Pretium, an alternative investment management firm, and funds managed by Ares Management, have closed on their $2.4 billion acquisition of Front Yard Residential, making Pretium the second-largest owner and operator of single-family rental properties in the U.S.
As a result, Pretium now has more than 55,000 SFRs. It will manage the venture and partner with Ares to further expand Front Yard’s portfolio of assets.
“There is significant opportunity in the SFR market and a clear sense of urgency among institutional investors to deploy capital to this asset class given record-high occupancy rates, stable cash-flow characteristics, and potential for continued capital appreciation,” said Pretium chairman and CEO Don Mullen.
Joel Holsinger, partner and co-head of Alternative Credit in the Ares Credit Group, said the asset class is particularly strong given its “compelling secular market tailwinds.”
The transaction demonstrates investors’ increasing demand for SFR assets and the unique investment opportunities available to operators such as Pretium that possess the requisite scale to drive margins. Pretium led the transaction and will manage the venture following closing.
“This transaction further establishes Pretium as both a pioneer and a leader in the SFR space since 2012, having completed the industry’s largest strategic recapitalization in 2019 and now leading the industry’s first public-to-private transaction,” stated Mullen.
“We firmly believe that scale is paramount to outperformance and continuing to create meaningful liquidity for SFR investors is necessary to ensure robust valuations and the continued flow of institutional capital into the SFR asset class.”
Fried Frank acted as counsel to Pretium Partners in connection with the joint venture with Ares Management and other investors. RBC Capital Markets served as financial advisor to Pretium. BofA Securities is financial advisor to Ares. Sidley Austin is served as M&A legal counsel and Hunton Andrews Kurth as special tax and financing counsel to Pretium. Latham & Watkins is serving as legal counsel to Ares.