Homebuilder, Lennar Corporation has formed a new single family rental venture with investment giants Allianz Real Estate and Centerbridge.
Called Upward America, the company has a $1.25 billion equity commitment from Allianz and Centerbridge, along with other un-named institutional investors, to acquire single family rental homes in high growth markets across the United States.
Including leverage, the Upward America will be positioned to acquire over $4 billion of new single-family homes and townhomes from Lennar and, potentially, other homebuilders, and rent them to households earning “approximately” the median income in each market.
Rick Beckwitt, co-oresident of Lennar, said, “The Upward America Venture continues Lennar’s vision of becoming an ESG driven homebuilding company by making our high quality homes not only available for sale but also for rent, with a portion of the homes available with a rent to own option.
“The vehicle’s social focus provides a unique opportunity for families and individuals across the country to live in brand-new homes at an attainable price point, all without putting up a down payment. We have a distinct opportunity to create upward mobility in the housing market through this initiative.”
Beckwitt said he believes the venture has an opportunity to scale at a pace beyond competitors in the single family rental space, given its direct access to Lennar’s pipeline of over 300,000 owned and controlled homesites.
“As the housing needs and demographics in the United States continue to evolve, we believe that the single-family rental sector will continue to outperform,” said William Rahm, global head of real estate at Centerbridge.
“We are thrilled to partner with Lennar given their scale and capabilities to aggregate a geographically diverse portfolio of homes concentrated in some of the fastest growing markets in the country.”
Kirkland & Ellis LLP acted as legal advisor to Lennar, Simpson Thacher & Bartlett LLP acted as legal advisor to Centerbridge and Ropes & Gray LLP acted as legal advisor to Allianz Real Estate in the deal.
The investment is a first for Allianz in single family rental in the US market as the company looks to get in on strong demand seen in the segment from maturing millennials looking for accommodation with a preference for newly constructed homes and their propensity to rent.
The investment forms a diversification play within the U.S. strategy, where Allianz intends to deploy $1.3 billion in the residential markets over the next few years.
Karen Horstmann, head of acquisitions, Allianz, commented, “This trend started some years ago and has only been amplified by the more flexible approach many employers are taking to work from home. This household demographic, which will increase the 35-49 age cohort by almost 20 percent over the next two decades, will value space and modern housing even more than they have done in the past.”
The transaction demonstrates investors’ increasing demand for SFR assets, a sector which has grown from individual units owned and rented out by small investors, to large investors acquiring significant portfolios, building new units specifically for rent and creating entire communities of SFR properties.
In recent months Nuveen Real Estate, one of the world’s largest real estate investment managers, announced that it will invest up to $400 million through Sparrow, a newly launched single-family home rental platform.
Invitation Homes announced a $375 million joint venture with Rockpoint to acquire single-family rental homes.
And Canada’s Tricon Investment Group, an early investor in the sector, has moved into the build-to-rent space with American Homes 4 Rent.