New $700M JV Targets Single-Family Rental Homes
The joint venture between Canada’s Public Sector Pension Investment Board and Pretium is the latest string of deals investing in this sector.
Institutional investors continue to pump money into the single-family rental home market. The latest example: the Public Sector Pension Investment Board, one of Canada’s largest pension investment managers, and alternative investment management firm Pretium have formed a joint venture that will initially invest $700 million into SFRs in the southeastern and southwestern US.
Capital has been increasingly interested in this particular asset class, especially over the last year when it became competitive with multifamily.
JLL recently closed a recent $133.7 million capitalization on behalf of Haven Realty Capital with an institutional equity source for a six-property portfolio of new and to-be-built homes in the greater Atlanta area. Last fall, Invitation Homes and Rockpoint Group announced a $1 billion joint venture to operate single-family rentals in the Western US, Southeast US, Florida and Texas. In November, RangeWater launched an $800 million platform to build and operate 15 SFR communities across the SunBelt (a region that’s having a major moment).
And large brokerages are taking note. Earlier this month, JLL announced a new team, led by National Multi-Housing Group leader Bill Miller, to focus on the SFR space in a “direct response” to increasing the institutional interest in the sector.
Institutions with more than 100 homes own less than 3% of the nearly 16 million single-family rental units in the US, giving new entrants significant runway for growth as they tap into the asset class. A third quarter report by Arbor noted that the pandemic boosted outward migration and demand for single-family homes, while rent collections remained stable, rents pressed upward, and new demand hit generational records.
Interest in the asset class shows no signs of slowing: Michael Carey, senior director at the Altus Group, estimates there will “easily” be 70,000 to 100,000 SFRs being purchased and constructed in 2021 and 2022.
Scalability is critical to success, he added, with big players likely to look for portfolios of up to 2,000 homes.
“Whether it’s build-for-rent or a scatterplot single-family homeownership, you need to have scale in a market,” Carey says. “You need scale in order to operate it efficiently. You can’t go in and own a hundred homes. It does not work.”