.

In a joint announcement Monday, Starwood Waypoint Residential Trust (SWAY), which was spun off of Starwood Property Trust (STWD) in Jan. 2014, announced that it will be merging with Colony American Homes.

According to the companies’ announcement, the merger will be a stock-for-stock transaction.

Upon completion of the merger, the combined company will own and manage more than 30,000 single-family homes.

The companies’ announcement also states that the combined company will have an aggregate asset value of $7.7 billion, and the merger is expected to achieve an estimated annualized “cost synergies” of $40-$50 million.

Under the terms of the agreement, Colony American’s shareholders will receive an aggregate of 64,869,583 Starwood Waypoint shares in exchange for all shares of Colony American.

Starwood Waypoint’s shares rose during Monday’s trading, with the stock trading at $25.55 as of 3:05 p.m. Eastern, which is up $2.86 and 11.17% for the day.

Upon completion of the transaction, existing Starwood Waypoint shareholders will own approximately 41% of the combined company’s shares, while former Colony American shareholders will own approximately 59% of the combined company’s shares. 

Barry Sternlicht, Chief Executive Officer and Chairman of Starwood Capital Group, and Thomas Barrack, Executive Chairman of Colony Capital, will serve as non-executive co-chairmen of the combined company’s Board of Trustees.

Fred Tuomi, President and Chief Operating Officer of Colony American, will serve as CEO of the combined company. Doug Brien, CEO of Starwood Waypoint, will serve as President and COO. Arik Prawer, Chief Financial Officer of Colony American, will serve as CFO.

“This merger is a transformative event for SWAY and for our industry,” stated Barry Sternlicht. “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.”

Barrack said that the merger “demonstrates the power of scale and consolidation and really crystallizes the long-term durability” of the single-family rental industry.

“This combination of Colony American and Starwood Waypoint truly redefines this asset class, and the opportunity in front of us is immense,” Barrack added.

In the last year, Starwood Waypoint and Colony American both began securitizing pools of single-family rental homes, with Colony American Homes’ first securitization coming in March 2014 and Starwood offering its first securitization in Dec. 2014.

The merger is expected to close in the first quarter of 2016.

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