JP Morgan Asset Management has formed a joint venture with American Homes 4 Rent to invest in the single-family homes, according to sources familiar with the matter.
The investment is being made on behalf of JP Morgan’s flagship open-ended core US real estate vehicle, the Strategic Property Fund.
JP Morgan and American Homes 4 Rent declined requests for comment.
The move comes at a time when many open-ended core funds in the US are seeking to increase exposure beyond the traditional sectors of office, industrial, retail and multifamily apartments.
The single-family rental sector is expected to become a growing constituent of core real estate portfolios of US pension funds. Arizona State Retirement System recently entered a $450m (€408m) joint venture with Tricon Capital Group to build single-family homes for rent.
In a Global Alternatives Outlook report published in January, JP Morgan Asset Management argued that “core allocations need to adapt” to changes in technology, demographics and other structural trends.
The report predicted “extended core sectors”, which include self-storage, hotels, student housing and healthcare, “to make up an increasing share of private real estate allocations as investors come to better understand these opportunities and their risks and roles in a diversified core portfolio”.
Single-family homes are included in a list of preferred extended core sectors. “Technology has given REITs and, more recently, private real estate managers a platform for buying, managing and renting a large number of single-family properties, spread over a broad geography, allowing these properties to be run at attractive margins,” the report said.
“The result is a new investment opportunity for institutional investors, with attractive return and diversification potential. We anticipate more private real estate managers entering this space, partnering with REITs or other third-party businesses with the required platforms and specialised expertise.”
Core ODCE funds in the US tend to invest directly in assets, but JP Morgan has begun to target joint ventures. At the end of 2018, the Strategic Property Fund entered a $400m joint venture with the Black Creek Industrial Fund.