CalSTRS venture will invest $1B in build-to-rent homes

Pension fund and Pacific Coast Capital Partners will target existing properties and develop new ones in fast-growing sector

CalSTRS CEO Jack Ehnes and PCCP partner Jim Galovan (Photos via iStock, CalSTRS, PCCP)
CalSTRS CEO Jack Ehnes and PCCP partner Jim Galovan (Photos via iStock, CalSTRS, PCCP)

The nation’s second largest public pension fund and an investment firm are placing a big bet on build-to-rent housing.

California State Teachers’ Retirement System and Pacific Coast Capital Partners have formed a $1 billion joint venture to invest in the fast-growing single-family housing sector, according to the Los Angeles Business Journal.

The venture will focus on build-to-rent communities in primary and secondary markets across the country. It will acquire existing properties and construct new single-family developments.

CalSTRS and PCCP have so far paid $240 million for five build-to-rent properties in Atlanta; Jacksonville, Florida; Nashville, Tennessee; and Raleigh, North Carolina.

“With a nationwide shortage of single-family housing supply, we see the strongest demand for the [build-for-rent] sector coming from millennials and baby boomers,” PCCP’s Jim Galovan said in a statement. The duo is targeting homes between 1,200 square feet and 2,000 square feet, which Galovan said are in particular demand among renters because of their price point.

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The pandemic has led to a surge in demand for housing outside urban areas, and has also pushed prices up. A growing number of individuals and families who have struggled with social distancing in large apartment buildings are opting for more indoor and outdoor space in the suburbs once their leases are up.

Investors are seeing opportunity. Firms like NexMetro, Brookfield Asset Management, and American Homes 4 Rent are also betting big on the build-to-rent sector.

More than 50,000 build-to-rent homes were constructed in the 12 months ending on Sept. 30, according to a recent report. That was 66 percent more than the average over the last 40 years.

Last week, developer Quinn Residences said it was planning to construct 8,000 build-to-rent houses in the Southeast after a $500 million commitment from an investor. [LABJ] — Dennis Lynch