Ex-Colony Executive Seeks $1.2 Billion for Single-Family Rentals
Ex-Colony Executive Seeks $1.2 Billion for Single-Family Rentals
(Bloomberg) -- ResiBuilt Homes was supposed to raise $250 million to develop single-family rental communities, but the deal was scuttled in March after the Covid-19 pandemic brought the U.S. economy to a halt.
Now, the Atlanta-based builder is out raising money again, and it’s seeking nearly five times the original amount. ResiBuilt is working with New York investment bank Whelan Advisory to raise $400 million in equity and $800 million in debt to build and manage rental houses as it looks to capitalize on demand for larger living spaces and investor appetite for ways to bet on the suburbs.
“We were already seeing both boomers and millennials move to rental communities because they wanted more room and a low-maintenance lifestyle,” ResiBuilt co-founder Jay Byce said in an interview. “Covid has accelerated the shifts that were already happening.”
Byce, who helped Tom Barrack’s Colony Capital Inc. build a single-family rental business in the aftermath of the U.S. foreclosure crisis, started the company in 2018 as an affiliate of ResiCap, which helps institutional investors buy, repair and manage rental houses.
The original fundraising was intended to recapitalize the company’s development pipeline and fund construction of 1,500 homes. Instead, ResiBuilt sold 600 houses for more than $150 million and landed on a more ambitious strategy. Now, it plans to build roughly 5,000 homes, targeting renters who want properties with three or four bedrooms and two-car garages at rents of about $1,850 a month.
Popular Bet
The single-family business has become a popular bet in the Covid-19 era. Publicly traded rental-home landlords have reported stronger occupancy and collection rates than their apartment-owning peers, reaping outsized stock market gains.
Shares in Invitation Homes Inc., the largest single-family rental landlord, have increased nearly 80% since the market bottomed out on March 23, compared with a roughly 25% increase in a Bloomberg index of apartment owners over the same period.
Private capital is also chasing the asset class, responding to growing consumer demand as well as the reality that the pandemic has made it more difficult to invest in traditional assets like shopping malls, hotels and office buildings.
In the months since the virus spread to the U.S., JPMorgan Chase & Co.’s asset management arm increased the size of a joint venture with American Homes 4 Rent, and Brookfield Asset Management Inc. got into the space with a $300 million fund. Most recently, Blackstone Group Inc. took a minority stake in Tricon Residential Inc.
While there are reasons to think the shift to the suburbs has legs, high unemployment rates will eventually translate into more missed rent payments, and urban exiles could return to cities as the pandemic recedes.
“That’s what makes it an interesting time to decide whether to double down,” said Jeffrey Langbaum, an analyst at Bloomberg Intelligence.
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