Tricon Residential Forms $5B SFR Joint Venture
- Jul 20, 2021
Tricon Residential Inc. has joined with three institutional investors to launch a $5 billion joint venture that will acquire more than 18,000 single-family rental homes in the Sun Belt.
The JV, which includes the Teacher Retirement System of Texas and Pacific Life Insurance Co., along with an existing Tricon global investor, is the company’s largest joint venture to date.
Gary Berman, president & CEO of Tricon Residential, said in a prepared statement the JV also represents a significant milestone for institutional investment in the SFR asset class. Institutional investment in SFR has been growing throughout the pandemic, particularly at Tricon.
In May, Pacific Life Insurance and an unidentified global institutional investor formed a $1.5 billion joint venture with Tricon that aims to acquire approximately 5,000 newly built homes in the Sun Belt. That joint venture, Homebuilder Direct, had an initial equity commitment of $300 million (one-third from each partner) and included the ability for the investors to increase the vehicle size to $450 million, representing $1.5 billion of purchasing potential when including associated leverage. The JV plans to purchase about 5,000 new single-family homes directly from national and regional homebuilders, both scattered site home and finished built-to-rent communities.
The new JV is single-family rental Joint Venture (SFR JV-2), which is the successor to SFR JV-1, which has acquired more than 9,000 homes and is now fully invested. SFR JV-2 will have an initial equity commitment of $1.4 billion and include the ability for investors to increase the vehicle size to $1.55 billion.
Including Tricon’s co-investment of $450 million, that will represent approximately $5 billion of purchasing power when including associated leverage. Over a three-year investment period, SFR JV-2 is expected to acquire more than 18,000 single-family rental homes primarily from resale channels complementing Tricon’s other investment vehicles targeting the SFR homes. Tricon will serve as the asset manager and property manager of this joint venture as well as Homebuilder Direct JV.
Berman said Tricon, an owner and operator of a growing portfolio of more than 31,000 single-family rental homes and multifamily units in the U.S. and Canada, has now raised $2 billion of third-party equity commitments year-to-date and has enough capital in place to grow its SFR portfolio to nearly 50,000 homes over three years.
He said Tricon expects to add more than 6,000 homes in the coming year and is already on track having acquired more than 1,500 in the second quarter. Berman noted SFR JV-2 will help Tricon meet the demand it has been seeing across the Sun Belt for high-quality single-family rental homes at an accessible rental price point. The new joint venture will also enhance Tricon’s scale and the efficiency of its technology-enabled operating platform.
Tricon entered the SFR market in 2012 as an owner-operator and started to manage third-party institutional capital and its own capital in the rapidly growing SFR market about three years ago. In addition to SFR JV-2 and the Homebuilder Direct JV, Tricon’s SFR strategy includes development of BTR communities in its THPAS JV-1, a $450 million joint venture with the Arizona Retirement System that has an anticipated capitalization of $1 billion.
Growing Investment Market
The new Tricon JV comes weeks after Blackstone expanded its presence in the SFR market by agreeing to buy Home Partners of America, a SFR company that owns more than 17,000 homes in the U.S., for $6 billion. The investment by Blackstone Real Estate Income Trust Inc. (BREIT) is expected to close in the third quarter. Last August, Blackstone led a $300 million minority investment in Tricon. Blackstone had previously owned a stake in Invitation Homes, the largest SFR owner in the U.S., but sold off its investment in the company in 2019.
Also in June, SFR company Mynd partnered with global real estate investment manager Invesco Real Estate and plans to deploy up to $5 billion to acquire 20,000 homes.