Los Angeles Investor Buying 2 Atlanta For-Sale Communities To Pivot To Rentals
Another out-of-town firm is targeting the Metro Atlanta area's burgeoning build-to-rent housing sector, where developers take single-family homes and townhouses and operate them like apartment communities.
California-based Haven Realty Capital recently purchased two neighborhoods under development in Metro Atlanta to turn them into rental campuses: Stapleton Park in McDonough, which includes 76 Craftsman-style single-family houses, and Rosemary Park at Sugarloaf, a 78-unit townhome community in Lawrenceville. Haven also purchased Queen City Townes, a 106-unit rental townhouse community in Charlotte. The combined purchase of all three properties totaled $80M, according to a press release.
Since October, Haven has spent $500M on 1,500 homes in 17 communities in Georgia, the Carolinas, Arizona and Illinois. Haven's model is to contract with homebuilders at the outset of construction and close on the homes once they deliver, it said in the press release.
Haven is another player coming to invest in the build-to-rent market in Metro Atlanta. While not a new segment of the real estate industry — for years, investors purchased houses to offer for rent — the market was mainly dominated by smaller investors who owned portfolios of single-family and townhouses scattered around the region.
Now there is an influx of more well-heeled institutional and bigger multifamily and housing developers like JPMorgan Chase, Invesco Real Estate, Blackstone Group, Lennar Corp., D.R. Horton and Toll Brothers buying or developing more traditional suburban neighborhoods, maintaining ownership and renting them out.
Earlier this year, Atlanta-based Crescent Communities, known for developing and operating its NOVEL luxury apartment brand, formed a joint venture with the DRB Group to develop single-family and townhouse build-to-rent communities across the Southeast.
And both Atlanta-based Kaplan Residential and RangeWater Real Estate announced plans recently to develop single-family and townhouse communities targeting renters as investors eye the metro area's growing population along with climbing housing prices.
“It's not like the old days when if you were renting a home, it was just because you couldn't buy a home,” Haven Managing Principal Sudha Reddy said in an interview.
When Haven formed in 2010, the firm focused on buying single-family houses, fixing them up and then offering them for rental, Reddy said. But soon after, Haven shifted its strategy to investing in value-add apartment communities across the country. By 2019, the firm was eyeing a way to get back into the build-to-rent market, this time by amassing all the houses in a single neighborhood, Reddy said.
Haven entered the Metro Atlanta market in a big way last year when, in a partnership with Walton Street Capital, it purchased six neighborhoods with 537 single-family houses dedicated to renters from ResiBuilt Homes for $133.7M.
“The whole single-family rental demand, we were on the front end of seeing that demand over the past 10 years,” Reddy said.
While the build-to-rent market comprises 5% of new homes in the U.S., the segment is growing rapidly. A number of factors are fueling that demand, mostly centered on millennials, Reddy said. Now that they are having children, millennial households are becoming interested in schools and more space — characteristics more available in Metro Atlanta's low-density suburbs — but either cannot afford to buy homes or don't want to enter the ownership market.
“As homes get more expensive, you'll just see more and more people remain in the renter pool,” Reddy said.
Homebuyers are encountering a market where demand has outstripped supply, causing housing prices to continue to escalate. Roughly 60% of all U.S. households are unable to afford the median-priced U.S. home of $346,577, according to the National Association of Home Builders. And for every $1K increase in a house's price, another 154,000 households get priced out of homeownership.
The median price of a single-family home in Metro Atlanta has risen from $245K to $352K over the past 15 years, according to data compiled by the residential brokerage firm Engel & Volkers. Median housing prices climbed more than 25% year-over-year in June, according to the Atlanta Realtors Association.
Haven plans to focus on for-rent housing, instead of buying and fixing up apartment communities for the time being. Reddy said the prices investors have to pay for value-add multifamily properties, especially with cap rates as low as they are today, doesn't give much room for error.
“Because we believe this segment of the market has better risk-adjusted returns, we have been less focused on multifamily as of late,” Reddy said. “We want to aggregate as many of these communities as possible.”