Tricon Residential Inc. (TCN-T) has announced its third major joint venture into the U.S. single-family housing rental market, partnering with Pacific Life Insurance Company and an unnamed third investor to acquire up to $1.5 billion (all figures U.S., unless specified) in new homes across the Sun Belt.

Toronto-based Tricon, a longtime player in the U.S. single-family rental (SFR) market, already owns interests in over 31,000 single-family homes and apartment units in the U.S. and Canada.

The initial commitment to this venture, to be known as the Homebuilder Direct JV, is $100 million by each of the three investors, or $300 million in total. The vehicle could expand to $450 million in equity, offering the capacity for up to $1.5 billion in acquisitions, including financing for the properties.

“We are excited to begin a new partnership with Pacific Life alongside one of our existing institutional investors to expand our single-family rental platform and offer our residents the option to live in brand-new homes at an accessible price point,” said Gary Berman, president and CEO of Tricon Residential, in the announcement.

“We continue to see exceptional demand for high-quality rental homes as a result of de-urbanization, de-densification and work-from-home trends that have only accelerated in the past year.”

Tricon’s U.S. single-family joint ventures

As with most of its SFR portfolio, Tricon remains focused on the middle-market demographic.

The partners plan to acquire approximately 5,000 new single-family homes, primarily from national and regional homebuilders. They’ll seek out both scattered-site homes and finished build-to-rent communities.

Tricon will serve as the asset manager and property manager.

Tricon considers the Homebuilder Direct JV a strategic accompaniment to its existing partnerships, which have a different focus in the single-family rental sector.

“The Homebuilder Direct JV leverages our longstanding relationships with homebuilders across the United States and rounds out our single-family rental acquisition strategy to include new homes, complementing our ongoing acquisition program of resale homes in our SFR JV-1 vehicle and the development of build-to-rent communities in our THPAS JV-1,” Berman said in the release. “With the formation of the Homebuilder Direct JV, we now have a clear runway to grow our single-family rental portfolio well beyond 30,000 homes.”

The SFR JV-1 venture has a total equity commitment of $750 million (one third each from three investors) and a target of up to $2 billion in acquisitions. THPAS JV-1 has an equity commitment of $450 million – including $50 million from Tricon – and a goal to acquire up to $1 billion of property.

Other recent Tricon transactions

This is the second major announcement for Tricon since it announced the sale of a majority stake in its U.S. multifamily holdings in February. In that transaction, Tricon sold an 80 per cent interest in 23 properties containing about 7,300 units, with the intention of lowering its overall debt.

The sale valued the properties at $1.33 billion. Tricon received about $425 million in proceeds, once debt was taken into account.

The firm also received a $395-million equity investment from a syndicate led by Blackstone Real Estate Income Trust, Inc. in August 2020, which left it in a strong equity position and seeking new ventures.

In March, Tricon and CPP Investments announced a joint venture to construct up to 3,000 apartments , valued at up to $1.4 billion Cdn, in the Greater Toronto Area. The two partners plan to providing up to $500 million Cdn in equity; $350 million from CPP Investments and the balance from Tricon Residential (a 70-30 split).

The first project for the Tricon-CPP Investments JV is in Toronto’s Downtown East neighbourhood, a two-tower development proposed to contain 870 units on a 1.8-acre site within walking distance to the downtown Central Business District.

They hope to begin construction in 2022, with completion in 2025.

About Tricon Residential, Pacific Life

Tricon Residential owns and operates over 31,000 single-family rental homes and multifamily rental apartments in the United States and Canada with a primary focus on the U.S. Sun Belt.

Pacific Life offers a variety of investment products and services to individuals, businesses and pension plans.

The firm, established over 150 years ago, counts more than half of the 100 largest U.S. companies as its clients and has been named one of the 2021 World’s Most Ethical Companies by the Ethisphere Institute.