Litt’s Land & Buildings Adds Stake in American Homes 4 Rent

(Bloomberg) -- Activist investor Jonathan Litt has built a new position in American Homes 4 Rent and nominated a minority slate of directors to try and improve the real estate investment trust’s performance, according to people familiar with the matter.

Litt’s Land & Buildings Investment Management, which owns about 2.5 million shares -- or less than 1% -- of American Homes, believes the company is being outperformed by its peers in the single-family home rental industry, the people said, asking not to be identified because the details are private.

“AMH is one of L&B’s largest investments,” Litt confirmed on Twitter Tuesday, using the stock ticker for American Homes.

A representative for American Homes wasn’t immediately available to comment.

Litt has spoken to the company about his views, the people said. It’s not clear exactly how many directors Land & Buildings has put forward for the 10-member board, they said.

Shares in American Homes have gained 25% in the past 12 months, giving the company a market valuation of $8.5 billion. While the stock is up, it has trailed rival Invitation Homes Inc., which was taken public by Blackstone Group Inc. in 2017 and has gained 38% over the past year. Shares climbed less than 1% to $28.55 apiece in New York Tuesday.

Litt believes American Homes has a stronger balance sheet than Invitation Homes and that its shares would be worth 35% more if it traded at a similar multiple, the people said. He believes inconsistent communication from the management team, as well as a need to improve margins and revenue growth, is behind the gap in valuation, they said. Land & Buildings also believes the board needs to be refreshed as nearly half of the current roster is insiders, they said.

American Homes, based in Agoura Hills, California, is a leader in the single-family home rental industry with nearly 53,000 properties in 22 states, according to its website. The company was founded in 2012 by B. Wayne Hughes, and went public in 2013. Shares are up 79% since the initial public offering.

Investors like Hughes and Blackstone bought up cheap houses for the rental market in the aftermath of the 2008 financial crisis, helping prove that scattered portfolios of rental properties could be managed profitably.

Blackstone cashed out of its post-recession bet on Invitation Homes in November, making $7 billion from the stock sales and dividends, more than twice what it invested. Other investors, such as JPMorgan Chase & Co.’s asset management arm, pension funds, and sovereign wealth funds are now piling into the space since housing prices have started to recover.

To contact the reporter on this story: Scott Deveau in New York at sdeveau2@bloomberg.net

To contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, Elizabeth Fournier

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