SWAY Merger Enthusiasm Wanes

Home-building in the U.S. slipped in August, with declines in both single-family and apartment-building construction.

Sourced through Scoop.it from: www.wsj.com

The enthusiasm of the merger between Starwood Waypoint Residential Trust (NYSE: SWAY) and Colony American Homes has waned in recent days following last week’s fifteen percent increase in Starwood’s share price. The merger was announced on September 21, 2015, revealing that Colony’s shareholders would receive fifty-nine percent of the new company’s shares. Due to a high daily selling volume activity, it only took a couple of days from the announcement to lower Starwood’s share price back down to the pre-announcement levels.

The merger of both companies will create a single family REIT with 30,000 homes, thereby positioning the new company as one of the larger players in the industry. Both scalability and consolidation are the main reasons stated for the merger. In the minimum, the new company’s occupancy rate and average rental increase will surpass Starwood’s, and additionally will reinforce their presence in top single-family home rental markets such as California, Texas, Florida, and Georgia. Starwood is contributing approximately thirteen thousand homes out the combined thirty thousand.

This new merger elevates the new company to a level closer to comparison with American Homes 4 Rent (NYSE: AMH), a leading REIT in the category with over thirty-seven thousand single-family homes. Although home building in the US has slipped this past August, the industry is still expecting an upward trend due to the rising number of building permits for single-family properties.

Disclaimer: This newsletter is not engaged in rendering tax, accounting, or other professional advice through this publication. No statement in this issue is to be construed as a recommendation to buy or sell any security or other investment. Please do your own due diligence before making any investment decision. Some information presented in this publication has been obtained from third-party sources considered to be reliable. Sources are not required to make representations as to the accuracy of the information, however, and consequently the publisher cannot guarantee accuracy.

Disclosure: The author has no positions in any shares mentioned, and no plans to initiate any positions within the next 72 hours.

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