Southeast Multifamily Developer Jumping Into Single-Family Rentals
An Atlanta multifamily firm with a more than $5B portfolio in 10 states is getting into a whole new rental category: single-family houses.
RangeWater Real Estate is developing single-family neighborhoods in the Southeast under a newly established brand name called Storia, Bisnow has learned. Storia's first project is underway in Flowery Branch, a city 45 miles north of Downtown Atlanta. The project, a 197-house neighborhood called Beacon Lake Lanier, is off Interstate 985 next to Lake Lanier.
RangeWater, formerly known as Pollack Shores, is developing 1,800 to 2K SF single- and two-story homes on slab, which RangeWater CEO Steven Shores compared to typical starter homes.
It's a major shift for RangeWater, which is best known for luxury apartment mid- and high-rise projects in Atlanta and its suburbs, such as the Skylark, The Ivy at Ariston and The Local on 14th in Midtown.
“We feel like the renters we have been serving for the past 10, 15 years are moving into this stage of life or desire where they need and want more space,” Shores said. “However, they like the ease and convenience of a managed community, of living in a rental [and] having that flexibility of not being tied to one place.”
Beacon is expected to deliver by October, Shores said.
Once relegated to small investors who owned a patchwork of rental homes scattered in traditional neighborhoods, the single-family rental market has grown to attract big institutional investors. Names like JPMorgan Chase & Co. and Blackstone Group have invested in single-family rentals or rental companies.
Numerous homebuilders are breaking ground on or expanding their rental portfolios, including Lennar Corp., DR Horton and Toll Brothers, which established a $400M joint venture with BB Living to develop single-family rentals in Phoenix, Denver, Las Vegas, Jacksonville, Dallas and Houston.
Just this week, Invesco Real Estate agreed to back single-family rental firm Mynd Management to spend $5B to buy 20,000 single-family houses in the U.S. over the next three years.
While the build-to-rent market is only 5% of new homes in the U.S., the segment is growing rapidly.
According to John Burns Real Estate Consulting's first-quarter survey of 193 single-family rental managers, the market has hit an expansion index of 90 out of 100 for the first three months of the year, up from 82 in the fourth quarter of 2020. The national median rent for houses was $1,741/month, up more than 6% year-over-year in the first quarter, with the expected leasing index hitting 96, the highest level ever recorded.
“The appeal here is you can enjoy the lifestyle of a home, but the lease of a multifamily structure. And the best of both worlds is exceptionally appealing to a growing number of consumers,” said Jacque Petroulakis, executive vice president at NexMetro Communities, which owns, operates or is developing more than 6,500 rental homes in Phoenix, Dallas, Denver and Tampa, and has plans to expand into Metro Atlanta in the future.
When NexMetro launched in 2010, establishing the brand name Avilla Homes, executives believed its biggest customer base would be those with poor credit who couldn't buy homes, Petroulakis said. Instead, Petroulakis said NexMetro's customers tend to fall into three buckets: professional millennials, customers who are in some form of life transitions — newlyweds or divorcees, and empty nesters and retirees. All three categories are renters by choice, she added.
“Instead of what we found is our residents have great credit and most have the wherewithal to buy but are choosing to rent for one reason or another,” she said.
She said many of the customers are attracted to the apartment-like services performed by the landlord — lawns and landscaping, home and appliance repairs — while having the amenities of a single-family neighborhood: privacy and a backyard.
“The amenities is detached walls and privacy and not walking down a hall to get to your [unit],” Petroulakis said. “The amenities on steroids that you see in multifamily properties are not what is appealing to our renters. They want their privacy. They want their single-family home lifestyle, and that is more valuable to them than 35 ellipticals and a maxed-out weight room.”
Shores said RangeWater's homes will offer traditional apartment lease terms, but with a premium of $400/month in rents compared to area Class-A apartments. RangeWater plans to spend $800M over the next 18 months building 15 Storia communities across the Sun Belt close to retail and community hubs. It tested this concept with two townhome developments in 2019, including Maverick along the Atlanta BeltLine's Southside Trail.
“By far the majority of what we will always do is Class-A apartment acquisition and development,” he said. “We would like to get to the point where we're building 1,000, 1,500 [single-family rental] units a year on a consistent basis.”
CORRECTION, JUNE 3, 2021 2:35 P.M. ET: An earlier version of the story listed apartments managed by RangeWater and not developed by the firm. The story has been updated.