Tricon Residential lines up $5B single-family rental venture

Pacific Life, Texas pension system partner to buy 18K homes as interest in sector remains hot

Gary Berman CEO of Tricon Residential (Tricon, iStock)
Gary Berman CEO of Tricon Residential (Tricon, iStock)

A new joint venture led by Tricon Residential plans to invest $5 billion into thousands of single-family rental homes in the U.S., signaling the insatiable demand of institutional investors in the asset class.

The Toronto-based investment firm partnered with the Teacher Retirement System of Texas and Pacific Life Insurance Company on the joint venture — one of the largest deals in the single-family sector’s history — which will target homes in the Sunbelt.

The joint venture will have an initial equity commitment of $1.4 billion and will include the option for investors to increase the investment to $1.55 billion. Tricon provided a $450 million co-investment.

Tricon expects the joint venture to acquire more 18,000 single-family rental homes in the next three years. The company will serve as an asset manager and property manager for the venture.

As opposed to building new homes, the venture plans to acquire existing homes and home communities. The partnership will be the successor to an existing single-family rental joint venture previously launched by Tricon, which has acquired over 9,000 homes and is now fully invested.

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Tricon’s latest deal highlights the massive interest in single-family rentals, once a generally overlooked sector. Large institutional investors and private equity firms are raising money to invest in the asset class, which has seen an explosion in growth during the pandemic and amid a record low inventory of homes available for purchase.

In June, Blackstone agreed to acquire Home Partners of America, owner of more than 17,000 homes across the U.S., for $6 billion.

Rising home prices have also turned buyers into renters. In April, home prices shot up 14.6 percent from a year earlier, according to the S&P CoreLogic Case-Shiller U.S National Home Price Index, the biggest gain since the index began over 30 years ago.

Skeptics of the single-family rental sector wonder if these firms will be able to make the numbers pencil out if the Federal Reserve raises interest rates, which would in turn increase the cost of financing.

Tricon’s Gary Berman recently told The Real Deal that the company has a three pronged approach to the sector. It buys homes off the Multiple Listing Service, works directly with homebuilders and builds new home rentals. Berman said the company was buying 800 homes a quarter one at a time off the MLS, but is planning to increase that to 1,500 homes per quarter later this year.

The company owns and operates a portfolio of over 31,000 single-family rental homes and multi-family rental apartments across the U.S. and Canada. Last August, Blackstone led a group of investors that infused $300 million into Tricon Residential.