Hoar Construction broke ground on Icon Tallahassee, a nine-story multifamily community serving students at Florida State University in Tallahassee, Florida. Hoar is serving as the general contractor on the more than $100 million project, developed by Park7 Group and slated for completion in the fall of 2028.

Icon Tallahassee will house 804 beds across one-bedroom studios to five-bedroom apartment layouts. Amenities will include a club room, study lounges, below-grade parking, bike and scooter storage, and a fitness center with a yoga studio. Icon will feature a rooftop pool deck lounge with views of Doak S. Campbell Stadium. 

Additional project partners include Boarman Kross Vogel Group, Inc. as architect.

Hoar continues to expand its portfolio in Florida, with over $750 million in projects completed within the state over the last five years. In 2024, Hoar completed construction on Cordelia, a 12-story, 240-unit multifamily community in Sarasota.

Digital Realty has closed its inaugural U.S. hyperscale development fund, an effort that represents a new approach to securing development capital for the world’s largest data center provider.

At the same time, the public REIT signaled a renewed commitment to pursuing private capital strategies to fund new data center build-out, announcing the hire of two executives to help lead its dedicated fund team. 

A Digital Realty data center in Ontario, Canada

The closure of Digital Realty’s first private development fund comes almost exactly a year after it was launched. The fund received $3.25B from a range of institutional investors — including public pensions, sovereign wealth funds, endowments and foundations, corporate pensions, insurance and asset managers, and family offices — to support more than $10B of new hyperscale investment. 

The fund owns 80% of a portfolio of Digital Realty’s stabilized data centers and preleased development sites, including properties in Northern Virginia, Dallas, Atlanta, Charlotte, New York and Northern California. Digital Realty maintains a 20% ownership stake and manages the fund. 

Creating a private development fund was a novel approach to leveraging existing data centers to raise the capital needed to build new ones — a major challenge for developers across the digital infrastructure space. The arrangement allows institutional investors to receive a steady stream of income from the fully leased data centers, while Digital Realty uses the invested capital to cover predevelopment and development costs without relying on project-specific debt. 

Digital Realty told investors the fund is part of a $15B liquidity pool from private capital it calls “dry powder” to bank land and power ahead of demand to be able to deliver capacity on short timelines when Big Tech tenants need it.

“We remain focused on sourcing and delivering hyperscale data center capacity to support our customers’ accelerating requirements, and private capital is playing an increasingly important role in how we prudently and efficiently scale PlatformDIGITAL,” Digital Realty Chief Investment Officer Greg Wright said Monday in a written statement.

“Strengthening our private capital capabilities enhances our customer focus, expands our ability to fund growth, and positions Digital Realty for durable long-term value creation.”

Digital Realty plans to continue using this new private capital strategy to augment the on-balance-sheet financing strategies it has traditionally used to fund new development, announcing Monday that it is adding a pair of experienced executives with private capital and fund management backgrounds to its leadership team. 

Former CBRE Senior Managing Director Michael Yang will join Digital Realty as the firm’s executive director for fund management. Yang previously held various investment management roles at Goldman Sachs, NEPC, GID and AEW Capital Management.

The company also brought on Bradley Petersen to serve as managing director for private capital fundraising. Prior to Digital Realty, Peterson held a similar position at Jamestown LP following stints at Garrison Investment Group and Aetos Capital Real Estate.

Private equity investment is gobbling up an increasing share of apartment units, now accounting for at least a tenth of all ownership in the United States, with most of it concentrated in the Sun Belt region.

Multifamily Apartment Building

Private equity firms own about 8,200 apartment buildings comprised of over 2.2 million units, according to a Private Equity Stakeholder Project report. Of the 121 big private equity firms PESP tracked, the 10 largest apartment owners collectively share 41% of them, a total of 900,000 units across the country.

Blackstone is the largest private equity owner of apartments in the U.S. with over 230,000 units. Greystar follows with 138,000 units. Other major firms owning vast swaths of units include Starwood Capital, Related Cos., Cortland and Brookfield.

Sixty-two percent of these units, or 1.4 million, were purchased since 2018, and almost 930,000 since 2021.

Blackstone picked up 58% of its units in or after 2021, and more than 75% were acquired since 2018. Starwood bought 53% of its portfolio in or after 2021 and 77% since 2018.

More than half of all units are located in five states: Texas, Florida, California, Georgia and North Carolina. Texas has the largest share of private equity-owned units at over 440,000 units across 1,500 properties.

Four of the top five — Texas, Florida, Georgia and North Carolina — also saw the largest population growth from 2020 to 2024.

The top 10 metropolitan areas with the largest private equity investment are Dallas; Atlanta; Houston; Denver; Austin; Phoenix; Orlando, Florida; Charlotte and Raleigh, North Carolina; and Tampa, Florida.

Those metros are home to 860,000 units owned by private equity, with Dallas seeing the largest share at 191,431 units and 598 properties, followed by Atlanta, where private equity owns 141,500 units and 466 properties.

