By Konrad Putzier
Big foreign investment firms that buy office buildings, hotels
and shopping centers around the world have a new favorite
real-estate play: single-family homes in American suburbs.
These institutions are partnering with U.S. housing companies to
buy or build rental homes by the thousands. In suburban
neighborhoods near cities such as Atlanta, Las Vegas and Phoenix,
blocks of families are sending monthly rent checks to ventures
backed by Canadian pension funds, European insurers, and Asian or
Middle Eastern government-run funds.
The overseas investors are following in the footsteps of many
big U.S. investment firms and pension funds, which started buying
single-family homes on a large scale in the aftermath of the
Foreign investors barely registered in these markets a few years
ago. Now, they account for nearly a third of institutional
investment in single-family rental homes, said Alex Foshay, head of
international capital markets at real-estate services firm
"There's been very limited overseas investment into the
single-family rental space prior to Covid, but nothing on this
scale," he said.
German insurer Allianz SE last month said it is investing in a
venture to buy more than $4 billion of U.S. rental homes.
Singapore's sovereign-wealth fund GIC is backing plans by Quinn
Residences to buy single-family rental homes across the
southeastern U.S., according to people familiar with matter.
Canada's Public Sector Pension Investment Board, meanwhile, said
in January it agreed to a $700 million rental-home venture in
partnership with Pretium Partners LLC. The venture has bought
around 2,000 homes, said Pretium Chief Executive Donald Mullen.
Foreign institutions have also invested in the Pretium's funds
targeting single-family rental homes, he added.
The recent growth of foreign investment means that individual
home buyers must increasingly contend with this deep-pocketed group
of purchasers in a number of prime U.S. neighborhoods, boosting
prices there and adding more fuel to a housing boom that is already
the hottest in 14 years.
Foreign investors are attracted to the single-family-home rental
market for many of the same reasons that U.S. investment firms are.
There is a limited supply of new houses and the strong demand for
homes in the most desirable suburbs with top schools has led many
families to rent if they can't buy in these neighborhoods.
The sector became even more attractive amid the pandemic and
remote work, when more young professionals turned to the suburbs
for greater space. At the same time, Covid-19 has upended the
businesses of office buildings, hotels and retail real estate
globally, making U.S. housing gains look even more attractive by
An index measuring rents and occupancy rose by 5.7% last year
for single-family rental homes while it fell for the real-estate
industry as a whole, according to Green Street. Pretium's Mr.
Mullen said that rising inflation expectations make single-family
rentals more appealing, too, because unlike office leases, home
leases reset every year and rent is more closely tied to consumer
Foreign investors are also buying more single-family rental
homes because it has become easier for them to do so. A decade ago,
some big U.S. firms and financiers bought foreclosed homes by the
thousands. But as the foreclosure crisis wound down, the main way
to directly invest in these properties was to hire a broker and buy
them one by one. That process was too tedious for big insurance
companies, sovereign-wealth funds and pension funds, which usually
want to invest large sums of money with as little effort as
Today, more U.S. real-estate companies and Wall Street firms are
buying in bulk or building single-family rental homes specifically
for rentals, allowing foreign investors to back them with large
sums of money.
Home builder Lennar Corp., for example, recently launched a
venture to buy single-family rental homes across the country. The
company said it already has commitments from investors for $1.25
billion and will use that to buy $4 billion worth of homes. A
number of these investors are based or affiliated with companies
abroad, say people familiar with the matter. That includes Allianz
Real Estate, a subsidiary of the German insurance giant, which said
it committed $300 million.
In the U.S., Allianz had focused mostly on office skyscrapers in
big cities, which tend to be easier to buy and sell. It then
branched out to warehouses and apartments. The firm started
discussions with Lennar about the venture in early 2020.
Unlike a decade ago, when investors bought foreclosed homes and
those already occupied, the focus is now on newly built properties.
"The lack of institutional ownership just shows you how difficult
it is to get into the market," said Christoph Donner, who heads
Allianz Real Estate's North America business.
Roofstock Inc., which lets customers buy rental homes through an
online platform, said visits to its website from Canada are up 80%
over the past year. Visits to the site from Mexico jumped 140%. The
company is in talks with foreign investment funds interested in
buying properties through its platform, said CEO Gary Beasley.
Part of the appeal of single-family rental homes is that despite
rising home prices, they are still considered less expensive to
acquire than apartment buildings, even when the rental income is
That is because for many years the only people willing or able
to buy them were small investors, who often have to pay more for
loans than big institutions, said Jeff Scott, a managing director
at real-estate investment bank Eastdil Secured. But as more big
institutions buy single-family homes, the discount compared to
multifamily buildings is expected to shrink.
Investors are hoping that by buying now, they can benefit from a
rising market. "There are large economies of scale still to be
gotten for a professional manager," Allianz's Mr. Donner said.
Write to Konrad Putzier at email@example.com
(END) Dow Jones Newswires
April 13, 2021 05:44 ET (09:44 GMT)
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