Corporate Buyers are Purchasing Twin Cities Homes

Big money wants in

“Even before the pandemic hit, institutions already heavily invested in commercial real estate were looking at ways to diversify their income streams,” said Jeremy Eddy, head of living and hospitality capital markets for Europe, Middle East and Africa at JLL. “Residential real estate provided an obvious alternative and one that has only become more attractive since the pandemic,” he told CNN Business. The coronavirus pandemic gave institutional investors all the proof they needed that single-family rentals could survive a severe economic downturn.

Real estate analytics firm Green Street estimates that single-family rental values in the United States are 15% above their pre-Covid level. Renting out single-family homes is expected to deliver annual returns for private investors in the next three years of 6.8%, compared with 6.1% for apartments, 6.3% for industrial properties and 6.4% for malls, Green Street said in a July report.

 

Since the onset of the pandemic, the share prices of publicly traded real estate investment trusts that specialize in these types of dwellings, such as Invitation Homes (INVH) and American Homes 4 Rent (AMH), have outperformed companies like Equity Residential (EQR) and AvalonBay (AVB) that own apartment blocks.

“Single family as an asset class didn’t just fare [well], it shined,” said Doug Brien, the CEO of Mynd Property Management, pointing to improved rental growth and steady occupancy rates.

A pioneer in single-family rental investing, Brien co-founded Waypoint Homes — which later became Starwood Waypoint Homes — in the aftermath of the global financial crisis, buying up foreclosed homes and turning them into rentals. (Starwood Waypoint merged with Invitation Homes in 2017.)

In the years following the 2008 housing crash, pension funds and traditional real estate investors mostly steered clear, leaving it to opportunistic hedge funds and private equity firms to mop up supply.

Now, big institutions can’t get enough of family homes. Earlier this year, funds managed by Invesco Real Estate, one of the world’s largest property investors, gave Mynd $5 billion to buy 20,000 homes in the United States in the next three years on behalf of pension funds. Mynd is currently buying between 30 and 40 homes a month and wants to increase that to over 1,000, according to Brien.

Invesco isn’t the only big name diving in. In March, Allianz Real Estate and private equity group Centerbridge led a $1.25 billion equity investment in Upward America Venture, a partnership with homebuilder Lennar Corporation to acquire over $4 billion of new single-family homes for rent in the United States. “The strong demand for single family homes is led by maturing millennials seeking accommodation for their increasing space needs, with a preference for newly constructed homes and a propensity to rent,” said Karen Horstmann, head of acquisitions at Allianz Real Estate in the United States. “This trend started some years ago and has only been amplified by the more flexible approach many employers are taking to work from home,”