The report also tracked the cost-burden impact of the private equity sector on these markets.

The Tampa, Florida, metro, where 23.4% of apartments are owned by private equity, saw a 20.8% increase in households spending 30% or more of their income on housing between 2019 and 2023. The percentage of households exceeding that spending figure rose from 53% to 64% over those four years.

Just under 1 in 10 homes that broke ground in the United States in 2024 was being built for a tenant, not an owner, according to John Burns Research and Consulting data. 

Single-family rentals accounted for more than 1 in 4 rental unit construction starts in 2024.

Investors poured a combined $57B into single-family rentals in 2021 and 2022. Capital flows slowed in 2023 as rising interest rates squeezed deals, but the sector bounced back, with investment nearly doubling year-over-year to $6.3B in 2024. Analysts expect more growth ahead. 

“This niche is only 6, 7 or 8 years old, but it gained a ton of traction, not only on the demand side from tenants moving into a purpose-built rental community but also on the development side,” said Chris Nebenzahl, vice president of rental research at John Burns. “Developers have seen that demand and have really met the demand.”

Single-family rentals have exploded into the housing market, with 124,825 new rental homes built since 2017. Unit completions have grown in each of the last six years, and 2024 set the new high-water mark for deliveries with more than 34,000 units, according to Point2Homes data, an SFR leasing platform and subsidiary of Yardi Matrix. 

Private equity continues to pour money into the sector to take advantage of macroeconomic and cultural shifts that have made renting more attractive. Persistently high home prices, exacerbated in the last two years by elevated interest rates, have contributed to the sector’s success.

Single-family build-to-rent homes accounted for 27% of all rental housing starts last year, and SFRs accounted for 9% of all single-family housing starts, according to John Burns. 

“Institutional investors are increasingly favoring purpose-built developments over acquisitions, further boosting the growth of SFR/BTR properties,” Doug Ressler, manager of business intelligence at Yardi Matrix, wrote in an email. 

New SFR construction was up 41% year-over-year in 2024 even as traditional housing starts fell by 2%, according to John Burns. A quarter of the SFR developers, operators and investors surveyed by the research firm expect to break ground on more units this year compared to last. 

Today, it is cheaper to rent than to buy in all of the country’s 50 top metros, with the median mortgage priced around $2,703 per month, while rent in a comparable city is around $1,979 per month, according to Bankrate. Homeowners, unlike renters, also have to contend with property taxes, insurance and repair bills. 

Renting becomes even more attractive when factoring in that 30-year mortgage rates are floating between 6% and 7%, up from the sub-3% rates that were common before the Federal Reserve tightening policy in 2022. 

“It’s still expensive, and we’re waiting for our incomes to come up, but you don’t hear that many complaints about rents anymore. But you’re hearing more about home prices, and that’s because home prices have continued to go up,” said Ken Johnson, a housing economist and the real estate chair at the University of Mississippi.

Homebuyers look at today’s prices and sense that the market is near a peak, giving them more reason to hold off on closing a sale, he said. There are signs that Wall Street investors agree.

The stocks of Invitation Homes and American Homes 4 Rent, the two largest public SFR firms, are trading somewhere between a 20% and 35% discount on their net asset values, The Wall Street Journal reported. 

Invitation Homes has been trading at a discount since early 2022, but the gap has widened by 10 percentage points over the last 12 months. With home prices elevated, large institutional investors that own more than 1,000 homes accounted for just 0.3% of U.S. home purchases in the third quarter, according to Point2Homes. 

Sun Belt markets have drawn the bulk of investment in the last five years, after the pandemic provided a burst of energy to existing migration trends driving Americans south. 

Nearly 4,300 new build-to-rent homes broke ground in Phoenix in 2024, the most of any major city. It was followed by Atlanta, which saw 3,236 units break ground, Dallas, Houston and Charlotte. Since 2017, developers have broken ground on 42,000 single-family rentals across those five cities alone. 

“The concept is going to be most effective in large metropolitan areas that are growing,” Johnson said, highlighting cities with large populations of young professionals.

But SFR owners and developers have found themselves in regulatory crosshairs in recent years as the nation’s housing affordability crisis deepens.

Lina Khan, the head of the Federal Trade Commission under former President Joe Biden, took a parting shot at SFR providers in the waning days before President Donald Trump took over the White House. 

The FTC issued a mid-January request for public comment seeking input about how the federal watchdog could probe SFR operators and their impact on the housing market. The investigation would target at least 30 firms, each of which owned at least 1,000 rental units, the FTC said. 

“This proposed study would shed much-needed light on the mega-investors that have amassed huge portfolios of single-family rental units and potentially contributed to the housing challenges that Americans face,” Khan said in a statement at the time. 

FTC commissioners unanimously approved the notice, but it is unclear whether Trump’s nominee to replace Khan, Andrew Ferguson, will follow through with a probe. 

Private equity’s interest in housing has drawn scrutiny for years, including a 2022 ProPublica investigation that found the investment firms were behind 85% of Freddie Mac’s largest apartment deals since 2013.

