Real Estate

Cerberus plots $500 million expansion of FirstKey Homes single-family rental portfolio

Private capital management company ravenous for single-family rental homes

Cerberus Capital Management is hungry for single-family rental homes.

According to Bloomberg, the company, which manages its single-family properties through FirstKey Homes and owned 11,000 homes at the end of 2017, is trying to raise more than $500 million to expand its portfolio by over 40,000 homes.

This is the latest blip in a growing trend of investment in rental homes.

Pretium Partners recently closed on a $1 billion fund to grow its single-family rental platform, Progress Residential. The company said that the new fund’s strategy is to provide investors with access to a “diverse pool of single-family homes across attractive major markets in the U.S. that are experiencing above-average employment and population growth.”

Additionally, Tricon Capital Group partnered with the Teacher Retirement System of Texas and GIC Pte. to put forward $750 million in the space; while Front Yard Residential, the company formerly known as Altisource Residential, recently announced that it is planning a significant expansion of its single-family rental business and is coughing up more than $500 million to do it.

Bloomberg’s report notes that Cerberus fund is evergreen with no target date for returning capital. Transcendent Investment Management CEO Jordan Kavana told Bloomberg this is important since buying into the rental home market is not as easy as it was just after the housing crisis. New capital flowing into the industry will drive down yields and could threaten short-term funds if they are forced to sell properties at the same time.

The news comes at an interesting time, considering that earlier this week, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will both be shutting down their single-family rental pilot programs and ending their participation in the single-family rental market, outside of their previously existing small investor programs.

According to the FHFA, the GSEs’ expansion into single-family rentals was a test designed to determine if the GSEs were needed to support the growing single-family rental market. But the FHFA said that it has since learned that the market can function without the GSEs.

So whatever expansion that comes in the single-family rental market for these large operators will come from private capital.



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