Mountain West and Austin Attract BFR Investment, Communities

The build-for-rent (BFR) market continued its momentum as one player launched a new capital fund designed specifically for this strategy and another made inroads with new development.

Wanting to bring BFR housing communities to the Mountain West, PEG Companies (PEG), a vertically integrated commercial real estate investment firm, this month launched PEG Capital Partners Fund IV, L.P., specifically to capitalize on this strategy.

The new fund, currently targeting $200 million in equity, will focus on the development and management of luxury BFR communities in the primary markets of Utah, Idaho, Arizona, and Colorado. During the past 10 years, population growth in the Mountain West has significantly outpaced the rest of the country, with a 12.8% average growth annually (versus 6%, nationally). 

“The BFR strategy appeals to every generation of renters for different reasons,” Rachel Oh, managing director of PEG Capital Partners, the firm’s fund manager, said in prepared remarks.

“We know that millennials entering the household formation stage remain a significant pool of renters, but strong interest from non-millennial renters have also emerged. Gen X and baby boomers are more likely to rent than ever before for a variety of reasons including the conveniences associated with renting, wanting a more mobile lifestyle, and prioritizing other investments over home ownership.”

PEG CIO  Soren Halladay noted that the Mountain West faces a severely supply-constrained single-family housing market. 

“With rising construction costs and over a decade-long shortage of new housing deliveries, the average home price has increased by more than $70,000 in the past five years,” Halladay said in prepared remarks. “This has created an environment where many ‘would-be’ home buyers are unable to afford homes.”

Mountain West Sees Double-Digit Population Growth

The Mountain West remains a leading region in the United States for population migration, and home prices in the market have seen double-digit growth between 2020 and 2021. The decline in homeownership affordability is one of the most pressing challenges facing the region, driving additional demand toward low-density rental housing.

As one of the first groups in the Mountain West to launch a BFR strategy in a large-scale, systematic fashion, PEG “is uniquely positioned to execute on the entire investment strategy,” according to the company’s announcement. “With a disciplined investment approach, experienced development team, a proven in-house property management group, and a strong multifamily housing track record, PEG is confident in its ability to maximize returns for its investors.”

Banyan Residential Enters Market Near Austin

Los Angeles-based private real estate investment firm, Banyan Residential, just broke ground on another build-to-rent community, Banyan Bunton Creek, about 20 miles south of Austin.

The community will feature 163 homes with private two-car garages, landscaped backyards and modern interiors, supported by a curated amenity package.

Max Friedman, Partner at Banyan Residential, tells GlobeSt, “The single-family build-to-rent asset class has grown dramatically over the past year, as pandemic-influenced migration patterns have led to increased user demand for larger private living spaces and community amenities that do not require a financial commitment to homeownership.

“We expect this sector to play a critical role in real estate markets across the country, particularly in high job-growth metropolitan markets with short supplies of for-sale housing. We’ve seen a great deal of interest from single professionals, young families and empty nesters that are looking for more space and community amenities, which are often found in more urban settings.

“Our goal is to cater to the demands of end users seeking more space and flexible leasing options, with a focus on building in locations with convenient access to urban job centers.”