MORE Residential, Stockbridge Launch $4B SFR JV

More investors continue to pour into the single-family rental home asset class amid insatiable demand for these properties and a stellar business model. 

The latest are MORE Residential, a Texas-based owner and operator of residential rental properties and San Francisco-based investment firm Stockbridge Capital Group, which recently formed a programmatic joint venture to acquire single-family rental communities in high-growth US markets.

The joint venture will have more than $4 billion of initial gross purchasing power, with the potential to further scale over time. It targets newly built single-family rental communities that are purpose-built as rentals (or “build-to-rent” communities), including those that have been recently constructed, are currently under development, or are planned for development. 

The joint venture will seek to acquire build-to-rent communities consisting of 50 or more homes with modern finishes and high-quality amenities (such as clubhouses, fitness centers and pools) in locations characterized by strong population and job growth.

Taking the Middle Route: Renting a Home

Demand is indeed on the upswing for these homes, Lisa Knee, tax partner and chair of the national real estate practice and the national real estate private equity group at EisnerAmper, tells GlobeSt.com.  

Millennials have families and need more space but can’t afford to buy, while Boomers are selling their homes, taking the equity, and renting in warmer climates or near their children and grandchildren, Knee said.

“Buying a house is less and less affordable for many Americans, not just because the price is so high but because mortgage underwriting is tighter and lenders want bigger down payments. But apartment rents are also rising at unprecedented rates, and apartment sizes have been shrinking for a decade,” she said. 

“So, if you have to spend the money, take the middle route and rent a house. You get more space, a garage and a yard, and don’t have to deal with the maintenance costs of a house. Surveys of Gen Z are also showing even these younger people right out of college would rather stay in the suburbs and rent a house.”

This, in turn, is making SFR “incredibly attractive” to investors, Knee continued. “The result is an enormous flow of capital to the sector, including the big public aggregators, home builders, and many new private equity funds. We expect the trend to continue, but it comes with a cost. It will become harder to find and aggregate portfolios of homes for rent as prices continue to rise, so yields may not be as rich as the last few years. Many funds are building homes for rent—horizontal communities—but land prices are also rising.”

MORE led by Former Monogram Residential Execs

The MORE-Stockbridge joint venture has recently either acquired, or is in the process of acquiring, more than $1 billion of communities, which are at various stages of development and completion throughout the US Sun Belt.

MORE Residential is led by former senior executives of Monogram Residential Trust, a NYSE-listed multifamily REIT taken private by an institutional investor group in 2017. MORE Residential will oversee day-to-day operations of the venture.

Stockbridge is a real estate investment manager with approximately $25 billion of assets under management. Stockbridge will contribute to overall investment strategy execution.