Invitation, Rockpoint Forge $1 Billion Rental-Home Deal

Real-estate investors have a mountain of money looking for a home. Lately a lot of it is ending up in suburban single-family houses.

Invitation Homes Inc.,

INVH -0.37%

the country’s largest rental-home owner, on Wednesday disclosed a joint venture with Boston property investor Rockpoint Group LLC that will result in more than $1 billion for the landlord’s ongoing house hunt.

Invitation, which owns about 80,000 houses, has been buying at a clip of roughly $200 million a quarter since a pause at the onset of the coronavirus lockdown. It sold $448 million of new shares in June to fuel its expansion, and the agreement with Rockpoint will add enough cash to buy about 3,500 more homes, said Dallas Tanner, Invitation’s chief executive.

It is the latest example of cash flowing from large money managers to single-family-rental companies. Financiers created the companies a decade ago to buy foreclosed homes by the thousand following the financial crisis.

The pandemic has sent Americans rushing to the suburbs in search of a lawn, room for home offices and distance from neighbors. Landlords including Invitation and

American Homes 4 Rent

AMH -0.27%

have reported record occupancy and rising rents despite widespread job loss and economic upheaval, which have clouded the future of more-traditional investment properties such as office towers, shopping malls and hotels.

Shares of Invitation, American Homes 4 Rent and

Tricon Residential Inc.

TCN 0.89%

have outperformed the broader market since stocks hit a nadir in late March. Shares of companies that own hotels, offices and retail space have languished.

“Postpandemic, people have looked at our industry as a safe harbor,” Mr. Tanner said in an interview.

Last week the investment manager Nuveen said it would provide as much as $400 million for a rental operation buying houses in Texas, Arizona and Florida.

Earlier, the Canadian property firm

Brookfield Asset Management Inc.

acquired a landlord with over 10,000 houses from Ohio to Alabama and raised $300 million for it to buy more. J.P. Morgan Asset Management is building $625 million of for-lease houses with American Homes 4 Rent.

Blackstone Group Inc.,

which launched Invitation Homes at the depths of the foreclosure crisis and cashed out last year with a multibillion-dollar profit, jumped back in this summer with a $240 million investment in Tricon.

Real-estate investors are particularly flush after a banner fundraising year in 2019. There is more than $150 billion of unspent cash in U.S. private-equity real-estate funds, according to Dave Bragg, managing director at real-estate analytics firm Green Street. With core holdings such as hotels and office buildings having uncertain prospects, fund managers are looking to single-family homes for growth, he said.

Rental firms have a business model that has held up during the pandemic. They forecast millions of high-earning but debt-burdened millennials forming families and heading for the suburbs. These landlords have room to expand, with a combined percentage of the rental-home market in the low single digits. And though rising home prices can squeeze rental margins, the more expensive houses get, the more home buyers will be priced out.

“There is an acute shortage of homes available for sale, a dynamic which should help support home prices and keep many families who would prefer to purchase a home in the rental market,” Barclays analyst Ryan Preclaw wrote in a recent report.

Rockpoint, which manages $20 billion, finished raising $5.8 billion in a pair of funds in June. While Rockpoint has owned apartments and developed single-family homes, the deal with Invitation is its first foray into rental houses.

“We believe that it will become a core asset class and allocation for many institutional real-estate investors,” said Tom Gilbane, managing member at the firm. Co-founder Keith Gelb said the venture, to which Rockpoint is contributing $300 million, is “an opportunity to supplement our longstanding focus on for-rent housing.”

Invitation, which will acquire and manage the properties, is contributing $75 million. More than $600 million of debt will be used to boost the partnership’s purchasing power. The homes will be in the 16 markets where Invitation already operates, including Seattle, Dallas and South Florida. Like the other houses Invitation is buying these days, they will cost an average of $300,000 and will be chosen to appeal to its typical tenant: parents with pets and six-figure incomes.

Write to Ryan Dezember at [email protected]

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