Many Big Builders Are Stepping Back From BTR. This One’s Still All In
While Taylor Morris ramps up its portfolio, there are signs of overbuilding in some markets.
While some Wall Street investors in single-family rental house are offloading their holdings, particularly in highly competitive markets, at least one major home builder is still gung-ho on the rental sector.
Taylor Morrison, the nation’s fifth largest home builder, according to one estimate, has secured a $3 billion investment to accelerate growth of its build-to-rent brand known as “Yardly.” The deal will allow the company to expand its rental operations and meet what it says is the high demand by consumers who cannot afford to buy.
The Yardly brand offers a higher-end rental experience than typical apartments, with single-family homes that include private backyards and community amenities. The company puts a special focus on pet-friendly features to appeal to a large segment of the rental market.
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The funds are being put up by Kennedy Lewis, which manages approximately $30 billion in assets and . will be used for both existing Yardly communities and new projects.
The financing arrangement builds on an existing relationship between the companies, which already have a land banking agreement supporting Taylor Morrison’s for-sale operations.
“This strategic financial facility agreement dedicated to our build-for-rent business will help to scale our existing core competencies of land acquisition, land development and efficient home construction,” Sheryl Palmer, Taylor Morrison’s chairman & CEO, told BUILDER, a trade publication. “Ultimately, our hope is for Yardly renters to become future Taylor Morrison homeowners.”
Others are net sellers
Meanwhile, some institutional investors are selling more of their portfolios than they are adding to them, according to a new report, with selling activity clustered in three major markets—Atlanta, Miami and Houston. Together, they represent half of all institutional for-sale inventory, according to the report from Parcl Labs.
The three markets are also the places where institutional investors have their largest concentrations of houses for rent. Listings by Wall Street investors total 771 in Atlanta, 336 in Miami and 269 in Houston, according to Parcl Labs, which tracks investor activity in the housing sector.
FirstKey Homes is the most active seller, with more than twice the listings of any competitor. It has been cutting its asking prices by an average of 10 percent over its original asking prices, with reductions occurring every 20 days or so.
Three companies account for two thirds of the listings offered by institutional investors, the report found. FirstKey Homes has listed 1,045 houses for sale, or 35% of the total. Amherst has 418 houses on the market and AMH has 409 listings.
Houston has four times the local median number of listings, the report says. Miami and Atlanta also “significantly outpace” their local markets. And Chicago chimes in as a “surprise outlier.”
The report says market-level pressures explain some of the institutional selling activity. Noting that Atlanta has the highest institutional SFR concentration of any market, operators there are reducing exposure in what has become a “saturated market.”
In Houston, meanwhile, institutional operators face rising competition from so-called accidental landlords. Parcl Labs recently reported that Houston had the largest year-over-year jump in homes converting from for-sale to rental listings. And Miami’s single-family rental market faces broader Florida headwinds—declining prices and growing inventory—creating clear incentives for institutions to trim positions.
