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Thursday, Jan 17, 2019
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There’s good, bad news for Invitation Homes rental venture

TAMPA — An early report card on how rental-home powerhouse Invitation Homes is faring suggests it has more vacancies than expected, but it’s also getting more of its renters to renew their leases than expected, a new report from Morningstar Credit Ratings says.

Invitation Homes is a major player in Tampa Bay-area real estate, having purchased more than 1,450 homes in Hillsborough County, property records show, plus a few hundred in Pasco and Pinellas counties. Nationwide, it has purchased more than 40,000 homes.

Owned by private equity firm Blackstone Group, Invitation Homes pioneered a new type of investment in November: It sold $479 million in bonds, using the rental payments from 3,207 rental homes to pay bondholders, according to Bloomberg News.

Of those homes, 257 are in the Tampa Bay area. Numerous media reports suggest other rental-home companies are eager to issue similar bonds.

To be sure, it’s still very early in the bonds’ life cycle, and the rental homes that back the bonds are a small fraction of Invitation Homes’ total portfolio.

Still, an update from Morningstar this week gives some clues on how some of Invitation Homes’ rental homes are performing.

The company started with a pool of 3,207 homes in October, all of which were occupied and generated monthly rental payments of $4.2 million.

By January the company had 252 vacancies and its monthly rent collections had fallen to $3.9 million, Morningstar’s report says. That’s a vacancy rate of 7.9 percent.

That’s not necessarily unexpected, because everyone assumed some renters would leave before their leases expired and some renters wouldn’t renew. Morningstar had expected a vacancy rate of 8 percent all along, but the issuer of the bonds, technically called Invitation Homes 2013-SFR1 Trust, expected a lower vacancy rate of 6 percent, Morningstar said.

On a good note, the early results show Invitation Homes has a better renter renewal rate than predicted. Of 288 leases that expired in December, 79 percent of the renters renewed their leases. Morningstar had expected only 67 percent to renew.

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