50% rule. fiction? non-fiction? Let's see for 37,491 SFR

12 Replies

American Homes for Rent (NYSE: AMH) numbers for quarterly period ended June 30, 2015.. for 37,491 single-family properties in 22 states:

Rents from single-family properties $137,818,000
Fees from single-family properties $2,204,000

Property operating expenses:
Leased single-family properties $67,823,000
Vacant single-family properties and other $4,456,000

72,288 / 140,022 = 51.63%

If you take into account "tenant chargebacks" revenue and "General and administrative" expense, you reach the same conclusion (51.69%).

I think for the most part the "numbers" and their conclusions match pretty well with what I (and many others here on BP) expected, now that their portfolio is "stabilized" and they have some consistent operational history and have seen some tenant turns. Their stock price and stock performance is about what I expected as well. Summary: No fools on Wall Street are paying a premium for an unproven SFR hedge fund investment concept. This stock is at book value where it belongs.

Source: AMH latest 10-Q SEC filing

I was going start a thread to talk trash about them. They buy from our county foreclosure auction at ridiculous high prices.  they outbid most people unfortunately. And they got a house I wanted for $1000 over my max bid number.  They probably would have gone to about 90%arv.  Yeah I'm bitter.  1% dividend payout?.....I hope they fail.....

Until they reload, they are running light on cash. Only 1.36% of assets are in unrestricted cash. They may be done for a while.

But I'm not bitter they shoved me out of the market. Hey, it's their money. The worst thing you can do is try to compete with them. They have the lowest cash amount I've seen but it (unrestricted cash) is still over $90M. I ain't biddin' against that! They tend to win at the courthouse. Always. Like the school yard bully, let 'em go... let 'em have their space. Wait it out, hopefully someplace nice... like at a resort rehab you might find;)

I agree. The only problem is that if I wouldn't have bid, they would have gotten it at about 60% arv. Got to keep some pressure on them.  I think some of us locals are making it a point to not let them go un contested. 

So how does a reit reload? Sell more prefered shares? 

As far as the 50% rule.... Looks pretty convincing. 

@Mike Landry

Regarding "So how does a reit reload? Sell more prefered shares?"  Good question. It turns out the particular REIT in question reloads in conceptually a similar way to what my company has done for 10+ years. But we do only 5-10 properties at ~75% LTV. They aggregate properties into a 'tranche' and find a commercial lender. In their case, they use a Wall Street investment banker (Goldman Sachs Mortgage Company.) Their Deed of Trust (D-T) is not a FNMA boilerplate D-T, but includes Assignment of Leases and Rents, a Security Instrunment, and Fixture (UCC) Filing. The D-T appears to be a Golden Slacks 'standard' multi-state document. And the leverage is incredible.

Details of properties in the D-T, loan amount, date of filing:
199 properties: $513,315,800 !!!! 9/30/2014
316 properties: $528,418,000 !!!! 12/3/2014
122 properties: $552,830,000 !!!! 3/16/2015

Part of the process they used was to transfer property from their AH4R holding company to a newly formed "Borrower" LLC. All these different entities generally hold a few hundred properties.

So... they borrow a couple million on average per property that they acquired for (average) $174K. Hell of a concept. Welcome to Wall Street!

@Chris Martin not knowing what they buy in other markets. however when they came to Oregon and loaded up.. they only bought off of MLS they did not go the auction route since our sales turned into judicial with rights of redemption.. and they only bought top end properties. So if this is representative of their portfolio nationwide... and they are at basically the 50% rule... those private investors buying low grade b and C should expect the same or even higher costs of ownership... Unless we think this company loses controls by being so large and is over paying for services.

Medium ksqoekox 400x400Jay Hinrichs, TurnKey-Reviews.com | Podcast Guest on Show #222

Has anyone looked in to how the numbers compare on this REIT, which specializes in single family rentals to any REIT's that have mostly multi families?  

I'm just wondering if there is much of a difference in numbers between asset classes.

