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Charlotte’s Wall Street landlords move quickly to evict renters

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  • Wall Street-backed landlords 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 .

    Maria David

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 Management, 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
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