Earlier this year, New York Gov. Kathy Hochul proposed blocking hedge funds and private equity firms from buying up large numbers of homes in the state. Similar proposals have been floated in Nevada and Minnesota. 

Analysts who spoke to Bisnow said private equity’s interest in single-family housing was a positive development for housing affordability. The build-to-rent communities popping up across the country are a supplement to housing options rather than a replacement, they said. 

It takes tens of millions of dollars in upfront investment to build homes for rent, and the cash has to come from somewhere, Johnson said. 

“We see politicians saying that we don’t need Wall Street or private equity in the rental market or building homes for ownership. That’s a prescription for disaster,” he said. “I don’t hear people saying we don’t need professional investors in the stock market. People that know what they’re doing create price efficiency and liquidity in the housing market.”

Time Equities Inc. has acquired The Armory, a student housing property near Sam Houston State University (SHSU) in Huntsville, TX. The property, which features 145 units and 502 beds, was sold by Stonemont Financial, a real estate investment and development firm headquartered in Atlanta. At the time of purchase, the asset was 96% occupied. Commercial Edge reported the sale price at $25.8 million.

Built in 2018, The Armory spans 2.5 acres and offers a mix of studio to five-bedroom units, catering to a diverse range of student preferences and needs. Community amenities include a 10k sf clubhouse, a resort-style pool, a dog park, a putting green, soundproof study rooms and a fitness center, as well as a seven-story parking garage with 387 spaces plus guest parking. 

Located at 2257 Sam Houston Ave, The Armory offers easy access to university classrooms and athletic facilities, as well as off-campus dining, shopping, recreation and entertainment options, all within walking distance.

CBRE arranged the $4.9-million sale of a 8,450-square-foot multifamily development site in the Century City submarket of West Los Angeles to 416 Development Group, LLC, which will utilize Fox Hills Development Group, LLC as the development entity. Laurie Lustig-Bower and Kamran Paydar with CBRE’s Los Angeles Multifamily Investment Sales represented the seller, 1814 Fox Hill Drive, LLC, a Los Angeles-based private investor.

The site is located on the Northeast corner of Missouri Avenue and Fox Hills Drive at 10285 W. Missouri and 1814-1824 Fox Hills Dr. The buyer is planning to build a 20-unit apartment building.

“The site’s proximity to premier retail amenities and the Century City business district provides an ideal live-work-play environment,” said Lustig-Bower.

“Missouri-Fox Hills is a rare opportunity to acquire an infill development site in one of Los Angeles’ top residential and business locations,” Paydar added.

The property is one block from Westfield Century City, an open-air retail destination with more than 200 shops and restaurants, and within walking distance of Century City.

Crew Campus Private REIT, a pure-play student housing REIT headquartered in Aliso Viejo, announced a performance fee waiver incentive program to benefit early investors. Following Crew Campus’ announcement in February of the acquisition of a 297-bed seed asset located near Baylor University in Waco, TX, investors are now poised to receive further benefits following changes to the offering and the launch of the incentive program.

“Investors who are accepted into the Crew Campus Private REIT during incentive periods will no longer be subject to the performance fee typically earned by the advisor,” said Jeff Daly, CEO of Crew Campus. “This Incentive Program fee waiver applies to the life of the investor’s investment; the original investment, as well as investments pursuant to the DRIP.”

Beyond the incentive program, Crew Campus is making the following changes to the offering in its most recent supplement: there will be no disposition fees associated with the sale of private REIT assets; the advisor’s performance allocation is being updated; and the minimum investment requirement is being reduced from $25,000 to $5,000.

Pictured: Oso Verde student housing in Waco, TX.

How are deals getting financed in today’s uncertain climate? On May 1, Connect Los Angeles 2024 brings together John Manning of MMCC, Gary Bechtel of Red Oak Capital Holdings, Felix Gutnikov of Thorofare and TR Hazelrigg, IV of Avatar Financial Group on the Financing with Debt Panel. Register now to hear from these industry experts. 

Hanley Investment Group Real Estate Advisors and Progressive Real Estate Partner arranged the sale of a newly constructed, single-tenant property occupied by Chase Bank with a drive-thru ATM in Bakersfield. The purchase price was $2.93 million for the absolute triple-net ground lease.

EVPs Bill Asher and Jeff Lefko of Hanley represented the seller, a private investor based in Bakersfield. The buyer, a private investor based in San Bernardino County, was represented by Greg Bedell and Lance Mordachini of Progressive Real Estate Partners.

“We procured a repeat single-tenant bank investor through a longstanding broker relationship. This resulted in a smooth and timely transaction that benefitted both the buyer and seller,” said Asher. He added that this particular Chase Bank branch was a relocation and had a very strong deposit base within the trade area.

Constructed in 2022, the 3,576-square-foot bank building is located at the signalized intersection of Oswell Street and Mall View Road at 2631 Oswell St. It sits on a 0.85-pad in front of an In-Shape and PetSmart-anchored shopping center.