Headline: City's new landlords quick to evict

Wall Street-backed firms buying hundreds of Charlotte houses

Subhead:
Reporter: By Andrew Dunn
Desk:
Source:
Day: Sunday
Dateline:
Print Run11/10/2013
Date:
Digital Run
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Corrections:
Text: The Wall Street-backed investment firms that have bought Charlotte homes
by the hundreds are moving with unusual speed to evict their new renters
when payments don't come in as expected.
Court documents and interviews with more than a half-dozen current and
former tenants show these new companies have brought with them an
aggressive stance toward collections that has caught longtime renters by
surprise.
It's the latest sign of how Wall Street's entry into the local single-family
home market has transformed that corner of Charlotte's housing sector.
Doretha Johnson, 59, had rented a home near North Graham Street and
Interstate 85 for nearly four years when her landlord sold it to a subsidiary
of Blackstone, a Wall Street private equity giant. The house's new owner,
Invitation Homes, raised the rent by a third, beyond what she said her fixed
income would bear.
In the shuffle of ownership, Johnson paid her old rate of $650 when $875
was due. She received a notice of eviction.
She offered to pay $875 for another month or two in exchange for time to
find a new place to live. The answer was no. She was forced to leave in late
October.
"They're buying people's houses, but they don't care about people, " Johnson
said. "They just care about money."
Lured by low home prices in the wake of the recession, Invitation Homes
and other large investment companies have bought up wide swaths of
single-family houses across the country. They started in states devastated by
the housing collapse, such as Nevada and Florida, and quickly branched out.

They began stepping up their Charlotte purchases in March, and today they
own more than 2,200.
A marked rise in evictions
In general, the homes are worth between $100,000 and $200,000. They're
clustered in middle-class neighborhoods stretching from the Steele Creek
area, to Huntersville, to the Interstate 485 corridor in eastern Mecklenburg
County.
Combined, their purchases have made Charlotte the second-busiest market
in the country among single-family home investors. Over the summer, one
in every five Charlotte-area homes sold was bought by an investment group.
Since then, these Wall Street-backed landlords have aggressively moved to
evict people from their homes if payment doesn't come in as scheduled,
current and former tenants say.
To be sure, evictions are an inevitable part of the rental business. But local
real estate veterans say the investment companies' rapid evictions differ
markedly from the stance of many mom-and-pop landlords, who work with
renters during difficult months as they try to avoid costly tenant turnover.
Johnson's case is among more than 240 eviction proceedings filed in
Mecklenburg County's small claims court by the four largest investment
companies in the past few months.
Invitation Homes, which bills its housing investments as "a bet on America,
" has begun eviction proceedings on about 10 percent of its Charlotte
portfolio in just a few months, court and property records show.
At SFRH, a unit of Tricon Capital Group, eviction proceedings have hit
more than one in four homes.
Other than the private equity firms, no rental companies have a similar
business model for single-family homes in Charlotte, making comparisons
difficult. Neither the city government nor the Mecklenburg County court
system keeps data on the average local eviction rate.
But Camden Property Trust, one of Charlotte's largest landlords with more
than 3,100 apartment units around the city, started eviction proceedings on
just 81 people this year, court records show. That's a 2.5 percent rate.
Invitation Homes spokesman Andrew Gallina described the company's

collection experience in Charlotte as "very normal."

