Lennar Targets $2 Billion for Major Single-Family Rental Push

(Bloomberg) -- The U.S. homebuilder Lennar Corp. is making a big push into single-family rentals, targeting a new set of customers at a time when surging prices threaten to push homeownership out of reach for many.

The Miami-based company is laying the groundwork to develop thousands of rental houses, according to people with knowledge of the matter. The firm is seeking to raise $2 billion for the initiative, said one of the people, who asked not to be named because the matter is private.

A representative for the company declined to comment.

Lennar, which is hiring staff for a unit called LennarSFR, is the latest heavyweight to embrace single-family rentals during a pandemic that has increased consumer demand for suburban living and pushed property investors to look for new places to put their money.

That comes as historically low rates and inventory of homes to buy has pushed up prices, creating a hurdle for Americans who want properties with more space for remote learning and offices.

New Investment

With shopping malls, office buildings and hotels at least temporarily out of favor, investors including Blackstone Group Inc., Brookfield Asset Management Inc. and JPMorgan Chase & Co.’s asset-management arm have made new investments in rental homes.

Lennar, which also operates an apartment business, made an early foray into rental houses in 2015. It isn’t the only homebuilder pursuing the asset. Toll Brothers Inc. and Taylor Morrison Home Corp. have partnered with rental operators. DR Horton Inc. said in November it was building rental communities with the intention of selling leased-up portfolios to investors.

The result has been a mini-boom in rental-home construction that saw builders start work on roughly 14,000 rental houses during the third quarter, according to a National Association of Home Builders analysis of census data. That number is up 27% from 11,000 homes in the third quarter of 2019.

Race to the Suburbs Sparks Boom in Rental-House Construction

Lennar, the largest homebuilder by revenue, appears to be building capability to manage a rental-home division internally. An executive named John Gray, who previously served as a managing director in Lennar’s apartment business, took on the title of president of LennarSFR in August, according to his LinkedIn profile.

And the company is currently hiring for an associate “interested in building a large business” to work on acquisitions, asset management and deal structuring, among other duties.

Large Landlord

The new single-family rental push would likely put Lennar among the largest landlords in the industry.

Last January, Executive Chairman Stuart Miller told investors that the company was in the early stages of developing branded single-family rental communities intended for people who want suburban homes but aren’t ready to make a down payment.

“Capital is starting to understand this business and this will be an emerging story as we go forward,” he said. “This product is going to enable a consumer that wants single-family, but might not quite be able to get into a for-sale program.”