When Altisource Residential said last year that it planned to grow its portfolio of single-family rental homes by 900% – from 2,516 to more than 25,000 – over the next few years, the company apparently wasn’t kidding.
The company disclosed recently that it increased its single-family rental portfolio to nearly 4,000, but that increase pales in comparison to the deal Altisource just announced.
Altisource said Friday that it is buying a portfolio of 4,262 single-family rental properties for an aggregate purchase price of $652.3 million, which more than doubles Altisource’s rental holdings.
According to details from Altisource, the deal is a seller-financed transaction and the homes were acquired from “investment funds sponsored by Amherst Holdings.”
Altisource said that the acquisition “greatly enhances” its presence in new and existing markets, including Florida, Texas, Georgia, Tennessee, North Carolina and South Carolina.
The company said that the newly acquired portfolio is “consistent” with Altisource’s existing holdings of “quality, affordable” rental homes.
According to George Ellison, Altisource’s CEO, the deal moves the real estate investment trust closer to its goal of moving its entire business into single-family rentals.
“These high-yielding properties are an excellent fit for the Residential brand and expand our geographic reach in strategic markets,” Ellison said. “The acquisition of these properties is a crucial milestone for Residential and keeps the company on track to achieve its stated goal of 10,000 rental homes by the end of 2016.”
David Reiner, Altisource Residential’s chairman of the board of directors, called the deal a “transformative transaction” for the REIT. “By continuing to execute on our strategy, Residential is well positioned to reward investors with long-term growth and attractive returns,” Reiner said.
According to Altisource, the seller financing for this transaction represents 75% of the purchase price and was provided pursuant to a loan agreement with a term of up to five years and a floating interest rate of one-month LIBOR plus a fixed spread.
As part of the deal, and as a condition of the seller financing, Altisource Residential will continue to use the current property manager for the portfolio, Main Street Renewal, to provide property management services to the acquired properties.
According to Altisource, the company will continue to use Altisource Portfolio Solutions as its property manager on all of the company's other REO and single-family rental properties.
To facilitate the new acquisition, Altisource Residential had to obtain a “waiver of the exclusivity provisions in its existing Master Services Agreement” with Altisource Portfolio Solutions.
In order to obtain that waiver, Altisource Residential and Altisource Portfolio Solutions agreed to “certain amendments” to the Master Services Agreement, including a contingent liquidation fee of $60 million in the event Altisource Residential decides to to liquidate 50% or more of its single-family rental portfolio that is currently managed by Altisource Portfolio Solutions.
“We are very supportive of Altisource Residential’s portfolio acquisition as it accelerates Altisource Residential’s transition to a 100% single-family rental company,” Altisource Portfolio Solutions said in statement.
“We believe this acquisition strengthens Altisource Residential’s position in the industry and positions them well for growth, which are positive for Altisource Portfolio Solutions. We believe the terms we agreed to with Altisource Residential further underscore Altisource Residential’s long-term commitment to the rental home business and our strong ongoing relationship with Altisource Residential."