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Reven Housing REIT seeks an institutional investor in strategic review, CEO says

Reven Housing REIT Inc. would prefer to remain an independent company after reviewing strategic options, and hopes to find an institutional capital partner to help it grow, the company's chairman and CEO said in an interview.

The company, which is a fraction of the size of its publicly traded single-family rental competitors, is exploring strategic alternatives — including a sale, merger or strategic investment — with the help of adviser RBC Capital Markets.

Chad Carpenter, who launched the company in 2012 and is chairman and CEO, said its net asset value is $6 per share, based on an independent valuation of Reven's portfolio performed in 2018 as part of a refinancing backed by Freddie Mac. Reven's share price was $2.99 per share as of the close of trading March 22, the first trading day after the strategic review was announced.

Carpenter said the company's business model, centered on investing in lower-priced, single-family rental properties with higher rental yields, "works beautifully," but said raising capital has been difficult.

"One of the challenges we've had is, we haven't actually ever done an underwritten public offering, and so we've never been able to get the proper float or analyst coverage, so our stock trades at a huge discount to net asset value, because of the liquidity challenge in trading," he said.

Reven is seeking a strategic partner to help it grow to the size at which it can complete an underwritten public offering at an attractive price, he said. He added: "The best-case scenario is we find a big institutional strategic partner who wants to be in the sector, and we've got the perfect, experienced management team and platform to grow with. We just haven't found that investor yet. We've found a lot of guys who will give us expensive capital, but we've turned it down."

Reven is majority-owned by funds affiliated with Allied Fortune (HK) Management Ltd, and Carpenter said the investor, like Reven's management team, would prefer to see the company grow — both within its existing markets and into new ones.

Carpenter said he could not discuss the initial response to the company's strategic process, but added, "I can tell you RBC is pretty busy right now."

Still, he said he doubts that the company will strike a deal with Invitation Homes Inc., American Homes 4 Rent or Front Yard Residential Corp., Reven's larger public real estate investment trust peers, because their strategies, which typically focus on newer, larger and more expensive homes, are distinct from Reven's middle-market approach.

That said, "If they wanted to get into the mid segment, we'd be an ideal group to tackle that with, right?" Carpenter said. "Because they're still single-family homes, and we're getting higher yields than those guys are getting, so it's pretty good, per box."