Investment manager

A look at the strategy of a private real estate manager SFR

Quinn Residences, an Atlanta-based single-family rental real estate (SFR) investment firm, has raised nearly $1 billion from investors eager to back Quinn’s plan to develop and operate new home subdivisions rent.

“Based on the company’s success to date and our confidence in its future, we are delighted to have deepened our partnership with Quinn,” said Michael Simanovsky, founder and managing partner of Conversant Capital, the advisor in private investment that organized Quinn’s capital raise.

Quinn is already using the money to expand her portfolio of rental homes. In January 2022, he announced plans to purchase six more single-family rental developments in Georgia, Florida, and the Carolinas. Quinn has teamed up with local development partners who will build the communities, increasing its portfolio by more than 50%, to nearly 2,300 homes across 17 sites.

WMRE met with Quinn President Richard Ross to discuss the company’s growth strategy.

This interview has been edited for style, length and clarity.

WMRE: Why has Quinn generated so much interest from funding partners?

Richard Ross: The company was founded based on all of the demographic trends that have occurred over the past five to 10 years of aging baby boomers, aging millennials, people starting families and needing more space. – all the things you read about pre-COVID. And then COVID came along and threw gas on all of these trends.

We initially started with plans to raise $250 million in equity. We raised a first round of $100m, hit $250m and with all the acceleration of COVID and all the hubbub in the financial markets, we were able, once we proved our concept, to carry those equity at just under $1 billion, just over $905 million, or just over four times what we had at the start, which will allow us, over the next three to five years, to acquire and operate approximately 10,000 homes.

WMRE: What surprised you during your fundraising?

Richard Ross: Purpose-built rental communities are a very, very new concept. And I was surprised at the enthusiasm for this product among very, very knowledgeable private investors. I think the biggest initial question was, is this concept viable, and we’ve certainly proven it. Now, the question most ask themselves is, “How many tracks are there?” How big can this industry get? »

If you look at the demographics and the statistics, I don’t think there’s a real ceiling. If you look at census data, there’s a housing shortage of four or five million units in this country because when we came out of the housing crisis, they weren’t building houses.

WMRE: To show this demand, you would probably point to your occupancy rates in the 90s and the growth of your rents by more than 10%? What else would you say?

Richard Ross: We emphasize resident satisfaction. We interview our residents and they like the privacy. They love the lifestyle. And the stay in these houses an average of three years. That says a lot.

WMRE: Who are your tenants?

Richard Ross: When we started, I would have told you that the majority of our residents would be couples in their early to mid-thirties moving out of a traditional two- to three-bedroom apartment and moving into a house because they are about to retire. having their first child. , they have a dog or two and they want more space. Probably a third of our residents fall into this category. But if you had asked me a year or two ago, I would have said three quarters.

What was a little surprising was the number of our tenants who were tenants by choice. They don’t need or want to buy a house. They want flexibility. They want a maintenance-free lifestyle. About a third of our tenants fall into this category.

There are a number, maybe a third, maybe 20%, that are empty nests.

We are quite conservative on our resident profile and we knew that our residents were earning nearly three times their rent. Our average is five times. We felt very comfortable going into COVID that our business model would be sustainable. And it turned out pretty quickly.

WMRE: How long do investors leave their money with you?

Richard Ross: The investment horizon is four to five years. But they are long-term starters. It’s not something that makes a quick buck, which sometimes private equity is known for. The majority of our investment partners are there for the long term.

WMRE: How big are your houses?

Richard Ross: They average between 1,700 and 2,400 square feet and rents average $1,600 to $2,500. The price if you were to buy a house like this would be between $275,000 and $300,000.

WMRE: Are they scattered site?

Richard Ross: No. They are contiguous communities. Our smallest has 33 units. Our sweet spot is 150 to 250 homes all built for rental. This is what you would typically see in a suburban market, what you would call a housing estate.

WMRE: What questions do you still answer about how single-family rental homes work?

Richard Ross: I spend a lot of time educating communities on what single family rental means in a given community. There is a certain amount of backlash or NIMBYism. They say, “I don’t want a lot of tenants in my little town in North Carolina. What I’m saying is that we are professional managers. Our resident qualifications are higher than most homebuyers. This is the biggest challenge for us. Not just Quinn. This is for everyone in this industry.