Institutional Investors Come to SFRs With Varying Risk Profiles

When institutional investors contacted Anthony Cazazian, managing director, head of US Residential Real Estate at Man Global Private Markets, earlier in 2020 about single-family rental homes, they were asking general questions about the asset class.

By the end of the year, their questions were much more focused, centering around who to partner with and what markets were best.

What changed?

Cazazian says part of the story was that single-family rentals proved that they could withstand a stressed environment or a downturn.

Institutions across the board are now ramping up their interest in single-family rentals.

“We are seeing very broad-based interest across different pockets of capital from REITs to private equity funds to insurance companies to pension funds to diversified real estate funds,” says Cazazian. “They are allocating money away from other sectors into single-family rentals.”

Cazazian says investors across the risk/return spectrum are interested in SFRs, from core to opportunistic investors. Man Global Private Markets plays across various risk spectrums by acquiring existing homes and new homes and pursuing build-to-rent development opportunities in purpose-built rental communities.

“There is broad-based interest that also has very different objectives and return profiles,” he says. “But the asset class can cater to all of those different types of investors.”

Traditionally institutional investors could only gain exposure to US rental housing through direct investment in multifamily properties. But Cazazian believes that may be shifting over time.

“More holistically, you are seeing more institutional capital being allocated to single-family. Part of that is likely to be an allocation of already invested capital in other real estate sectors.”

While institutional interest is growing in the space, Cazazian thinks that the number of institutional platforms with a deep track record and size in the asset class is still relatively limited. “There is all of this interest and capital that’s looking to be invested in the space, but there aren’t that many platforms out there that the capital can be allocated to,” he says.

Overall, investor interest in US housing is strong. Cazazian says different platforms are focused on different areas. They aren’t just looking at single-family rentals but across the residential landscape.

“From our perspective, we like to invest in both single-family rentals as a direct investment, but we also have got investment strategies that invest in US housing as a whole,” Cazazian says. “So we have a little bit of a different kind of take than others that may be singularly focused on single-family or more focused on other areas. We are very much focused on our US housing expertise as a whole, and providing investors with the ability to express their interest in US housing, whether it be through direct investment in single-family rentals or through debt investments in the residential investment space.”