Invesco and Mynd Partner to Invest $5B in SFRs

A partnership between funds managed by Invesco Real Estate and Mynd Management plans to invest in the single family rental home space. The duo plan to spend $5 billion, including debt, to purchase approximately 20,000 single-family rental homes in the next three years.

“We know SFR represents a tremendous opportunity to invest in an emerging asset class that will allow us to provide a high-quality living experience to Americans seeking their next home,” said Pete Cassiano, managing director at Invesco Real Estate in prepared remarks.

According to Mynd’s website, it oversees more than 8,000 units for its property owner clients in a number of markets around the country, including the Bay Area, San Diego, Sacramento, Phoenix, Reno, Las Vegas, Dallas, Atlanta, Portland, OR, Vancouver, WA, Tucson, Denver, San Antonio, Houston and Tampa.

As an asset class, single-family rentals have grown during the pandemic as renters left their urban apartments in search of more space.

Walker & Dunlop estimates the SFR market to be valued at around $3.4 trillion. By comparison, the entire multifamily market is estimated at $3.5 trillion. 

Institutional investors currently comprise less than 2% of SFR (as opposed to 55% of multifamily), but as more young families and retirees look to rent SFRs with great amenities and big yards, more institutional investors are turning to the SFR space to expand their portfolios.

These single-family rental investors have grown increasingly aggressive, buying newly constructed homes from builders.

For instance, operator Haven Realty Capital has been successful in forming partnerships with builders to quickly scale its portfolio of homes.

“SFR operators like Haven can be a great sales channel for builders who are open to selling an entire rental community to one buyer instead of to numerous individual buyers,” Sudha Reddy, managing principal of Haven Realty Capital, told GlobeSt.com in an earlier interview. “This type of transaction can decrease the total hold period for a builder as operators can typically acquire phases of homes more quickly than individual buyers can buy phases of home.” 

With such an active market, CMBS issuance has increased in the sector.

CMBS issuance in the single-family rental sector hit $8.3 billion in 2020, double the amount issued in 2019, according to recent data from Trepp.

The uptick stands in stark contrast to issuance volume for other asset classes during the pandemic year, which declined across the board. And the trend is expected to continue in 2021, as large investors flood the space and total volume inches north of $3 billion. 

Trepp analysts call the SFR space “recession-resistant,” noting that the delinquency rate of SFR properties backing CMBS loans is below 1% and has remained at that level over the last year (with the exclusion of December 2020). In April, the delinquency rate of SFR loans hit 0.31%, and the special servicing rate hit 0.66% (compared to 10.32% and 10.48%, respectively, for the overall CMBS market).