Private Equity Buying SFR

David Goldsmith

All Powerful Moderator
Staff member

Blackstone Bets $6 Billion on Buying and Renting Homes​

Deal for Home Partners of America, owner of over 17,000 houses in U.S., is latest sign Wall Street believes housing market will stay hot

Blackstone Group Inc. has agreed to buy a company that buys and rents single-family homes in a $6 billion deal, a sign Wall Street believes the U.S. housing market is going to stay hot.

The investment firm confirmed Tuesday that it has reached a deal to acquire Home Partners of America Inc., which owns more than 17,000 houses throughout the U.S. Home Partners buys homes, rents them out and offers its tenants the chance to eventually buy.

 

David Goldsmith

All Powerful Moderator
Staff member
KKR & Co. will invest real estate and private credit funds in the Miami-based platform My Community Homes, which will buy and manage rentals nationwide, Bloomberg reported.

The platform’s debut follows a flood of investment into the single-family housing market by firms looking to buy and flip or rent properties to a growing number of millennials looking for larger spaces without the mortgage payment.
 

David Goldsmith

All Powerful Moderator
Staff member

Big Landlord Launches $5 Billion House Hunt​

Tricon Residential plans to add 18,000 rental houses in pact with Texas pension fund, other investors​

One of America’s biggest landlords is teaming up with an insurance company, a global investment company and a Texas pension fund to buy $5 billion of U.S. houses to turn into rentals.

Tricon Residential Inc., a Toronto company that operates one of the largest pools of U.S. rental homes, said it has struck a home-buying pact with the Teacher Retirement System of Texas, Pacific Life Insurance Co. and one of the company’s existing foreign investors, which it declined to name.

The parties will together contribute up to $1.55 billion in cash, which will be combined with debt to give the venture purchasing power of about $5 billion. Tricon, which operates about 25,000 U.S. rental homes as well as several apartment complexes in the U.S. and Canada, said it expects to be able to buy about 18,000 houses through the new venture.
 

David Goldsmith

All Powerful Moderator
Staff member

Private equity firms are betting big on New York apartments​

Blackstone, KKR, Carlyle and others are going all-in on the city's rental market — albeit with different playbooks​


Just before Manhattan rents started soaring at the start of the year, Blackstone Group agreed to buy a Frank Gehry-designed apartment tower in the Financial District for $930 million.
Across the East River, KKR has spent more than $1 billion in the past two years to become one of the biggest owners of newer tax-exempt apartment buildings in Brooklyn. And Carlyle Group has quietly amassed a portfolio of small, mom-and-pop-style buildings in the borough worth at least half a billion dollars. Meanwhile, Apollo Global Management, an active commercial lender, is starting to take a more direct role in projects.
Private equity, historically focused on leveraged buyouts, has in recent years branched into everything from fast fashion to life sciences, taking on a role akin to, as the New York Times put it, “supermarkets of the financial industry.”
As private equity firms evolve, their appetite for big-ticket prime real estate plays has grown, and they’ve emerged as one of the biggest forces in the city’s post-pandemic recovery as multifamily investment reaches levels not seen since seven years ago, at the peak of the last cycle.
Though all are big names on Wall Street, each appears to have its own idiosyncratic strategies, largely avoiding going after the same types of properties as the others.
“One size does not fit all,” said MSCI Real Estate’s Jim Costello.
Private equity’s hunger for New York apartments is not new. Blackstone has owned the 11,000-unit Stuyvesant Town complex on Manhattan’s East Side since 2015 — when it partnered with Ivanhoé Cambridge to buy it for $5.45 billion — and acquired the Parker Towers complex in Queens for $500 million in 2018. Before its Brooklyn shopping spree, Carlyle already owned the rental tower 1 QPS in Long Island City and the 43-story Ritz Plaza north of Times Square.
KKR, which has spent the past decade building up its real estate business, is relatively new to the New York City market, and a wave of private equity-backed real estate investment trusts represents another emerging pool of money.
Today’s big multifamily buys, however, look different from the high-juice deals of yesterday. Instead of buying older properties with heavy rent-stabilized components and banking on the fix-and-flip model, private equity appears focused on free-market buildings with cash flow.

