Invitation Homes
Invitation Homes Inc. is the largest owner of single-family rental homes in the United States, owning approximately 80,000 homes.[1][2]
| Type | Public company |
|---|---|
| NYSE: INVH Russell 1000 Index component | |
| Industry | Real estate investment trust |
| Founded | 2012 |
| Founder | Dallas B. Tanner Brad Greiwe |
| Headquarters | Dallas, Texas |
Key people | Dallas B. Tanner, CEO Barry Sternlicht, Director |
| Products | Leasehold estates |
| Revenue |  $1.764 billion (2019) |
| $147 million (2019) | |
| Total assets |  $17.392 billion (2019) |
| Total equity | $8.266 billion (2019) |
| Owner | The Blackstone Group (27%) |
Number of employees | 1,140 (2019) |
| Website | www |
| Footnotes / references [1] | |
Overview
Invitation Homes markets itself as a uniquely "worry free" single-family rent company in comparison to mom-and-pop businesses that make up most of the industry, which guarantees customers "peace of mind" with "exceptional resident services," including "24/7 emergency maintenance."[3]
History
2005–2012: Background and formation
In 2005, entrepreneur Dallas Tanner formed the housing and apartment investment company Treehouse Group in Arizona; between 2010 and 2011, it bought 1,000 distressed houses in Phoenix, a city heavily impacted by foreclosures caused by the subprime mortgage crisis[2] and one the first areas where private equity investor purchases of homes for rent took place after the 2008 crash.[4]
In 2011, Treehouse paired with the Dallas-based property management firm Riverstone Residential, a merge noticed by The Blackstone Group; Tanner explained that Blackstone felt Treehouse and Residential "had a perfect model in terms of one market [Phoenix], a high concentration of residential product, and a consistent operating history."[2] The pairing merged with Blackstone in the spring of 2012 into a new entity named Invitation Homes, with Blackstone giving Treehouse and Residential more capital to expand the business.[2]
2012–2017: Initial purchases
Invitation Homes' first home purchase was in April 2012,[2] and within a year, the entity became the largest buyer of homes for rent in the United States with 24,000 homes, spent with $4 billion; section 8 properties made up 16% of the portfolio.[5] In April 2013, it made a single, $100-million-plus purchase of 1,400 Atlanta homes from Building and Land Technology.[5]
From August 2012 to June 2013, Invitation Homes purchased 1,650 homes in the Tampa Bay Area for a total of above $250 million, $840,000 a day.[6] The Tampa Bay Times, in a June 2013 article, reported 85% of Tampa Bay online listings by Invitation Homes were above the area's average rent of $1,200.[6]
Wall Street was purchasing houses in "strike zones," neighborhoods located near several jobs, schools, and transportation systems that were also facing high amounts of foreclosures, and sold them to middle-aged parents raising children making around $100,000 a year or more.[3] As the 2010s progressed, so did Wall Street's focus on single-family housing, a movement led by Invitation Homes.[2][3]
In 2013, Invitation Homes created an asset class of single-family rental securities (SFR) to have money for purchasing houses and restoration; by January 2017, nearly $10 billion of the bonds were sold,[7] a number that went to $15 billion in July 2018, a month-and-a-half after the February 2017 initial public offering.[3]
2017–present: Initial public offering and merge
On January 23, 2017, Fannie Mae funded $1 billion of debt to Invitation Homes as back-up money; the enterprise, only four years prior, stopped another government-sponsored entity buying distressed homes, and Fannie's acquisition with the Blackstone entity was the first time in history it backstopped a single-family house landlord company.[7] According to Corinne Russell, spokesperson of Fannie Mae regulator Federal Housing Finance Agency (FHFA), the deal was a way for Fannie Mae and Freddie Mac to learn about the mechanics of the single-family rent market and what the government enterprises' role should be in it.[3] Writes MarketWatch's Ryan Dezember, "Fannie Mae's involvement is a sign that it believes homeownership will remain out of reach for many Americans and that Wall Street's housing wager will be become a long-term business, not just an opportunistic trade made after the foreclosure crisis."[7] The decision received criticism from more than 25 affordable-housing advocate groups, who believed Fannie Mae wasn't following its principle of protecting home owners.[3]
