Blackstone and Starwood Merging Rental House Portfolios to Produce $11 Billion Company

Combined Portfolios Will Consist of 82,000 Single Household Rental Homes, the Largest in the USA

The Blackstone Group’s(NYSE: BX)Invite Houses(NYSE: INVH)and Starwood Waypoint Homes(NYSE: SFR), two of the nation’s largest rental-home owners, are integrating in a 100% stock-for-stock merger that would produce one of the largest owners of rental houses in the U.S. with approximately 82,000 single-family rental homes.

The combined business will operate under the Invite Homes banner and continue trading on the New York Stock Exchange under the ticker symbol for Invite Homes (NYSE: INVH).

Under the terms of the agreement, each Starwood Waypoint Residences share will be transformed into 1.614 Invitation Homes shares, with Invitation Homes stockholders will own around 59% of the combined business’s stock.

Based upon the closing prices of Starwood Waypoint Homes common shares and Invite Homes typical stock on Aug. 9, 2017, the equity market capitalization of the combined business would be approximately $11 billion and the total business value (consisting of debt) would be roughly $20 billion.

Invite Houses stock was up 80 cents on the news today (3.81%) to about $21.80/ share. Starwood’s stock leapt much more: $2.90/ share (9.22%) to $34.35/ share.

This tactical deal combines two business with highly complementary abilities, including Invite Houses’ industry-leading approach to customer service and asset-management competence, and Starwood Waypoint Homes’ industry-leading technology. In addition, the current Starwood Waypoint Houses CEO Fred Tuomi, who will end up being CEO of the combined business, has experience effectively incorporating mergers of large-scale, single-family rental business. In general, the 2 business have actually invested nearly $2 billion, an average of approximately $22,000 per house, in restorations and upkeep, improving resident experience and driving financial growth and task production in local communities.

The combined business would own and manage a portfolio of approximately 82,000 single-family homes.

The two companies have really similar portfolios of homes focused on overlapping, high-growth markets – with nearly similar average monthly leas and almost 70% of combined business earnings originating from the Western United States and Florida.

The combined portfolio would likewise have approximately 4,800 houses per market, enabling it to leverage economies of scale and enhance operating performance.

The combined company experienced pro forma same-store net operating income (NOI) growth of 7.0% in 2Q 2017 with over 95% occupancy.

The companies’ combined portfolios still represent less than 0.1% of the more than 90 million single-family homes in the United States, and simply 0.5% of the almost 16 million single-family houses for rent in the U.S.

Upon conclusion of the deal, Fred Tuomi, CEO of Starwood Waypoint Houses, will end up being CEO of Invitation Houses; Ernie Freedman, CFO of Invitation Residences, will remain CFO; Charles Young, COO of Starwood Waypoint Residences, will end up being COO; and Dallas Tanner, CIO of Invite Houses, will stay CIO. The combined business will be locateded in Dallas, Texas, and will preserve a presence in Scottsdale, Arizona.

The combined company is expected to produce projected yearly run-rate cost synergies of $45 million to $50 million. The combined company is likewise anticipated to benefit from a flexible balance sheet with lower long-term cost of capital and a continued course towards deleveraging.

The deal has been all authorized by the boards of both Starwood Waypoint Residences and Invitation Houses. Blackstone, the bulk investor of Invite Homes, has likewise granted the contract. The deal is expected to close by year-end, subject to approval by Starwood Waypoint Residences stockholders and other traditional closing conditions.

Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC are serving as monetary consultants and Simpson Thacher & & Bartlett LLP is functioning as legal advisor to Invite Residences. Morgan Stanley & & Co. LLC and Evercore are serving as financial consultants and Sidley Austin LLP is serving as legal advisor to Starwood Waypoint Houses.

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