See the Wall Street Investors Buying Single Family American Homes
Posted on 06/12/2021
As the COVID pandemic prompted the Federal Reserve to flood the country with U.S. dollars, the price of single-family homes in the U.S. have increased as there remains a tight supply in single-family housing. Inflation has crept in and there is increased speculation in American real estate in 2020 and 2021. The Wall Street Journal issued a story on BlackRock and their activities in buying homes. Single-family homes are widely regarding among the populace as the American dream, the idea of owning property. Furthermore, Wall Street banks’ greed on underwriting risky loan products drove the housing bubbles in 2006 and 2007, which ended up as the global financial crisis of 2008. Then taxpayers bailout out Wall Street and other companies like AIG, General Motors, and Ally Financial. In the ashes of the financial crisis, private equity firms like BlackRock created Invitation Homes to buy up cheap homes and rent them out. Other investors followed suit such as GI Partners backing Waypoint, and the Alaska Permanent Fund Corporation backing American Homes 4 Rent.
The article by the WSJ is giving BlackRock substantial press attention its its single-family home investing strategies.
In a Fox News television interview, Pedro Gonzalez, an associate editor of Chronicles Magazine, said, “Homeownership gives people a stake in a society. It’s a way to build generational wealth.”
According to data from Invitation Homes, there are 128 million households and 62% are owned homes, while 38% are rented. Out of the rental batch of 49 million units, 35% are Single-family rentals, 62% are apartments, and 4% are mobile homes and others. In the investor presentation, institutional owners are just at 300,000 units for single-family homes vs. 16.2 million which are called “Moms and Pops”.
Dallas-based Invitation Homes Inc. is a listed company with origins with the Blackstone Group Inc. In the first quarter of 2021, Invitation Homes acquired 696 homes for US$ 233 million worth of homes and is part of a US$ 1 billion acquisition target in 2021.
In November 2017, Invitation Homes acquired listed company Starwood Waypoint Homes to create largest single-family landlord company. At the time, the merger created a company that owned approximately 82,000 single-family rentals. Earlier, Starwood Waypoint Residential Trust merged with Colony American Homes two years ago to form Colony Starwood Homes to create a single-family rental giant. Colony Starwood Homes changed its name to Starwood Waypoint Homes.
Invitation Homes has housing investment joint ventures with Rockpoint Group, L.L.C. (80% Rockpoint, 20% Invitation JV ownership) and the Federal National Mortgage Association (FNMA) (90% FNMA, 10% Invitation JV ownership).
American Homes 4 Rent, L.P.
American Homes 4 Rent originally had backing from the Alaska Permanent Fund Corporation. American Homes 4 Rent in February 2020 formed an operating venture with investors advised by J.P. Morgan Asset Management focused on constructing and operating newly built rental homes. American Homes 4 Rent, holds a 20% ownership interest in the joint venture, which has an evergreen term. Subsequent to March 31, 2020, as contemplated by the joint venture agreement, the parties entered into an amended agreement to increase the size of the partnership to US$ 625 million.
Tricon Capital Group
In February 2017, Tricon Capital Group Inc. acquired listed company Silver Bay Realty Trust Corp. by transaction that had a total enterprise value of approximately US$ 1.4 billion, comprised of the equity purchase price of approximately US$ 820 million and approximately US$ 600 million of Silver Bay debt.
Invesco Real Estate has giving Mynd Management a financial line to spend up to US$ 5 billion in order to buy 20,000 single-family rental homes in the U.S. in the next three years. Mynd is founded by an executive from Waypoint.
Front Yard Residential Corporation (acquired)
In January 2021, Pretium and a group of its investors, and funds managed by the Real Estate Equity and Alternative Credit strategies of Ares Management Corporation announced the completion of their acquisition of Front Yard Residential Corporation (NYSE: RESI), a company headquartered in the U.S. Virgin Islands. The completion of the transaction makes Pretium the second-largest owner and operator of SFR properties in the United States with a portfolio of over 55,000 cash-flowing single-family rentals. Pretium will manage the venture and partner with Ares to further optimize and expand Front Yard’s attractive and well-diversified portfolio of SFR assets.
Georgia-based HavenBrook Homes was run by Patrick Whelan, the former CEO of Beazer Pre-Owned Rental Homes platform. On August 8, 2018, Front Yard Residential Corporation acquired property manager HavenBrook Partners, LLC as well as the portfolio of 3,236 properties managed by HavenBrook. The combined purchase price of the properties and the property manager was US$ 485 million. HavenBrook Homes went on a buying spree in 2014 and purchased 400 homes in the Twin Cities in Minnesota. The HavenBrook Homes deal was backed by Freddie Mac through a affordable single-family rental pilot program for large property owners and a guaranteed, interest only loan. Freddie Mac then sold that loan to Wall Street investors as securities. However, on the same day, the Federal Housing Finance Agency (FHFA), which oversees Freddie, shut the pilot program down.
Pretium Partners is a specialized alternative investment management firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on secular investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. In January 2021, the Public Sector Pension Investment Board (PSP Investments) and Pretium launched of a joint venture that will initially invest US$ 700 million into single-family rentals across major markets in the southeastern and southwestern United States.
Other competitors include:
In late May 2021, Goldman Sachs Group Inc. provided a US$ 300 million credit facility to Washington, D.C.-based Fundrise, a real estate company that lets small investors invest in single-family homes.