JPMorgan wants to own the land

At first glance, there is nothing unusual Cantabria Bradenton. Located 46 miles south of Tampa and 14 miles north of Sarasota, the newly constructed rental community consists of 172 attached townhomes and 12 detached homes on a family on 36 acres. Cantabria Bradenton has a clubhouse, gym, and pool. It looks like a modern Florida rental community, with townhomes rent anywhere between $2,400 to $3,000.

However, beneath the surface, there is something that makes it novel: The rental community is owned by JP Morgan Asset Management.

Earlier this month, Wolfson Development Company sold Cantabria Bradenton, which is under construction between summer 2020 and spring 2023, to JP Morgan Asset Management for $59 million.

When it comes to institutional homeownership, companies want it Black stone or Invitation Homes is in mind. But this Cantabria Bradenton purchase is a reminder that the US housing market has the attention of Wall Street’s top dog: JPMorgan Chase.

Even before analysts knew that a housing boom would form during the pandemic, JP Morgan Asset Management announced in May 2020 it will form a $625 million joint venture with American Homes 4 Rent to build 2,500 single-family rentals throughout the West and Southeast. As millennials age out of apartments, JPMorgan Asset Management argues that the US housing market will see more demand for single-family rentals.

Then in November 2022, JPMorgan announced his asset-management arm will be another joint venture, this time with real estate investment firm Haven Realty Capital. They will allocate $1 billion to buy single-family rentals across the country in the form of what is called “build for rent,” which means they will buy directly from developers. The JPMorgan and Haven Realty Capital joint venture plans to begin buying 250 homes in metropolitan Atlanta.

As JPMorgan continues to push deeper into the US housing market, sorI institutional players are waiting for things.

Look, the Pandemic Housing Boom—a period of low interest rates, rising home prices, and rising rents—saw a stampede in institutional home buying in 2020 and 2021. However, that growth was followed by a sharp institutional slowdown as the Fed’s interest rate hikes, coupled with bubble house prices, cut into potential returns.

In fact, an analysis conducted by John Burns Research and Consulting found that institutional investors—those who own more than 1,000 homes—purchase 90% fewer houses in January and February than they did in the first two months of 2022. And Invitation Homes, the largest owner of US single-family rental homes, sold more homes in the first quarter of 2023 (297) than it bought (194).

“No space is immune from the capital markets, generally speaking. Every food group in real estate, whether it’s multi-family or single-family, all have difficulty finding an institutional buyer today ,” said Adam WolfsonCEO of Wolfson Development.

According to Wolfson, institutional homebuyers are waiting on the sidelines for either a drop in interest rates or home prices. At the end of the day, institutional investors are looking for financial returns (ie cap rates) that justify their investment.

While institutional home buying is slowing, it’s not going away. That may be the biggest takeaway from JP Morgan Asset Management’s purchase of Cantabria Bradenton from Wolfson Development. That’s also why Wolfson Development’s built-for-rent arm (Wolfson BTR) currently has a pipeline of 2,000 housing units “with a total exit valuation of nearly $1 billion.”

JPMorgan declined to comment. JPMorgan also declined to say how many U.S. leases it owns.

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