Colony American delays IPO amid stock jitters

Colony Capital founder and chairman Tom Barrack
Colony Capital founder and chairman Tom Barrack

Colony American Homes, a major property owner in South Florida, postponed its initial public offering as stock market jitters reach real-estate investment trusts, the Wall Street Journal reported.

Colony American Homes is a real estate investment trust  that buys single-family homes from foreclosure auctions and banks and manages them as rental properties; today, its land holdings in South Florida number in the hundreds, according to the Palm Beach Post. Parent company Colony Capital announced earlier this year it planned to buy an estimated 1,000 South Florida homes to rehabilitate and rent in target areas including Palm Beach, St. Lucie, Broward and Miami-Dade counties.

An April SEC filing shows that Colony spent $177 million to buy 1,242 Florida homes within the previous six months. Nationwide, the company spent $1.2 billion to buy 8,764 homes in nine states, the Post reported.

Company executives and bankers decided to delay the IPO late Tuesday evening because of adverse market conditions, according to the Journal, citing an unnamed source.

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Colony American had expected to raise as much as $245 million in the IPO, even as REIT stocks have taken a slide since late May amid expectations the Federal Reserve could raise interest rates.

While investors remain bullish on real estate, it remains unclear whether Colony American and other new REITs can efficiently rent and manage large portfolios of houses and apartment buildings, Andrew Schaffler, an investment analyst at Cohen & Steers Inc., told the Journal.

“It’s still very early in the life cycle of the industry and we want to see some of these companies fine-tune their operations,” Schaffler said. [WSJ]Emily Schmall