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SWAY - Starwood Waypoint Residential Trust


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This is a REIT that acquires, renovates, leases, maintains, and manages single family homes. It was a spin-off from Starwood Property Trust, Inc. earlier this year.


What I find interesting is that this REIT is focused in an area that most REITS avoid, Single family homes. But it appears they have a long standing successful rental management platform that they are using. The other thing I find interesting is the way they acquire their homes, they don't buy them off the market or even buy foreclosures from the bank. They have a system of buying non preforming loans (something nobody seems to want) and then they do the workout of those loans ending up with some of the houses.


I struggle with spin-off's because of the lack of operating data but this one is interesting to me. they have just announced selling 150 mil of Convertible Senior Notes




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an interesting idea but a couple of questions:


1. do they do better (i.e. more opportunity, more people renting) if the housing market does worse? 

2. if the housing market recovers do renters leave to buy their own home or does the reit sell the rental property to them?




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Good questions, I will give an opinion, not sure I could call what I give an answer.


1. Hard to say because they currently have a 90-Day Rent Ready Homes occupancy rate of 98.8%. not sure that they need that much more in the renters marketplace. but then again maybe it would enable them to increase their rental rates. from what I can tell their strategy involves both renting in some cases and selling the homes that they pick up in other cases so I think that if housing did worse then it would mean more opportunity for them but also a decrease in their inventory value. I don't know what the sweet spot is between those two things.


2. they are buying large chunks of none preforming loans and they work those out in a variety of ways that doesn't always involve them ending up owning the home. And they are also in the business of selling some of their homes off when they see fit. So I think the answer is Yes they do look at that possibility of selling the renter the home. As someone who has invested in single family homes you really need to take both ends of the market into consideration and always be open to the possibility of someone taking some of your inventory off your hands. that last statement was my opinion not the companies.

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