By Jon Peterson
San Francisco-based DivcoWest has joined the ever-growing crowd of institutional capital sources that are placing investment dollars in the single-family rental sector with a $250 million equity investment as part of a joint venture with Denver-based Atlas Real Estate.
DivcoWest declined to comment when contacted for this story. The capital provided by the manager will mean it will cover the vast majority of the capital for the venture. Atlas will be making a small co-investment to the relationship. The equity plus $750 million of debt to be placed on the venture will allow the venture to have a total capitalization of $1 billion.
DivcoWest has not invested in the single-family rental property type previously. The real estate manager has been known as an investor mostly buying and improving a mixture of traditional office buildings and life science assets. Its activity has included finding transactions in both the San Francisco Bay Area and Seattle.
Over the past couple of years, there has been a tremendous amount of institutional capital that has been invested in the single-family rental investment strategy. Some examples of this have been CalSTRS and PCCP creating a $1 billion joint venture, J.P. Morgan Asset Management investing $625 million with American Homes 4 Rent, Blackstone Real Estate Income Trust and Tricon Residential making an investment of $300 million and the Wisconsin State Investment Board investing $150 million with Hudson Advisors.
Atlas is no stranger to the single-family rental property type. As a company, it currently manages more than 4,200 units of this property type. The venture with DivcoWest will be active in some of the markets where Atlas already has a presence. This includes Nevada, Colorado, Arizona, Idaho and Utah.
DivcoWest had been in the market looking for a manager to team up and expand into this sector. “DivcoWest was seeking a partner for a venture with its initial $250 million investment, and they came aware of some of our previously relationships and that is how we found each other,” said Tony Julianelle, chief executive officer of Atlas.
The venture between the two companies will have a scattered site investment strategy. “For us, this means we will be buying a variety of homes across a market, rather than buying an entire subdivision or community. We are very experienced in our markets and know the neighborhoods and what are the best zip codes to buy in,” said Julianelle.
The homes that Atlas will be buying are those that would have some form of a value-add nature to them. This could include that the home needs new paint or carpeting. In some cases, it could also include renovating the basement to add another bedroom and bathroom to the home.