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Altisource Residential plans to grow single-family rental portfolio by 900%

Completes Invitation Homes portfolio acquisition

Altisource Residential (RESI) grew its portfolio of single-family rental homes by 156% in the third quarter, the company announced Monday, but that’s just the beginning of the company’s plans for growth.

The third quarter increase was due mostly to the now-completed acquisition of 1,314 rental homes in Atlanta from Invitation Homes for an aggregate purchase price of $111.4 million.

When Altisource announced the deal initially, the expected purchase was going to be slightly larger, 1,325 single-family rental homes for $112.6 million.

Despite the slightly smaller acquisition from Invitation Homes, Altisource said Monday that its rental portfolio increased from 984 as of June 30 to 2,516 homes as of Sept. 30.

Of those 2,516 single-family rental homes, 2,105 are rented, 156 properties are listed for rent and 255 properties are under leasehold renovation and unit turn.

Altisource disclosed the completion of the Invitation Homes deal as part of its third quarter earnings statement.

While the 156% growth is nice, Altisource said it has plans to grow its rental portfolio by much, much more – 900%, in fact.

The company said that it plans to grow its rental portfolio from 2,516 to more than 25,000.

"In the third quarter of 2015, we took crucial steps to continue diversifying Altisource’s acquisition strategies and substantially grew our single-family rental portfolio,” said Altisource’s CEO George Ellison.

“We also believe our recent agreed-upon sale of non-performing loans at carrying value proves our valuation model and supports the value of our remaining loan portfolio," Ellison said.

"Our results reflect the impact of a continued slowdown in the number of non-performing loan resolutions due to servicing transfers and the fact that we are managing a static non-performing loan pool with no new loan acquisitions in 2015,” Ellison added.

“However, we believe we have sufficient existing equity to acquire at least 25,000 homes and will continue to execute on our strategy to be one of the preeminent single-family rental companies in the industry."

Altisource also stated that during the third quarter it agreed to sell 871 non-performing loans at balance sheet carrying value. The loans carry an unpaid principal balance of $346.9 million, and the loans represent approximately 15% of the total unpaid principal balance in Altisource’s loan portfolio.

Altisource said the sale is expected to close in the fourth quarter.

Altisource also stated that it amended its repurchase facility with Wells Fargo (WFC) to extend the facility to September 2017, increase the funding capacity to $750 million and increase REO financing capability to 40% of the facility.

With the funds from the repurchase facility, as well as the money from the sale of non-preforming loans, Altsource said that the growth from 2,500 homes in portfolio to 25,000 is more than reasonable.

“The liquidity provided by non-performing loan and non-rental REO sales are expected to be a growth engine that will provide Residential with buying power to increase its rental portfolio to at least 25,000 single-family rental homes in bulk and/or on a one-by-one basis,” the company said in its earnings statement. “The company's amended repurchase facilities, which provide it with the ability to finance REOs and have significant remaining financing capacity, will provide the company with additional leverage to build its rental portfolio.”

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