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Real Estate

JPMorgan Chase, American Homes 4 Rent plan to build thousands of single-family rental homes

Joint venture will develop SFR properties in West and Southeast

One of the largest operators of single-family rental homes is partnering with one of the nation’s largest banks to build thousands of new rental homes.

J.P. Morgan Asset Management, the asset management arm of JPMorgan Chase and American Homes 4 Rent announced Thursday that they are establishing a joint venture that will seek to build approximately 2,500 single-family rentals in “multiple high-growth markets in the West and Southeast.”

American Homes 4 Rent, which owns 52,776 single-family rentals across 22 states, is one of the biggest SFR companies in the U.S.

And now, the company is seeking to grow its SFR portfolio through the partnership with JPMorgan.

According to the companies, J.P. Morgan Asset Management, on behalf of institutional investors, and American Homes 4 Rent are “seeking to deploy” $625 million of equity to build those 2,500 new SFR properties.

As for why the companies are partnering together now, amid a recession that’s crippled many homebuilders, the companies say the timing is actually ideal given the recent shifts in behavior and an increase in people’s desire to move away from more densely populated areas.

“This partnership provides us with the opportunity to capitalize on an increasing trend amongst city dwellers to seek additional space and the appeal of high-quality suburban living in a newly constructed community,” said Mike Kelly, Head of Real Estate Americas at J.P. Morgan Asset Management.

“We see this shift as particularly prevalent among the Millennial generation, the largest U.S. age cohort, who are looking to transition away from apartment living,” Kelly continued. “The move towards more spread-out living is also expected to accelerate in the wake of the COVID-19 pandemic, and we anticipate strong occupancy and rental growth rates across properties.”

The partnership’s goal of building new single-family homes to rent also demonstrates a shift that’s taken place in the last few years.

In the wake of the housing crisis, companies like American Homes 4 Rent, Invitation Homes, and others rose to prominence by buying foreclosed homes on the cheap, fixing them up, and turning them into revenue-producing rental properties.

But with far fewer foreclosures hitting the market than there used to be, some SFR companies have shifted to building their own SFR properties from the ground up.

The partnership between JPMorgan and American Homes 4 Rent has actually already produced results, as the companies said Thursday that the partnership actually began at the end of April and construction has already begun on new SFR properties.

The first round of construction features 34 single-family homes in the Sovana and Spring Valley areas of Las Vegas, Nevada, including 12 three-bedroom homes and 22 four-bedroom homes.

The first deliveries are expected in June and completion is anticipated by October 2020, the companies said.

“We are proud to be partnering with J.P. Morgan Asset Management and value the institutional endorsement of our industry-leading built-for-rental development program,” Christopher Lau, chief financial officer at American Homes 4 Rent, said.

“Coupled with our innovative mobile technology platform that enables prospective residents to tour homes without an agent and manage their rental experience online, we believe that our built-for-rental development program has the potential to revolutionize the single-family rental industry,” Lau concluded. “This really is a case of the right strategy, at the right time, with the right partner.”

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