Waypoint, GI Partners form single-family rental partnership

The California-based firms plan to together purchase up to $1 billion in single-family rental homes in the US over the next two years.

Waypoint Real Estate Group, an Oakland, California-based private equity real estate firm that invests solely in foreclosed homes to rent, and GI Partners, the Menlo Park, California-based private equity firm, are partnering to invest in the acquisition of single-family rental homes in the US.

GI has committed up to $400 million through a separate account with Waypoint, on behalf of its GI Partners Fund III fund, which attracted approximately $1.9 billion of capital commitments from institutional private equity and real estate investors. The investment, levered at 50 to 60 percent, will help Waypoint to initially purchase more than $250 million in single family rental homes, and ultimately acquire up to $1 billion in the property type by the end of 2013.

“GI has played a major role in building several impressive businesses over the past decade, and we are eager to work with the GI leadership to build Waypoint into another success story,” said Doug Brien, managing director and co-founder of the firm, in a statement.

Since its launch in 2008, Waypoint – which buys, renovates and then leases distressed single-family homes – has acquired nearly 1,000 homes in the San Francisco Bay Area and Inland Empire in southern California, and is looking to expand nationally in 2012, with an eye on areas with a high volume of foreclosed single-family homes and a strong outlook for improving job and real estate markets. These include markets such as Phoenix, Las Vegas, Florida, Atlanta and Chicago.

The firm has previously raised a total of $75 million in equity for seven funds from family offices and high-net-worth individuals. It is now seeking large investors for its eighth fund, for which it is targeting more than $100 million in commitments.

The Waypoint and GI joint venture is the latest partnership to focus on single family rental homes. Last year, New York-based Och-Ziff Capital Management partnered with McKinley Capital Partners, a California-based real estate investment firm, to acquire at least 500 foreclosed homes in the coming year.

Over the past year, several small real estate funds of $50 million or less have been launched to pursue single-family rental opportunities, usually at the local level, according to a October 2010 Morgan Stanley report. “We would anticipate more investments from private equity capital, which could take the form of limited partner investments in funds established to pursue this opportunity or additional joint ventures between operators and capital providers,” the report stated.