In February 2017, Invitation Homes became a public company via an initial public offering, the second-largest initial public offering of a real estate investment trust in the United States with $1.77 billion.[2] Wall Streets housing institutions scaled through mergers after most distressed houses were bought, climaxing into a merger of equals between Invitation Homes and Starwood Waypoint,[2] a corporate spin-off of Starwood Capital Group, in November 2017.[8] The merge was praised by JMP Securities' Aaron Hecht, "The geographic footprint of the portfolios overlay with each other pretty well. Scale means a lot in this business, because you are managing all these individual properties. So you need enough concentration in areas to become efficient."[2] What followed the merge was an 18-month integration between Invitation Homes and Starwood Waypoint.[2]
As of 2018, Invitation Homes is the largest single-family rental housing owner of all time, public or private, with 82,000 properties[2] in 17 Sun Belt cities and a portfolio 58% bigger than American Homes 4 Rent, its nearest competitor.[3] It was the top REIT of 2018 in the rankings of several of 17 analysts; all of them, except Goldman Sachs who gave the company a hold rating, rated it a buy.[2] 17 months after its February 2017 IPO, its stock price rose by 11%.[3] The corporation's addition of fees grew annual earnings by around 20-to-30-percent.[3] Blackstone owns a 42% stake of the entity, which equates to $5.1 billion.[3]
Criticism
Invitation Homes pitches itself as a singular landlord providing unprecedented ease and comfort for renters of its tens of thousands of single-family homes. But in interviews with scores of the company’s tenants in neighborhoods across the United States, the picture that emerges isn’t as much one of exceptional service as it is one of leaky pipes, vermin, toxic mold, nonfunctioning appliances and months-long waits for repairs.
Wall Street companies in the rent industry, especially Invitation Homes, have garnered strong backlash from real estate experts and affordable-housing activists for taking advantage of tenants to fulfill investors' pockets; the primary argument is that the corporations are incentivized keep repair costs low and fees and rent prices high in order to increase bond sales that determine their scale.[3] California Reinvestment Coalition's Kevin Stein derogatorily labeled the business model "securitization of rental income."[3]
Although chief operating officer Charles Young stated renters have the "optionality and freedom" to rent from Invitation Homes and that 70% of its user re-leased, only a few of the tenants interviewed by Reuters for a July 2018 article admitted to renewing because they enjoyed the company's services; others stated they had to renew due to a lack of other options.[3] An analysis of Census and property data by Massachusetts Institute of Technology researcher Maya Abood of four Los Angeles County neighborhoods where Invitation Homes single-family rents are located show that the percentages of rents it owns in a neighborhood ranged from 10% to up to 25%.[3]
A December 2016 Federal Reserve Bank of Atlanta study stated Wall Street rent corporation evicted tenants significantly more than regular mom-and-pop landlords; it reported Invitation Homes evicting 15% of its renters, and the entity it would later merge with, Starwood Waypoint, 30%, and stated being African-American also increased chances of being evicted if under a company like Invitation Homes.[3]
Complaints and horror stories from Invitation Homes' customers have been covered on publications and news stations such as CBS 46,[9] CBS Sacramento,[10] The Arizona Republic,[4] and NewsChannel 5 Nashville.[11] Mold;[3] sewage;[3] water leakage;[3] nail poking out,[10] infestation of vermin such as spiders, cockroaches, and ants;[3] broken appliances such as garage doors, heating systems, stoves, and microwaves;[3] and unfulfilled repair requests are frequent issues.[3] Places such as Oakland, California have raised rents by 10% per year, double the usual percentage for markets, which is attributable to Invisible Homes, stated the Alliance of Californians for Community Empowerment (ACCE).[3] There have been three protests at Blackstone's California offices by Invitation Homes tenants organized by ACCE, such as one in October 2017 at Blackstone's Santa Monica headquarters, which involved the tenants placing letters on the desks to hold a meeting with the corporation's executives and stop practices of excessive rent prices, fees, and poor maintenance; the company never got back to them.[3]
