Amherst Agrees to Buy Landlord Front Yard for $2.3 Billion

(Bloomberg) -- Amherst Holdings is buying Front Yard Residential Corp., expanding its portfolio of single-family rental homes as Wall Street makes new bets that more Americans want a suburban lifestyle, but can’t get a mortgage.

Front Yard put itself on the block last year after settling with an activist investor. The landlord, which has more than 15,000 homes, is being acquired for $12.50 a share, according to a statement Tuesday. The deal is valued at $2.3 billion, including debt.

Front Yard’s shares surged 11% on the news to $12.52 as of 9:46 a.m. in New York.

The purchase gives Amherst a rare opportunity to add a large number of properties in a single transaction, expanding its holdings to more than 36,000 rental homes. Amherst plans to integrate property-management operations under its Main Street Renewal Brand.

“Scale in this industry is very important,” said Drew Flahive, president of Amherst Residential, a subsidiary of Amherst Holdings. “It has a lot of knock-on benefits in terms of our cost to deliver services, which ultimately means we can deliver better products inside the home and better customer service to the tenant.”

Bloomberg News reported in December that the two firms were in advanced discussions about a deal.

Wall Street firms are increasingly targeting single-family rentals, buying up homes to cater to Americans who may want backyards and picket fences but would struggle to afford a purchase, or prefer to rent. JPMorgan Chase & Co.’s asset management arm recently entered the market, joining sovereign wealth and pension funds in making direct investments in the property type.

For decades, Wall Street viewed rental houses as too cumbersome to run efficiently and left the business to mom-and-pop operators. The foreclosure crisis changed that, allowing firms to buy thousands of homes cheaply and invest in new types of property-management platforms.

Investors including Blackstone Group Inc. benefited from buying homes in the aftermath of the financial crisis and helped prove that scattered portfolios of rental properties could be managed efficiently. Now, with home prices climbing, investors are betting that Americans priced out of the for-sale market will generate demand for rental houses.

Front Yard, based in Christiansted, U.S. Virgin Islands, launched a strategic review in May as part of a settlement with activist investor Snow Park Capital Partners. Snow Park had argued that Front Yard’s shares were trading at a substantial discount to the value of its assets.

Front Yard has more than $1.6 billion in debt, according to data compiled by Bloomberg. Its market value was about $609 million at the close of trading last Friday in New York.

To contact the reporter on this story: Patrick Clark in New York at pclark55@bloomberg.net

To contact the editors responsible for this story: Craig Giammona at cgiammona@bloomberg.net, Christine Maurus

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