Early fears that Wall Street landlords might have trouble refinancing their holdings of large portfolios of single family rental homes have proven unfounded.
The loans backing the first few rental property securitizations to mature were extended, prompting concerns that the bulk of deals in the sector might ultimately come due at the same time, crowding each other out. But over the past few months, one sponsor, Progress Residential, refinanced a deal, and another, Colony American Finance, paid one down, opting to keep the underlying mortgages on balance sheet.
Jonathan Ezrow, chief financial officer of Pretium Partners, says that growing interest in this asset class guarantees that there will be multiple exit strategies for investors, including accessing the public markets through an initial public offering or merger.
“I always say we can sell our portfolio the way we bought it, one house at time,” said Jonathan Ezrow, chief financial officer of Pretium Partners, which manages Progress. “It’s not plan A, but we can do it.”
Ezrow, who was speaking on a panel at IMN’s ABS East conference in Miami, expects the single family rental sector to attract more and more institutional investors over the next five to 10 years.
The number of single family rental houses, relative to size of the overall U.S. housing market. is very small. “We’re going to see more private institutional investors in this asset class over the next five to 10 years.
Progress was founded in 2013 by former Goldman Sachs partner Donald Mullen Jr and Curt Schade, a veteran of Bear Stearns. Other big investors in the asset class include Cerberus Capital Management, Blackstone Group, and Colony Capital. Ezrow thinks that the potential investor base is much larger.
“How many real estate investors have exposure to offices?,” he asked rhetorically. ”How many have exposure to multifamily? And how many exposure to single family rental? Very few.”
“It’s a $20 trillion, incomei-producing asset class. Why wouldn’t most real estate investors want an allocation? If an asset is operating well, and generating economic value, there are usually a lot of ways to exit.”