"It is very important to us to treat people fairly and we have the best
interests of our current and potential residents in mind in everything we do,
" he wrote in a response to questions. "We treat everyone the same so we do
have streamlined parameters we follow."
The company also says it has helped communities rebound from
foreclosures and created thousands of new opportunities for families to
move into affordable houses.
Gallina described eviction as a last resort and said only 2 percent of the
40,000 homes the company has acquired nationwide have been part of
eviction proceedings.
SFRH did not respond to repeated requests for comment.
Buying binge
Local real estate investors say the private equity firms are still buying
homes. A listing from law firm Shapiro & Ingle shows that the companies
bought at least 10 properties at foreclosure auctions in the past week.
Invitation Homes, which this year became the nation's largest homeowner,
now has a portfolio of about 900 homes in Mecklenburg County, according
to property records. It has begun 82 eviction proceedings since March, court
records show.
American Homes 4 Rent, founded by Public Storage Inc. billionaire Wayne
Hughes, has about 650, records show. The California company is now the
second-largest homeowner in the U.S. It has begun eviction proceedings
locally only once.
SFRH, the Tricon Capital affiliate, has bought 75 homes individually, plus a
portfolio of 550 existing rentals. The company has begun 158 eviction
proceedings.
Carolina Willow, an affiliate of Connecticut-based Ellington Management,
has bought about 118 homes. The company had not started any local
evictions as of Friday.
But now comes the hard part for these companies, industry experts say.
While managing a 1,000-unit apartment complex is commonplace,
managing 1,000 homes spread across a city is another matter.

Fixing those homes and keeping them in good repair presents substantial
challenges. Most of the homes are bought out of foreclosure, meaning they
may have been neglected.
At the same time, outside investors are demanding cash flow. Unplanned
costs and late payments eat into the returns they're expecting.
Nancy Aceto, 50, said she signed a lease with Invitation Homes in May for a
south Charlotte house. When move-in day came at the start of June, she said
the air conditioning wasn't working and the house wasn't clean.
By the time everything was ready, July had rolled around, Aceto said. She
was promised that she would receive credit for the month of June. But
instead, Invitation Homes began eviction proceedings.
She tried to argue, but ended up paying up in full.
"It's abuse what these companies are doing around Charlotte, " she said.
"They only want the money, and that's it."
'Looking to make it work'
With investors hungry for a larger rate of return, these companies have
begun eviction proceedings at the courthouse within days of rent being due,
court documents show.
"I'd say industry standard is you'd do that to somebody who's been an
ongoing problem, " said Tex Teixiera, president of the Carolinas Real Estate
Investors Association. "Turnover is your greatest hassle and your greatest
expense. We're not looking to get rid of people, we're looking to make it
work."
Still, some real estate investors say being quick to start eviction proceedings
makes sense. The cases take time to work through the court system and
tenants have a chance to get current on payments.
"It comes with the territory. You're always going to have a certain
percentage of tenants who are delinquent, " Charlotte real estate investor
Dan Gosser said. "Some will end up paying, but you have to file to start the
process. You don't want to find yourselves 90 or 120 days without rent."
"They have investors who want to see a rate of return, " Gosser said.
Indeed, the cash coming from tenants is vital to the companies' business

model, said JPMorgan Chase analyst Anthony Paolone.

"If you have large institutional capital behind these businesses, the investors
are going to expect a very systematic and streamlined process for owning
and operating these assets, " he said. "It wouldn't surprise me if the resident
collection process is something that's streamlined."
But the customer service should be efficient as well, he said. "Those two
things have to go hand in hand."
Johnson, so far, has been unable to find a new place to live. She and six of
her grandchildren will be staying at the Airport Parkway Inn for now, and
then - who knows.
"I've just been praying and giving to God. That's all I can do, " she said. "I
need a miracle."
Researcher Maria David contributed.
Dunn: 704-358-5235;
Twitter: @andrew_dunn
Wall Street-backed landlords that are buying in Charlotte
SFRH Charlotte Rental, an affiliate of Toronto private equity firm Tricon
Capital Group
Homes in portfolio: 625.
Evictions begun: 158
Invitation Homes, affiliate of New York-based private equity group
Blackstone
Homes in portfolio: 910
Evictions begun: 82
American Homes 4 Rent, a California-based public company
Homes in portfolio: 630
Evictions begun: 1

Carolina Willow, an affiliate of Connecticut-based private equity group

Ellington Management:
Homes in portfolio: 118
Evictions begun: 0
Data is accurate as of Nov. 8 .