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Merger boom affecting the real estate industry

On Behalf of | Dec 9, 2015 | Mergers & Acquisitions

Many of our posts have highlighted the boom of mergers and acquisitions this year as the convergence of “cheap” money, tax benefits and potential shareholder benefits have led many companies to purchase competitors or complimentary enterprises. Indeed, a number of the major transactions we have followed involve the health care industry, but our reporting of mergers and acquisitions should not ignore the changes that affect the housing industry.

Since the real estate fallout from 2007, some savvy investors went about purchasing thousands of distressed homes and turning them into rentals. The reasoning was simple; it was a way to save neighborhoods, keep people in homes and maintain the integrity of neighborhoods that would otherwise fall victim to blight. It also gave rise to several single family rental companies and stocks that became publicly traded. 

They include companies such as Colony American Homes, American Residential Properties, American Homes 4 Rent and Starwood Wayport Residential Trust, to name a few. But years after the bottoming of the market and the stabilization of the real estate market, it appears that corporate landlord market was in the need of a shift; much like the strategy change experienced in other industries (particularly health care).

So it is not surprising that Starwood Waypoint announced a takeover of Colony American Homes; and similarly, American Homes 4 Rent struck an accord to purchase American Residential Properties. The apparent goals were the same; to benefit stockholders and increase profits that could later be used to purchase more property.

It remains to be seen whether this will actually happen, but it exemplifies the need for experienced legal counsel to facilitate these deals.