This week, Nuveen Real Estate, which manages $127 billion in global client assets, announced that it will invest up to $400 million in a new startup aimed at the U.S. market for single-family housing, marking the alternative asset manager’s first move into this slice of the market.
The Scottsdale, Arizona-based startup, Sparrow, is a platform for single-family homes for rent. The platform is vertically integrated, which is to say that the homes on offer to prospective renters via Sparrow’s platform are properties it owns.
According to the company’s website, Sparrow also plans to soon launch a sale-leaseback offering for homeowners called Sparrow Direct.
Nuveen’s strategic investment will enable Sparrow to grow the platform, as well as buy more homes for its portfolio. According to a company announcement, Sparrow and Nuveen will invest together in “high-growth markets across several Sun Belt states that demonstrate attractive economic and demographic drivers.” Targeted cities in Texas, Florida and Arizona are first on their list of investment sites.
“Our investment in Sparrow allows us to efficiently scale with a best-in-class team in a sector where we have tremendous conviction,” said Michael Hunter, Global Head of Alternatives and Strategic Transactions at Nuveen Real Estate. “We believe the fundamental shift in demographics and lifestyles which underpin demand for single-family rentals is just starting to emerge.”
Sparrow was founded by a pair of entrepreneurs, Jami Schulman and Patrick Whelan, who have been involved in the origination, acquisition, development and management of more than $2 billion worth of single-family rental homes since 2012.
“Nuveen entering the single-family home rental community further speaks to the long-term strength and viability of a sector we have long believed in,” said Patrick Whelan, CEO of Sparrow. “We are excited that Nuveen chose to invest in our platform and look forward to growing our partnership.”
Nuveen isn’t the only deep-pocked institutional investor eyeing the market for single-family rental homes in warm, sunny states. According to a report from Bloomberg this week, JP Morgan Asset Management, whose real estate team manages $65 billion in client assets, is seeking $700 million in funds to develop single-family and multi-family rental homes in second-tier cities in the Sun Belt states of Texas, North Carolina and Georgia.
According to Bloomberg’s report, JPMorgan is going after investors that are “potentially over-allocated to key gateway cities” like New York and San Francisco, and property types like commercial office and retail spaces.
In July, Brookfield Asset Management bought a controlling stake in Conrex, a residential property manager offering more than 10,000 homes for rent across 11 U.S. states in the Midwest and Southeast. It also reportedly raised $300 million for a new investment fund called Brookfield Single Family Rental that will acquire and renovate homes to offer on the Conrex platform.