Global Real Estate Investment Fund Makes Major Investment in U.S. Housing
Watching the movements of large investment companies is often a way for smaller investors to identify some of the hottest trends. Varde Partners, a global investment firm, announced in November 2020 that it had raised $ 2.6 billion to invest in so-called “historic market dislocations and economic disruptions resulting from the COVID-19 pandemic”. Now, Varde has taken a giant step in the US real estate market, spending over $ 250 million on three separate transactions. These transactions highlight the key growth trends in residential construction.
Bet on a hot house builder
All three transactions that are part of Varde’s investment focus on the Sun Belt migration trend.
Most of the Varde investment is a $ 100 million land bank with Dream Finders Homes (NASDAQ: DFH). Dream Finders Homes recently hit the public market. The company is based in Jacksonville, Florida and has been one of the fastest growing home builders since its inception in 2008. Part of this growth was due to acquisitions. Shortly after going public, the company acquired Orlando-based Century Homes Florida.
Varde’s land bank will be used to buy land in markets where Dream Finders is already active, including Jacksonville and Orlando, Florida and Denver. Dream Finders will then create communities in these areas. Varde previously invested in Dream Finders and was listed as a Series C investor in the company’s S-1.
Two deals in very hot real estate markets
The second acquisition is in Scottsdale, Arizona, an area that has seen rapid growth in recent years. Varde bought Verde River, a master-planned community of more than 55 homes. Under the agreement, Shea Homes, the community builder, will continue developing the remainder of the project for a total of 1,210 homes.
The third acquisition takes Varde into another hot market: the Austin, Texas area. As part of an acquisition of the large community planned by Sunfield, the fund will set up a joint venture with IHP Capital Partners. Located in Buda, Texas, part of the Austin metropolitan area, Sunfield has more than 6,500 lots, less than half of which are still available. Several builders work at Sunfield, including PulteGroup (NYSE: PHM) and Taylor Morrison Home (NYSE: TMHC). The expansive community includes its own schools and several equipment centers, including one with a lazy river.
A vision of long-term trends
With these investments, Varde takes advantage of several property trends in the property market. The first is that household formation will increase after a break during the COVID-19 pandemic. With interest rates remaining low and new home sales rising in 2021, there should be solid demand for these properties.
In a funding press release, the company stated that the segments it enters are particularly well positioned to be successful. The role of government support, including stimulus packages and leniency, was mentioned. At the end of this policy, Varde will have a desire for more suburban housing. Varde has previously invested in a variety of master-planned communities including Daybreak in the Salt Lake City area and Windsong Ranch in Prosper, Texas.
The bottom line of Millionacres
Investors can learn from this huge $ 250 million investment that the demand for single-family homes in fast-growing cities in the sunbelt is not just a COVID-19 trend, but part of years of demographic change.