Build-to-rent communities are rapidly emerging in response to surging demand for single-family rentals—and two major players are driving the activity. Both single-family homebuilders and multifamily developers are building the robust pipeline of BTR product.
“Single-family homebuilders and multifamily developers each brings a unique viewpoint and experience,” Cody Kirkpatrick of Berkadia’s JV Equity & Structured Capital team, tells GlobeSt.com.
While these are the two developers driving construction activity, Kirkpatrick says that there is a diverse pool of players large and small. “What’s interesting about the BTR space is it is not heterogenous or dominated by a handful of large firms. There are some large firms, of course, but there are also many smaller, local groups that are active and extremely successful in BTR communities,” he explains.
The team is highly active in the growing BTR category, and it regularly fields inquiries from sovereign wealth funds, private equity funds, family offices and insurance companies. “These capital sources are constantly reaching out to us now looking for introductions to experienced sponsors in the BTR space. As a result, multifamily groups have also begun to realize that if they pivot to the BTR space, they gain access to a lot of equity capital they would not otherwise,” says Kirkpatrick.
As the BTR sector heats up, more players are looking to enter the market. Noam Franklin, who works closely with Kirkpatrick on Berkadia’s JV Equity & Structured Capital team, says that investors new to the asset class showed remain focused on the fundamentals. “Our advice for anyone interested in the BTR space is to stay focused on the fundamentals—similar to multifamily fundamentals in most respects,” Franklin tells GlobeSt.com, adding that it can get easy to get caught up in the excitement around the asset class. “Don’t succumb to the temptation to accept a higher price per foot or unit valuations, or a lower IRR, or some other metric that doesn’t measure up simply for the opportunity to get into the BTR space early,” he says. “It’s a tempting proposition, but sticking to the fundamentals will prevent buyer’s remorse.”