Originally posted by @Jay Hinrichs :

@Chris Martin not knowing what they buy in other markets. however when they came to Oregon and loaded up.. they only bought off of MLS they did not go the auction route since our sales turned into judicial with rights of redemption.. and they only bought top end properties. So if this is representative of their portfolio nationwide... and they are at basically the 50% rule... those private investors buying low grade b and C should expect the same or even higher costs of ownership... Unless we think this company loses controls by being so large and is over paying for services.

I think the Raleigh numbers are a reasonably good indicator of their operations nationally. I think they were overpaying for some services as they built up the portfolio, but once they stabilized the portfolio (aand got better economy of scale) their numbers (e.g. administration, management, etc.) seemed to approach "normal". To me, the 50% rule of thumb is (and has proven to be) a very good measure for a big chunk of the "bell curve" type investment portfolios, including large SFR portfoilios... which is the purpose of this topic. There are and always will be exceptions, but they aren't in the biggest volume of the bell curve.

I still can't believe the leverage. That was completely unexpected.

Time will tell if their operations are as sound as they anticipate. Some day, maybe I'll do an analysis of their rental operation. How many evictions have they had? Their SEC filings don't go into those kinds of details. I can tell you that in Wake county on one day about a month ago they had a full docket practically for themselves. I was in the other courtroom so didn't hear the attorney's cases... but the fact that they have some evictions is what I would expect for an operation of their size. They are by far the biggest SFR landlord(1) in my buy/hold area (Wake county NC)

(1) See my post on Sept 7, 2015

Updated over 2 years ago

New information... see posts below. The D-T in one county only covers property in that county, yet the borrowed amount spans several counties across multiple states...

Originally posted by @Jamin Stokes :

Has anyone looked in to how the numbers compare on this REIT, which specializes in single family rentals to any REIT's that have mostly multi families?  

I'm just wondering if there is much of a difference in numbers between asset classes.

Yes.

And yes.

@Chris Martin  They own 539 houses in Guilford Co assuming I have found all of their entities, both holding and borrower.  It looks to me like most of what they bought here is the circa 2000s tract housing that was thrown up (literally) by the national and regional builders, many of whom are no longer on the scene.  Not surprising I suppose - these developments brought in a lot of first time, no $ down buyers and now AH is buying them foreclosure.

From what I can tell, they have only executed one DoT in Guilford:

3/6/15 - $552,830,000 - 144 houses - average borrowed of $3.8MM / house!!  My guess is that these places are each worth 140k +/-

Interesting that the amount they borrowed in Wake Co on that final loan is the same as the one in Guilford.

Nice borrowing $3.8M on a 140k house, I wonder who is going to get stuck with that mess when that house of cards collapses. 

No wonder they spin it off, they don't want to associate it with the main company when it fails, and it will fail.

Originally posted by @Derek B. :

@Chris Martin  They own 539 houses in Guilford Co assuming I have found all of their entities, both holding and borrower.  It looks to me like most of what they bought here is the circa 2000s tract housing that was thrown up (literally) by the national and regional builders, many of whom are no longer on the scene.  Not surprising I suppose - these developments brought in a lot of first time, no $ down buyers and now AH is buying them foreclosure.

From what I can tell, they have only executed one DoT in Guilford:

3/6/15 - $552,830,000 - 144 houses - average borrowed of $3.8MM / house!!  My guess is that these places are each worth 140k +/-

Interesting that the amount they borrowed in Wake Co on that final loan is the same as the one in Guilford.

Ah!!! Regarding "Interesting that the amount they borrowed in Wake Co on that final loan is the same as the one in Guilford", the D-T covers property in multiple NC counties, possibly multiple states. That makes much more sense. Seems like there should be a notation somewhere that the D-T also applies to assets in other areas... but I guess this isn't needed, other than in the security instrument in the county (each county) where secured property is located. Learn something every day!

@Chris Martin  that makes more sense now.  

On that March 2015 D-T:

122 Wake Co - from your post above

144 Guilford

158 Mecklenburg

94 Forsyth

So yes, $552mil must have been a multi-state transaction.

@Chris Field  See Chris' post above mine to clarify the amount of leverage vs # of houses.

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