Appreciation Homes has assembled a 13-asset portfolio of build to rent homes that are located in the suburbs of Oklahoma City and wrapped that portfolio in a structure that it says is the first single family residential net lease deal to come to market.
The properties are being offered for sale with a 15-year, bond-net lease in place with Appreciation Homes as the single tenant. The structure gives the investor a fee simple ownership in the properties, which Appreciation Homes sublets to occupants.
Avison Young is marketing the offering.
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"When someone invests with us they are buying a single-family home with a long-term absolute net lease in place," Appreciation Homes managing director Paul Pettinelli, tells GlobeSt.com. "As the tenant, we pay the net lease payment every month to the owner and cover any capital expenditures and vacancy losses."
Jonathan Hipp, head of Avison Young's U.S. Net Lease Group explains that the structure is similar to any other net lease deal in that it is a bond wrapped in real estate "but in a new vertical which is single family rental."
So far the response to the offering has been "tremendous" Hipp says, coming from not only private market buyers in net lease but also from institutional and foundational inquiries.
The offering took between 18 months and two years to create, according to Stephen Satterfield, CEO of Appreciation Homes. "It is a very simple product to invest in and talk about, but it was complicated to develop. It was a lot to pull together with an investment grade tenant taking on everything and still producing an attractive yield. Having an investment grade tenant is fundamentally what makes this attractive to the investor market."
Satterfield says he expects to be in the market with additional offerings including one backed by 500 homes.
"We have a robust pipeline of inventory to choose from," says Pettinelli.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
