Ex-Morgan Housing Expert Wins Backing For Buy-To-Rent Fund

Aug 2 2012 | 1:01pm ET

A private equity firm has ponied up $300 million to back a new foreclosed home fund planned by Morgan Stanley's former chief housing strategist.

The undisclosed firm has committed the seed capital to Sylvan Road Capital, which founder Oliver Chang officially opened yesterday. The new firm plans to launch a buy-to-rent fund that will spend as much as $1 billion acquiring foreclosed homes and then renting them out.

"America is moving toward a rentership society, and I believe the opportunity to purchase and professionally manage single-family, rental homes represents one of the most compelling investment opportunities across all asset classes," Chang said.

Chang said Atlanta- and San Francisco-based Sylvan Road would rent its homes for between $1,250 and $1,500 a month after buying and renovating them. He expects that expenses will be less than 40% of rental income, which should produce a roughly 9% annual return for investors. The renovation and management will be handled through a subsidiary, HavenBrook Homes.

Sylvan Road has partnered with three buy-to-rent veterans from Delmar Realty Advisors, Robert Lee, Sarah Lee and Gavin Kleinknecht, to help it manage its portfolio. It said that the p.e. firm's money would be enough to buy about 3,000 homes, focusing initially on the Southeast and Midwest, particularly on markets where it can buy between 300 and 400 homes.

"My partners have been in the single-family real-estate business for nearly two decades and have built a best-in-class acquisition, renovation and management platform specifically designed for these properties," Chang said.

Chang left Morgan Stanley in May to set up Sylvan Road.

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