Lennar Launches $4B SFR Platform

Homebuilder Lennar has launched a $4 billion single family rental platform with lead investor Centerbridge, marking the latest entrant in the white-hot SFR market. 

Dubbed Upward America Venture, the business will acquire single family homes for rent in high growth markets across the US. It will initially be capitalized with a total equity commitment of $1.25 billion led by Centerbridge together with Allianz Real Estate and other unnamed institutional investors. Including leverage, “the venture will be positioned to acquire over $4 billion of new single family homes and townhomes from Lennar and potentially other homebuilders,” the company said in a statement.

The venture will also focus on making the “single family lifestyle available to a broader social and economic array of families” and will target median-income households.

“The Upward America Venture continues Lennar’s vision of becoming an ESG driven homebuilding company by making our high quality homes not only available for sale but also for rent, with a portion of the homes available with a rent to own option,” said Rick Beckwitt, co-CEO of Lennar. “The vehicle’s social focus provides a unique opportunity for families and individuals across the country to live in brand-new homes at an attainable price point, all without putting up a down payment. We have a distinct opportunity to create upward mobility in the housing market through this initiative.”

Beckwitt says the venture’s scalability is promising, as Lennar’s pipeline of more than 300,000 owned and controlled homesites gives the company a leg up on its competition.

Institutional capital is remaking the SFR asset class, a sector that offers a premium over multifamily yields and is attracting many investors that were once dedicated to apartments. 

For example, this investment represents Allianz’s first venture into the US SFR space. Allianz Real Estate and Lennar teamed up in 2016 when Allianz was an anchor investor in Lennar’s first venture, Lennar Multifamily Venture I. In 2019, they partnered again in Lennar Multifamily Venture II.

Now Allianz plans to deploy $1.3 billion in the residential markets over the next few years. The company sees an opportunity stemming from millennials’ preference to rent newer multi and single-family homes in a market with limited new supply. 

“The strong demand for single-family homes is led by maturing millennials seeking accommodation for their increasing space needs, with a preference for newly constructed homes and a propensity to rent,” said Karen Horstmann, head of acquisitions for Allianz Real Estate US, in a prepared statement.  “This trend started some years ago and has only been amplified by the more flexible approach many employers are taking to work from home.”

Indeed, SFR is rapidly on its way to becoming an asset class on par with the more traditional sectors such as multifamily and office. Certainly, CRE brokerages are taking note: in March, JLL announced it was taking a strategic minority investment in online SFR marketplace Roofstock, and in February, the firm announced it had created a dedicated team to handle investment sales in the space. That same month Walker & Dunlop rolled out its own dedicated team for the SFR and build-for-rent space.