J.P. Morgan, El Segundo real estate company to invest $1 billion in build-to-rent homes

PUBLISHED 10:57 AM PT NOV. 22, 2022
EL SEGUNDO, Calif. — With so many people unable to buy their own homes in this current market, real estate investors are capitalizing on a growing housing market segment: renters.

J.P. Morgan Global Alternatives is teaming up with El Segundo-based real estate developer Haven Realty Capital to acquire and develop more than $1 billion in new build-to-rent communities, the companies announced last week.

What You Need To Know

  • A joint venture between J.P. Morgan and Haven Realty plans to invest $1 billion to acquire and develop build-to-rent communities

  • The JV has already targeted three communities of about 250 homes in Atlanta for their initial investment

  • With so many people shut out of buying a home, many have opted to rent, fueling the demand for build-to-rent homes

  • Some of the main reasons for renting single-family homes over apartments is that it provides more space and privacy

Joint venture officials said J.P. Morgan's $415 million equity investment would "provide long-term capital for Haven to continue to execute its business plan in the BTR space, working with homebuilders."

"The for-sale housing market has been significantly hampered by recession fears, inflation and rising interest rates, placing a burden on homebuilders and their ability to add to the housing stock," said Sudha Reddy, the founder and managing principal at Haven. 

Reddy said the partnership would allow them to continue working with homebuilders, many of whom will sell the newly built community to Haven to lease to residents. 

The joint venture's partnership and $1 billion target highlight the growth and high demand for build-to-rent communities across the U.S. The number of single family build-to-rent homes under construction has increased 106% year-over-year, according to Fixr.com, a home remodeling news site.

Citing data from RentCafe, there are more than 13,900 build-to-rent homes currently under construction in the U.S. 

The coronavirus pandemic, historically low mortgage rates and low supply created an inflated housing market that shut out many first-time homebuyers and prospective buyers. 

The red-hot housing market has dipped in recent months since mortgage rates have increased, but affordability remains a crucial issue for many prospective homebuyers, leaving many to renting. 

RentCafe officials said some of the main reasons for renting single-family homes over apartments is that it provides more space and privacy. It's ideal for families.

Based in El Segundo, Haven Realty has a $1.2 billion portfolio of 35 communities, totaling 3,500 units across nine states in various construction phases. 

Haven Realty officials said they plan to leverage their existing relationships with homebuilders.

Officials said the joint venture would target 50 to 200 homes, ranging from 1,500 to 2,500 square feet, primarily with three- and four-bedroom and two- and three-bathroom floor plans, including two-car garages.  

The joint venture has already targeted three communities, totaling approximately 250 homes in the Atlanta area. That acquisition expects to close within the next 90 days, officials said.

"We're pleased to be able to partner with Haven to continue to provide the attractive, newly-built, larger single-family homes for rent that more and more American families seek," said Ryan Holgan, executive director, Real Estate Americas, at J.P. Morgan Asset Management.

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