In a $1.5 billion transaction, the homebuilding business D.R. Horton Inc. will sell thousands of homes to real estate investment management company Pretium Partners.
According to the site, which cited persons involved with the transaction who requested anonymity, the purchase consists of both completed residences and ones that are not yet built.
Pretium, under the direction of Don Mullen, has expanded quickly in recent years thanks to agreements with developers, iBuyers, and other landlords. Even if competitors’ acquisitions have slowed over the past year due to rising borrowing costs, the company has continued to be an active shopper.
The proposal would account for about 4.5% of D.R. Horton’s revenue from house sales and 4.8% of its single-family volume from the previous year, despite the headline’s claims to the contrary. That is important. But it won’t change the game.
The deal involves more than 4,000 properties, most of which are situated in high-demand regions of the Southeast and Southwest, according to the Wall Street Journal. The houses have already been leased; they were intended as rentals.
The transaction takes place at a time when a shortage of available for-sale homes is increasing demand from homebuilders.
Both partners have a lot of work ahead of them in terms of the operations and finances they are in charge of, and both are at danger. The major boost for Horton will come from lowering its input costs for manufacture of homes for rent to levels substantially below those of retail homes. The risk for Pretium is more likely to be a miscalculation of rent and borrowing cost trends.
We’ll see more of these partnerships because they give creators a way to profit from what they create. The large SFR firms have a lot of capital, so these kinds of collaborations will occur more frequently now that the reason for the pause may be easing.
The deal might also represent an investor re-entry into the housing market after institutional investors sold their holdings towards the end of 2022 as a result of a statewide decline in house prices.
According to the company, the Pretium platform, which was founded in 2012, makes use of financing and investing opportunities and has real estate interests totaling more than $50 billion across 30 U.S. locations.