Free-market frenzy​

Blackstone’s purchase of the roughly 900-unit Gehry tower at 8 Spruce Street is the city’s biggest multifamily deal so far this year, and it helped push the market close to a record high.
Manhattan multifamily sales totaled $4.4 billion in the first half of the year, according to Ariel Property Advisors. The last time it hit that mark was in the second half of 2015 — the peak of the post-Great Recession recovery.
It’s no surprise that rentals are so hot. Post-pandemic demand has led to bidding wars, social media posts of apartment hunters lined up around the block to view units and renters willing to cut side checks to secure a lease. Manhattan rents have broken records each month since February, with the median net effective rent reaching an all-time high of $4,100 in July, according to a report from Douglas Elliman.
From an investor perspective, multfamily properties are also attractive as an inflation hedge .
Free-market multifamily assets accounted for 75 percent of total sales in the first half of the year, according to Ariel’s figures.
That’s largely the result of the state’s 2019 Housing Stability and Tenant Protection Act, which severely limited landlords’ ability to raise rents on regulated apartments.
The act “changed that business plan,” said Ariel’s president, Shimon Shkury. “The value-add optionality is not relevant anymore.”
Private equity played a role in bringing about that shift.
In the years leading up to the overhaul, the firms had become villainized by tenant advocates and politicians as “predatory equity,” blamed for backing landlords who sought to make money by harassing people out of their rent-stabilized homes, then upgrading the units so they could raise the rent.
Fairly or not, New York investors like Joel Wiener’s Pinnacle Group became shorthand for profit-driven, eviction-happy landlords in the early aughts, drawing scrutiny from the City Council, the Manhattan district attorney and the state attorney general.
But although private equity is now targeting free-market properties, that doesn’t mean it’s avoiding the contentious politics of housing. One need only look at institutional investors’ aggressive push into single-family rentals — the subject of a June hearing by the U.S. House of Representatives’ Financial Services Committee — to see how their presence in the housing market can stir up controversy.
Carlyle came under fire this year when one of the companies it partnered with to buy Brooklyn walk-ups, Greg Fournier’s Greenbrook Partners, refused to renew leases for free-market renters during the pandemic.
Tenants pushed back and got local leaders, including state Sen. Jabari Brisport, to condemn the move.

City Comptroller Brad Lander, who helped organize tenants at other Greenbrook buildings as a City Council member last year, said he hasn’t heard of any new complaints about tenants being forced out of Carlyle-owned buildings. But he expressed his distrust of private-equity investors, which “focus on short-term profit-making at the expense of long-term tenants … accelerating the crisis of housing affordability and stability across our city” and repeated his support for “good cause eviction” legislation, which would expand tenant protections and limit rent increases, including for nonstabilized units.

Rise of the REITs​

One factor driving demand for cash-flowing apartments is the rise of private-equity REITs. Blackstone, KKR and Apollo have their own nontraded REITs, which allow individual investors to buy into large portfolios.
Blackstone recently raised $24 billion for its latest real estate fund — its largest ever, focused on opportunistic investments — but when the company bought 8 Spruce Street, it put the building into Blackstone Real Estate Income Trust (BREIT). Since its launch in 2017, BREIT has built a portfolio of mostly multifamily and industrial properties valued at nearly $120 billion.
“These are income-generating, stabilized properties, but over a longer period of time we still think there’s additional opportunities to improve and invest in these communities,” said Jacob Werner, Blackstone’s co-head of acquisitions for the Americas.
Similarly, KKR has been putting recent New York City investments into KKR Real Estate Select Trust (KREST), which it launched last year.
The REIT’s assets include the 365-unit tower at 80 DeKalb Avenue in Downtown Brooklyn, which it bought in July for $190 million. It also owns a piece of the $675 million mortgage secured by Josh Gotlib’s Black Spruce Management in March for its $837 million purchase of the 760-unit American Copper Buildings in Murray Hill.

“Those deals are about accessing high-quality properties that we wanted to own long-term,” said Danny Rudin, who heads up investments in the Northeast for KKR. “We like the dependable cash flow in submarkets with strong fundamentals.”
Hopping on the bandwagon, Apollo filed paperwork in April to form its Apollo Realty Income Solutions REIT.
On the company’s May earnings call, Apollo Co-President Scott Kleinman said the REIT is one product “across the risk-reward spectrum that is purposely designed for this market.”
Apollo is also developing a 51-story apartment tower in Downtown Brooklyn through its mortgage REIT, Apollo Commercial Real Estate Finance.
The REIT had provided a loan on the development site at 565 Fulton Street to RedSky Management’s Benjamin Bernstein and Benjamin Stokes, a pair of brash young developers who imploded in 2019.
When RedSky went under, Apollo took over the site and tapped Steve Witkoff to develop a 561-unit building known as the Brook. Apollo and Witkoff received a $388 million construction loan from Bank of America in August.
Stuart Rothstein, president of Apollo Commercial Real Estate Finance (also known as ARI), said on the REIT’s October earnings call that there is some risk with taking on the development project, but he likes the company’s chances of recovering its investment on the loan.
“I think there is — given the strength of Brooklyn, given the strength of the New York multifamily market recently — I think there is potential for real upside to ARI economically if we execute correctly,” he said, noting that the project will take two to three years to construct and lease up.

