Partners Group Buys Fortress SFR Portfolio for $1B

Asset manager Partners Group Holding AG has agreed to buy a portfolio of single-family rental homes owned by Fortress Investment Group for $1B, Partners Group announced this week.

The deal includes 2,528 new-build homes operated by Kairos Living and another 1,000 homes in contract. The houses are in the US Sun Belt, primarily in Texas, Alabama, Georgia and Oklahoma, in cities including Oklahoma City; Amarillo; Birmingham; Tampa and Atlanta.

In its release announcing the acquisition, Partners Group noted that the construction of new homes is helping to expand the supply of rental properties.

“Migration to the Sun Belt accelerated during the pandemic as new remote working patterns led to increased demand for rental properties with more space than conventional apartments. (Our) pipeline of new homes under construction will help expand the base of rental properties in the region,” Partners Group said.

Based in Baar-Zug, Switzerland, Partners Group has $18B of assets under management; the company has acquired 280 real estate developments and properties globally. Alternative asset managers like Partners Group have been increasingly acquiring residential real estate, especially SFR.

Kairos Living, established in 2019, has acquired homes for funds managed by Fortress, based on information from a 2021 securitization.

Partners Group said that Kairos Living will handle the management of the portfolio. The company said it will provide growth capital to acquire additional houses for SFR and to invest in the Kairos Living operating platform as the venture scales.

During a housing crunch that has been identified as the primary engine of the current inflationary spiral gripping the US, institutional investors have been stampeding during the past two years to purchase portfolios of thousands of SFR properties.

The US housing market is being squeezed by a perfect storm of skyrocketing prices for houses and rentals; record low vacancies; a shortfall in supply exacerbated by long delays in new construction due to supply chain disruptions; and by homes for sale being scooped up by investors and returned to the market as rentals.

First-time home buyers rapidly are getting priced out of nearly every US market. Using the standard measure of housing affordability—your monthly mortgage payment should not exceed 30% of your salary—only six US states currently have median incomes high enough to afford the current median monthly mortgage payment, which is nearly $2,000.

Ron Lamontagne, managing director, Partners Group, acknowledged that a “chronic undersupply” of housing is making it difficult for millennials to buy their first homes. In a statement, Lamontagne said Partners Group, through its acquisition of the Fortress portfolio, is expanding the supply of “affordable rental properties.”

“The provision of affordable rental properties for families that are not ready to buy their first home has never been more important,” he said.

Partners Group envisions growing the Fortress portfolio into a regional SFR platform, said Scott Egarian, member of management, Partners Group, in a statement.

“Our vision is to capitalize on the fragmented nature of the single-family rental market to build a platform across the region whilst ensuring superior tenant experiences,” Egarian said.