Invitation Homes has faced several lawsuits from courts throughout the country.[4] In May 2018, tenants filed a class action against the corporation in the United States District Court for the Northern District of California, with a rationale of excessive rent price increases and fees; they reported being charged $95 if even a minute late on a rent payment, regardless if the company's online payment system is broken, and filing eviction notices that added more "unfair" legal costs, fees, and penalties for them to bear.[3] On July 20, Invitation Homes responded with a motion that stated the class action group and its plaintiff had too little evidence.[3]
Staff of Invitation Homes has responded to the criticisms, including chief operating officer Charles Young who in July 2018 stated the company had an average rating of 4.32 stars out of five from tenant surveys it ran.[3]
Despite Congress passing legislation banning broker's price opinions after the mortgage crisis, it's legal for Invitation Homes to use them due to a loophole where the law doesn't apply to bonds of multiple homes.[3] For the entity, the other firm's BPOs are a less-costly alternative to mortgage appraisal by licensed contractors typical of the housing market; according to an investigation by the Securities and Exchange Commission that started in September 2017, they involve inspections by independent contractors unlicensed to do appraisals, who are only assigned to inspect the exteriors with the assumption that the interiors were already renovated.[3]
One of the single-family securities looked at by Reuters contained 7,024 houses, each of which was making the entity an average rent of $1,538 a month and $985 a year for other fees.[3] Reuters also interviewed five Invitation Homes ex-employees that stated the company spent too little on repairs; the bond data showed it spent a per-house annual average of $1,142 on maintenance, less than the typical $3,100 average most Americans spend for the same services, although the entity responded that the $750 spent on system back-up costs wasn't shown.[3]
References
- "Invitation Homes Inc. 2019 Form 10-K Annual Report". U.S. Securities and Exchange Commission.
- Curry, Kerry (April 2018). "Invitation to a Housing Revolution". D Magazine.
- Conlin, Michelle (July 27, 2018). "Spiders, sewage and a flurry of fees – the other side of renting a house from Wall Street". Reuters. Retrieved May 23, 2020.
- Reagor, Catherine; Sanders, Rebekah (August 15, 2018). "'Stay away': Arizona families share horror stories of one of Arizona's largest landlords". The Arizona Republic. Retrieved May 24, 2020.
- Gittelsohn, John (April 25, 2013). "Blackstone Buys Atlanta Homes in Largest Rental Trade". Bloomberg News. Archived from the original on December 7, 2013. Retrieved May 28, 2020.
- Harwell, Drew (June 22, 2013). "Investors still gobbling up thousands of Tampa Bay homes to rent out". Tampa Bay Times. Archived from the original on March 4, 2017. Retrieved May 28, 2020.
- Dezember, Ryan (January 24, 2017). "Blackstone wins Fannie's backing for rental homes". MarketWatch. Retrieved May 26, 2020.
- "Invitation Homes And Starwood Waypoint Homes Complete Merger" (Press release). PR Newswire. November 16, 2017.
- Murphy, Adam (October 30, 2018). "Tornado damaged home causes health issues". CBS 46. Archived from the original on October 31, 2018. Retrieved May 24, 2020.
- Bollea, Drew (January 18, 2018). "Report Claims Larger Landlords Exploiting Tenants, Harming Neighborhoods". CBS Sacramento. Archived from the original on January 22, 2018. Retrieved May 25, 2020.
- Kraus, Jennifer (February 4, 2019). "Former tenants share horror stories of renting from real estate investment firm Invitation Homes". NewsChannel 5 Nashville. Archived from the original on May 20, 2020. Retrieved May 24, 2020.
External links
- Business data for Invitation Homes: