As the U.S. continues to struggle with a housing shortage, more big commercial real estate firms are beginning to lend money to those compiling land for single-family residential construction.
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Starwood Capital Group and Trez Capital on Tuesday announced a new joint venture to provide capital for single-family housing developments. The firms are plotting a $450M seed round and are targeting more than $1B in annual originations.
The press release cites “structural housing supply imbalances and continued residential demand” as key elements of the joint venture’s investment thesis.
“Bringing together Starwood's institutional capital, deep expertise in real estate financing and master-planned community development with Trez Capital's capabilities in residential land financing will uniquely position us to capitalize on sector tailwinds as a premier lending platform,” Starwood Managing Director Anthony Murphy said in a statement.
The announcement came the day after global investment firm Wafra Inc. and Texas-based Hunt Cos. debuted a similar venture called Strata Land Partners, which seeks to provide capital to homebuilders and developers. It launched with projects including about 1,300 single-family lots.
“It is apparent that there is significant demand for a strategic capital partner that understands the industry's operational nuances and thoughtfully supports builders in achieving their goals,” Strata CEO Mike Forsum said in a statement.
“Our goal is to bridge that gap and play our part in building the new homes this country needs.”
Permits for future single-family home construction fell 4.8% year-over-year in September, according to a report last month from the National Association of Home Builders. That brought the metric to a 3.5-year low, Reuters reported.
The trade group also found that high mortgage rates have combined with expensive energy, material and labor costs to push builder sentiment to a 14-year low, excluding the pandemic.
Starwood’s announcement came after the firm announced in May that it had raised $10.2B for distressed deals from investors in 20 countries. Up to 35% of those funds were earmarked for data centers.
This won’t be the first time Miami-based Starwood has crossed paths with Trez.
The Canadian firm has been active in Texas. It partnered with Hines to construct nine master-planned communities across the state, several of which Starwood acquired in an $800M transaction last year.
Trez also lent $58M to W Land Development so the firm could refinance the first phase of Preservation Creek, a 5,700-home master-planned community south of Houston.
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