Starwood Waypoint Residential Trust has announced in a press release that it will be merging with Colony American Homes in a stock-for-stock transaction.
The transaction is expected to create a combined company that offers the best-in-class single-family rentals.
The combined company is expected to own and manage more than 30,000 homes and have an aggregate asset value of $7.7 billion, according to the press release.
The merger is also expected to achieve estimated annualized cost synergies of $40 - $50 million.
Barry Sternlicht, chairman and CEO of Starwood Capital Group, said in the press release that the merger is a "transformative event" for Starwood Waypoint.
"Combining two best-in-class teams, with a superior portfolio of homes in carefully selected geographic markets, positions us to deliver long-term capital appreciation for our shareholders while earning compelling current yields at or above those currently achievable in other major real estate asset classes," he said.
Thomas J. Barrack, executive chairman of Colony American, added in the press release that there is an immense opportunity for the combined company.
"We believe this merger demonstrates the power of scale and consolidation and really crystallizes the long-term durability of the single-family rental industry; this combination of CAH and SWAY truly redefines this asset class," he said.
The Denver Post adds that the merger of the two companies shows that they are betting that rents will keep on rising.
They are also betting that Americans will still have a difficult time buying their own homes.
The Denver Post adds that though the crisis with foreclosures has receded, tougher lending requirements have made it harder for a lot of U.S. citizens to acquire homes.
A report from the Commerce Department shows that U.S. homeownership has fallen to 63.5 percent in the second quarter, its lowest in 50 years.
On the other hand, a report from Moody's Analytics shows that single-family rentals have added up to 13 percent of overall housing stock, up from 9 percent in 2005, according to The Denver Post.
The two companies are betting that these figures continue to remain in their favor.
Under the terms of the agreement, shareholders of Colony American will receive an aggregate of 64,869,583 Starwood Waypoint shares in exchange for all shares of Colony American, according to the press release.
Once the transaction is completed, which is expected on the first quarter of 2016, Starwood Waypoint shareholders and the owners of Starwood Waypoint manager will own about 41 percent of the combined company while Colony American shareholders will own 59 percent.
In connection with the transaction, Starwood Waypoint will internalize the Starwood Waypoint Residential Trust manager, according to the press release.