Supply crunch​

New York’s rental market is only going to get tighter.
The city needs to build 560,000 housing units by 2030 to keep up with expected population and job growth, according to figures from the Real Estate Board of New York.
As an unintended consequence of the 2019 rent law, city landlords have warehoused some 20,000 vacant but uninhabitable units, claiming that fixing them up and renting them out would be a money-losing proposition. And the June expiration of 421a, a popular property tax break for multifamily developers, is expected to drastically slow the delivery of new units for the foreseeable future.
New York is also, relatively speaking, a bargain for investors.
Cap rates for New York multifamily properties are now 5.2 percent, much higher than the national average of 3 percent for the best locations, which essentially means other markets have become overheated and New York has become a less expensive alternative.
Investors who pulled money out of the city in recent years in favor of high-growth areas like the Sun Belt are now moving in reverse: selling out of secondary markets and buying in the Big Apple.
“Every landlord’s seeing that,” said GFI Realty Services President Michael Weiser. “If I believe I’ll get [rent growth] in Albuquerque, why not get it in New York City?”
The last time the multifamily market was this hot was in 2015, when Stuyvesant Town sold for more than $5 billion.
The buyer leading the market back then was, of course, Blackstone.

 

David Goldsmith

All Powerful Moderator
Staff member

JPMorgan aims to acquire $1B in single-family rentals​

Teams up with Haven Realty Capital to exploit lull in homebuilding​

JPMorgan Chase is taking another look at single-family rentals, partnering with Haven Realty Capital on a joint venture.
The partners plan to acquire and develop $1 billion worth of build-to-rent communities across the country. They are set to deploy $415 million in equity for the venture. JPMorgan is advising institutional investors on it.

Targeting homebuilders in the Sun Belt, the partners will look at communities of 50 to 200 homes spanning 1,500 to 2,500 square feet. Seed investments include three communities in Atlanta representing about 250 homes; the partners expect to close on them in the next three months.

The partners see an opportunity to exploit a lull in homebuilding, according to Haven founder Sudha Reddy.
“The for-sale housing market has been significantly hampered by recession fears, inflation and rising interest rates placing a burden on homebuilders and their ability to add to the housing stock,” Reddy said in a press release.

Another Haven executive noted in the release that “the fundamentals of the single-family rental industry remain solid,” despite turmoil in other sectors of the housing market.
Investors are trying to meet demand for single-family homes from people not ready to buy because of recession fears or mortgage rates and home prices having risen. Invitation Homes is reportedly looking for a partner on a $1 billion joint venture in the single-family rental sector.

Single-family rentals boomed during the first two years of the pandemic, supported by sustained demand and a short supply of for-sale homes. Build-to-rent homes became the fastest-growing housing sector in the country, handing investors big returns as rents rose.
The success of the JPMorgan and Haven deal, like all joint ventures, will depend on more than market conditions. Last week, Arizona-based homebuilder Taylor Morrison and developer Christopher Todd Communities ended their partnership in the build-to-rent space.

JPMorgan has played in this space before. Two years ago, the bank’s asset management arm increased its investment in American Homes 4 Rent from $250 million to $625 million only months after the partnership was formed.
Haven operates 35 communities across nine states, totaling 3,500 homes.
 

David Goldsmith

All Powerful Moderator
Staff member

JLL really wants to be a single-family megalandlord​

JV with Amherst aims to amass $500M portfolio over 2Y​


JLL’s appetite for single-family housing is growing, as an entity of the firm struck yet another pact with Amherst Group in the property sector.
JLL Income Property Trust announced the joint venture this week, saying in an SEC filing the program aims to acquire up to $500 million in single-family rental homes in the next two years.
JLL’s REIT will own a 95 percent stake in the venture, leaving the other 5 percent stake to Amherst. The venture expands on a previous deal between JLL and Amherst made a year ago.
JLL Income Property Trust CEO Allan Swaringen in a statement cited the REIT’s conviction of the future of single-family rentals, noting how high mortgage rates are dissauding homeownership and millennials are growing more interested in flexibility due to hybrid work environments.
The joint venture is already a quarter of a way to its goal, recently acquiring 360 renovated single-family homes across 10 states. Those acquisitions are valued at approximately $120 million.

