Pretium, Ares acquiring Front Yard in $2.4B SFR sector consolidation
Pretium Partners, one of the largest securitizers of single-family home rental properties, is adding to its SFR holdings via a $2.4 billion joint-venture purchase of competitor housing rental investment firm Front Yard Residential Corp. (NYSE: RESI).
According to a company announcement, Pretium (which has $16 billion in assets under management) is the lead in a joint venture launched with Ares Management Corp. (NYSE: ARES) to acquire Front Yard and take over management of the latter’s housing portfolio.
The deal, expected to close in the first quarter of 2021, will be the first public-to-private transaction in the single-family rental sector and will require approval of Front Yard shareholders.
The deal would make Pretium the second-largest owner and operator of SFR properties in the U.S. with a portfolio expanding beyond 55,000 single-family rentals with ongoing monthly cash flow from tenants, and also likely boost the issuance of SFR-backed securities.
Pretium, an alternative investment firm specializing in residential real estate, mortgage finance and corporate credit, manages the properties through its Progress Residential subsidiary, which has priced 18 securitization deals since 2014 backed by the income streams and broker-opinion values of single-family rentals from among its holdings.
From its second-quarter earnings report in August, Front Yard stated it owned 14,472 stabilized rental properties.
“We firmly believe that scale is paramount to outperformance and continuing to create meaningful liquidity for SFR investors is necessary to ensure robust valuations and the continued flow of institutional capital into the SFR asset class,” said Don Mullen, chairman and CEO at Pretium, in a statement.
“The acquisition of Front Yard and its team represents a unique and strategic opportunity to leverage our differentiating scale and best-in-class operating platform to drive margins and deliver attractive returns to investors,” added Dana Hamilton, head of real estate at Pretium.