Single-family rental is a relatively new niche institutional real estate investment strategy that began with property managers, including Blackstone Inc. and Starwood Capital Group LLC, purchasing foreclosed homes during and after the global financial crisis. Companies bundled properties and eventually turned them into real estate investment trusts that are among the largest landlords in the industry today.
But it’s only in recent years that institutional investors have started to invest heavily in the strategy.
In July 2021, real estate investment trust Tricon Residential Inc. created a $5 billion single-family home joint venture with the $204 billion Texas Teacher Retirement System, Austin, Pacific Life Insurance Co. and a third institution initially engaging a total of $1.4 billion in equity. . The joint venture plans to invest in debt and equity to buy homes in the United States and rent them out.
In late 2021, Toronto’s C$539 billion ($431.8 billion) Canada Pension Plan Investment Board partnered with property manager Greystar Real Estate Partners in an 840 million dollars to build and acquire single-family home communities. And in May, Indiana’s $40 billion public retirement system, Indianapolis, committed $30 million to property manager CenterSquare Investment Management for a dedicated single-family rental co-investment fund.
Aon PLC’s real estate advisory subsidiary, Townsend Group LLC, said $60 billion was raised or committed to the construction of rental housing in September 2021, according to a report from the city’s employee pension system. Los Angeles of $22.5 billion. Just 2.2% of single-family home rentals were owned by institutional operators in 2021, providing “significant room for further institutionalization,” Townsend said in its report. Additionally, single-family homes for rent saw more than 10% growth in new leases and more than 5% in renewals, Townsend said.
A growing number of alternative investment managers are also joining us. On May 16, for example, the $127 billion private equity manager Partners Group Holding AG acquired a $1 billion portfolio of single-family rental homes in the United States, consisting of 2,528 newly built homes and over 1,000 homes to be built in 17 states across the United States. Solar belt. Blackstone has called rental housing one of its “favorite neighborhoods” for investment, according to statements made by Jonathan Gray, Blackstone’s president and chief operating officer, during the company’s earnings call on April 21th.
Blackstone has a $4.1 billion single-family rental portfolio and hasn’t evicted tenants for nonpayment of rent for two years during the pandemic, according to its website. Additionally, Blackstone Real Estate Income Trust acquired single-family rental company Home Partners of America for $6 billion in June 2021.
Lenders are also getting in on the action. In April, Second Avenue Group, which manages $2 billion in single-family rental properties in the Southeast and Southwest United States, raised $250 million in equity and debt capital from the manager of private credit Monroe Capital LLC. In March, Second Avenue received $500 million from property manager Waterton and $150 million from another property manager, BLG Capital. Second Avenue plans to invest up to $1 billion per year.
Rising interest rates, inflation and rising rents are drawing investors to the sector, said Nancy Lashine, New York-based founder and managing partner of Park Madison Partners LLC, a private equity investment firm. in real estate assets. Investors have an appetite for any type of real estate such as single family rentals in which there is rental growth and a supply-demand imbalance that offers good cash flow as well as a hedge against inflation, a- she declared.
“Single-family rental is a whole new space … with so much more demand than supply,” Ms. Lashine said. The pandemic has only increased the demand for homes with more space, and people are willing to rent homes to get it, she added.
“There’s a huge appetite for this (single family rentals)…a lot of capital is available” both for specialist managers and as part of diversified funds, Ms. Lashine said.