Slightly more than a year ago, JLL Income Property Trust acquired a 47 percent stake in a $1.2 billion portfolio assembled and managed by Amherst. The firm’s investment came out to roughly $560 million. The 96-percent leased portfolio included more than 4,000 rental homes including in Atlanta, Phoenix and Dallas.
In March 2021, JLL made another big bet in the single-family rental sector, purchasing a minority stake in rental housing investment platform Roofstock. The deals swerved away from its usual investments, like apartment complexes, office buildings, industrial properties and grocery-anchored retail outlets.
JLL is not the only major player putting a lot on the line in the single-family rental market. JPMorgan Chase this week partnered announced a plan with Haven Realty Capital to acquire and develop $1 billion worth of built-to-rent communities across the country. The partners are set to deploy $415 million in equity for the venture.
Single-family rentals boomed at the start of the pandemic, propped up by sustained demand and a short supply of for-sale homes. Built-to-rent homes became the fastest-growing housing sector in the country and is seeing renewed demand as mortgage rates and home prices sideline buyers.
 

David Goldsmith

All Powerful Moderator
Staff member

Investors are purchasing more single-family homes than ever​

Real estate investing has always been a part of the housing market, but the roots of the "corporate investor" came out of the 2008 housing crisis.
By Dan Grossman | April 10, 2023
New data from data analytics companies shows real estate investors have been buying up more of the housing market in the last few years than ever before.
According to Pew Charitable Trusts, a non-partisan and non-ideological research organization based in Philadelphia, investors bought 24% of single-family homes purchased in 2021. Since 2012, that number has been between 15% and 16%, making 2021 the fastest "year over year increase in 16 years."
In 2022, that number peaked at 28% of single-family home purchases.
"There are billions of dollars, trillions of dollars, just sloshing around in the economy looking for places to go. Where do we go, what are we going to invest in? Real estate is a really, really good investment," said Mike DelPrete, a global real estate tech strategist and scholar at the University of Colorado Boulder. "It's definitely an issue worth paying attention to."
Real estate investing has always been a part of the housing market, but the roots of the "corporate investor" came out of the 2008 housing crisis when there were mass foreclosures across the United States.
Related Story This 1,200 square-foot home in Waldwick, NJ, received 20 offers for asking price of $400,000 April, 2023. Why is it more expensive than ever to buy a home in US?
"It's a bipartisan issue in terms of the concern that Democrats and Republicans have expressed," said Jordan Ash, a member of the Private Equity Stakeholder Project. "It's because it really is directly impacting people's ability to achieve the American Dream — that people are being shut out."
According to CoreLogic, a data firm that analyzes financial and property information, only 15% of homes purchased by investors in March of 2022 were resold within the following six months.
It's worth showing how these investors are splitting this pie.
The CoreLogic data shows of the 26% of homes that were purchased by investors in the third quarter of 2022- 49% were small mom and pop investors (fewer than 10 properties), 33% were medium-sized investors (11-100 properties), 8% were large investors (101-1,000 properties) and 11% were mega investors: companies that own more than 1,000 properties.
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"At its very base, it's going to make it more difficult for buyers to buy homes because people like you and I — if we're looking to buy a home in Atlanta or Phoenix, or any of these markets, we're competing against institutional buyers," said DelPrete. "They are, by definition, cash buyers. They don't have mortgages; they don't have contingencies; they've got briefcases full of cash, ready to go. And their job — the people you're bidding against — their job is to buy houses. So, who do you think is going to win that bidding war? It's going to keep going back to the institutional investors."

We reached out to Progress Residential for comment, as it boasts more than 85,000 properties across the country. They referred us to the National Rental Home Council, a trade group that represents some of our country's largest corporate investors. In an email, its president, David Howard, said, "Any narrative around the role of institutions that own single-family rental homes needs to begin with the fact that these companies (that own more than 1,000 properties) account for less than one-third of one percent of all the housing in the United States."
However small, Ash is still wary of how much of an impact these mega investors may really have on the housing market.
"There are entire communities that are now kind of being shut out, where these corporate landlords are basically extracting the money that would've been for individual families being able to build equity," said Ash.
In late October, three Democratic House members from California introduced the Stop Wall Street Landlords Act, which would deny certain tax benefits to investors whose assets exceed $100 million a year.
States legislators in Ohio, North Carolina, Georgia and Arizona have also introduced their own bills since December that would limit the amount of homes investment companies could purchase.
"This is a very nuanced [issue]," said DelPrete. "You know, institutional investors, on the other side; they're a backstop to the entire housing market. When people can't afford to buy and sell houses, they're there, they're buying. That is important."
 
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