SFR Software Services Vendor Avenue One Raises $100M

Software and data platforms that allow investors, particularly institutional ones, to more easily identify properties of a specific type, have increasingly become popular. Avenue One, which started in 2020 and focuses on single-family rentals, announced that it raised $100 million in a “strategic funding round” led by early investor WestCap and including MetLife Investment Management and others. Other existing investors are credit funds from KKR and Global Atlantic.

The sum is large given current economic pressures and ongoing concern and pulling back on the part of investors. The money will go to improving the software platform, building a local partner network, and expanding its institutional marketplace.

Avenue One provides a “service platform that combines proprietary data and a network of local partners to identify, acquire, renovate, lease and manage residential investment properties,” according to a press release. “This ecosystem of independent businesses – including brokers, contractors, title professionals, and property managers – provide local expertise to create and maintain portfolios of quality rental properties across the country.”

Local expertise is necessary in SFR because houses aren’t typically grouped the way they would in a build-to-rent development or multifamily campus. Someone needs to understand local neighborhoods, housing preferences, traffic patterns, service suppliers, and entitlement processes and individuals.

“To date, Avenue One has contracted more than $400 million in goods and services to 400+ operational partners,” the company claims. “In connecting institutional capital to local market experts, Avenue One makes investing in the residential rental market more transparent and efficient for institutions, while also supporting local businesses.”

In addition to the services platform, the company also offers a marketplace for buyers, owners, and sellers of residential real estate. “By offering a robust, independent marketplace and not buying for its own balance sheet, Avenue One has been able to quickly attract a wide variety of market participants. In just over two years, the company has expanded its operational footprint to 21 U.S. markets and has onboarded billions of dollars for investors.”

Institutional positions in SFR have grown controversial. According to Moody’s, in the five years between 2017 and 2022, the number of properties that SFR REITs held expanded by 8.4% even as the single-family detached housing stock grew by only 2.9%. So even as overall institutional ownership of SFRs is about 3%, recent purchase patterns have been close to 20% of total detached homes purchased. Politicians have made noises about regulating institutional ownership, as the purchase patterns frequently target lower-cost homes that would normally attract first-time buyers.