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American Homes 4 Rent prices IPO at $16 a share

Wed Jul 31, 2013 5:55pm EDT

July 31 (IFR) - American Homes 4 Rent, a REIT with some 18,000 single-family houses across the US, finalized pricing of an initial public offering on Wednesday that values the company at $3.7bn.

The IPO of the company, which was founded in 2011 by storage billionaire B. Wayne Hughes, comprised 44.1 million shares that were sold to the public at $16, the low end of a $16-$18 target.

In addition to the shares already privately held, the sale will value American Homes at $3.7 billion. Hughes is buying an additional $50 million of shares in a concurrent private placement, and early investor Alaska Permanent Fund Corporation is purchasing an additional $25 million.

Goldman Sachs, Bank of America Merrill Lynch, FBR Capital Markets, JP Morgan and Wells Fargo led the sale.

Market-watchers say the successful sale will give a significant boost to the growing market for US single-family rentals in the wake of the financial crisis.

After an untold number of foreclosures across the United States, AMH says it has spent $3.1 billion acquiring 17,949 single-family homes that it renovates and rents.

The company has another 1,152 properties in escrow that it has committed another $191m to buy.

But the rapid rate of the company's property acquisitions tested investor appetite for risk connected with the still fragile recovery in the US housing market.

According to paperwork filed with the SEC for the IPO, American Homes had just 55% of its properties leased as of June 30.

A considerable number of others were not rent-ready, and as a result cash flows are unlikely to stabilize until 2015 and beyond as the company continues buying homes.

Investors seem to be valuing the company either on the basis of price-to-book value or by discounting cash flows on future rental income and home price appreciation.

American Homes reported a net loss of $7.5m on total revenue of $6.6m in the three months ended March 31.

 
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