Two Canadian property managers with substantial U.S. holdings have filed preliminary documents for initial public offerings, seeking capital to bulk up their rental portfolios in North America.
Tricon Residential Inc. which already trades on the Toronto Stock Exchange, is pursuing a dual listing on the New York Stock Exchange in a US$350-million offering. Starlight U.S. Residential Fund, an affiliate of Starlight Group Property Holdings Inc., is preparing to trade some of its units on the TSX, and intends to raise up to US$198-million.
Tricon’s portfolio includes over 33,000 residential dwellings in the United States and Canada, comprising multifamily and single-family rentals. The net proceeds of the offering will go toward debt repayments and acquiring property.
In the United States, Tricon focuses on renting to middle-income tenants in warm-weather states that make between US$70,000 and US$110,000 per year.
Concurrent with the listing, Tricon will sell US$45-million of shares to Blackstone Real Estate Investment Trust Inc. in a private placement deal.
Morgan Stanley, RBC Dominion Securities, Citigroup Inc. and Goldman Sachs are the bookrunners on the IPO.
Starlight’s offering will raise capital for its U.S. Residential Fund, which will invest in residential properties in several U.S. states, mainly in the South and the Sun Belt. The company manages $23-billion in real estate assets across the U.S. and Canada.
Units of the fund are divided into various classes, and will be priced at $10 or US$10. Two classes of the units will sell on the TSX Venture Exchange.
CIBC World Markets is the lead agent on the offering, which the company said will need to raise a minimum of US$99-million to close.
The fund would be Starlight’s fifth publicly traded entity. Investors can access three residential funds on the market, and a commercial real estate investment trust.
Tricon and Starlight, both Toronto-based, are traditional players in a North American property management industry that has seen new entrants in recent years. Digital upstarts such as Zillow and Redfin, and asset managers like Blackrock, are buying up homes to either resell or rent out, capitalizing on limited housing supply in markets across the continent at a time when young adults have raised concerns about housing affordability. Tricon acknowledged these factors as a market condition that is favourable to its business.
“Homeownership in the United States is becoming increasingly out of reach due to rapidly rising home prices ... millennials in the United States now own far less real estate than baby boomers did at their age,” the company said in its prospectus. Renting “Tricon’s [single-family residential] homes provide an attractive housing option for young families as they form new households.”
This summer, Canadian developer Core Development Group Ltd. announced plans to spend $1-billion over five years buying detached houses and renting them out. The news spurred an outcry online from many young Canadians, who said they were concerned that home ownership has become exceedingly difficult, and that having more corporate players in the market makes it even harder.