Institutional Equity Gets Pickier as It Targets BTR and SFR

By Erika Morphy

Chinmay Bhatt, senior managing director of Berkadia Joint Venture Equity & Structured Capital, has been hearing from clients that the institutional equity markets are frozen. It is news to him. At the time of’s call with him, he was in the market with four deals. What is happening, he explains, is that equity has gotten much more selective as the economy softens and certain commercial real estate assets show weakness. “You just have to have a thick skin,” he says. “While capital is being selective, when they want to engage they will do so in a meaningful way.” 

One of the asset classes that institutional equity is targeting in particular right now is build-to-rent and single family rental homes. Groups interested in BTR and SFR right now are mid to large private equity firms, some REITs and some overseas family offices. All together, Bhatt estimates that the institutional equity available for the space is in the billions.

Bhatt points to a situation recently in which multiple capital sources were interested in a deal in Texas sponsored by a national developer. “A couple of capital sources said the deal was very interesting for them, but they also wanted to get deal flow in other parts of the country from the developer. That resulted in dialogue between the developer’s leadership team and I which might result in a bigger opportunity for everyone involved.’’

But not any BTR/SFR deal will be of interest to this group.

Institutional equity is approaching the market with the goal of finding fewer players and pumping more money into those players, Bhatt says.

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