Transcendent Electra Picks Up 3,500 Rental Homes In $1.25B Deal
Private equity firm Transcendent Electra announced Wednesday that it will be adding about 3,500 single-family homes and townhomes to its existing portfolio of rental homes in a $1.25B acquisition. The properties are new builds from an undisclosed corporate seller.
The deal is part of an ongoing run for Transcendent Electra. Last year, the firm announced a purchase of 1,889 new single-family homes for $496M, bringing its total to nearly 5,000, Transcendent Electra CEO Jordan Kavana told Bisnow.
"Our goal is to put another 9,000 units into the pipeline this year," Kavana said. "That's another $2B-plus that we're looking to invest. So that is our big, audacious goal. That would take us to around 14,000 units, total ownership."
Transcendent Electra made waves last year when the joint venture brought together Kavana's single-family rental platform, Transcendent Investment Management, and Electra America, the U.S. arm of Tel Aviv-based Electra Real Estate and a major player in the multifamily space. It owns about 33,000 apartments through its Tampa-based American Landmark Apartments, run by Joe Lubeck.
Kavana said the joint venture's initial goal was to acquire $3B of homes in the next three years, but "I think we're going to get there in the next two years."
Kavana said that build-to-rent is attractive for several reasons. It is getting tougher to find available inventory from homebuilders, so it ensures a pipeline of product. And because the industry has matured from a scattered-single-family model to a concentrated-community model, build-to-rent is essentially "horizontal multifamily," he said, which attracts investors who are comfortable with the multifamily model.
Transcendent Electra's investors include high net worth individuals and family offices as well as institutional investors.
"When you say, 'Hey, we're essentially doing multifamily, horizontally,' all of a sudden the cost of capital and the abundance of capital opened up, and that's really what we've seen happen in the last two, two-and-a-half years," Kavana said.
Tenants in the single-family rental space benefit from more square footage and typically higher room counts, which makes them stay longer, Kavana said.
"We capture five, six, seven years of life cycle with that tenant, as opposed to two or three years, when they have nowhere to go after they move into multifamily," he said.
Kavana said he doesn't see SFRs as taking away product that would otherwise be available to individual homebuyers.
"Even if we have a long-term rental view of the asset class, it doesn't mean that we cannot put rent-to-own programs in place to transition a two-, three-, four-year renter into eventually a homeowner, and that's part of our monetization strategy," he said. "So I don't think we price them out. I think we're actually facilitating optionality for a lot of these renters."
As for the new-build properties announced Wednesday, a first phase will consist of 1,424 new homes in communities in Tampa, Atlanta, Athens, Georgia, and Pinehurst, North Carolina, valued together at $504M. Another 2,000 homes will follow in Georgia, South Carolina, Florida and Texas, together worth $750M. The portfolio is expected to be completed by the end of this year.
The new builds are valued at about $175K to $300K apiece. Rents will average $1,500 to $2,800 per month.
Kavana said tremendous talent from all over the country has been joining Transcendent Electra and that he is working on some tech-related initiatives too: a proprietary artificial intelligence tool that will help the firm identify where and when to invest, as well as an app called Clean Living Health and Wellness, which will be available to renters and offer mental health programming, nutritional counseling, genetics testing, sleep management and more.
“Electra America is proud to continue to fuel the growth of Transcendent Electra in its path to becoming a premier owner and operator of Class A rental housing throughout the sunbelt," Electra America Chairman Lubeck said in a statement. "Each of the communities will have extraordinary architecture along with being highly-amenitized which will provide an unparalleled experience for our residents.”