Aiming to fill a credit gap as bank lenders scale back on commercial real estate, Pretium Partners has closed its inaugural homebuilder finance vehicles with $550 million in capital commitments, PERE has learned.
The strategy – comprised of two separate but similar investment vehicles – scored backing from institutional investors including the Virginia Retirement System, which committed $150 million in November, per PERE data, as well as a sovereign wealth fund and a large multifamily office, PERE understands.
The vehicles will originate up to $5 billion in loans to single-family homebuilders across the US. That includes residential transition loans to facilitate renovations, vertical construction loans on for-sale or build-to-rent single-family homes, and horizontal infrastructure loans to developers. They will not offer consumer loans, thus differentiating them from Pretium’s flagship residential credit fund series.
The vehicles have already provided $650 million of capital on a leveraged basis. Pretium, which ranked 19th on the 2024 PERE 100 ranking of private real estate’s top fundraisers, estimates the strategy will help finance the delivery of roughly 12,000 housing units.
Josh Pristaw, the manager’s head of real estate, told PERE that the fundraising process was brief. Pretium approached select new and existing investors, he said, to fill a void left by the retreat of regional banks from homebuilder financing in the wake of the 2023 banking crisis. Although regional and national banks are generally expected to ramp up their commercial real estate lending this year, Pristaw said they have not yet returned to residential construction.
“It was really a regional bank product and we’re not seeing those groups get back into the business,” said Pristaw. “It’s hard on their capital charge ratios… they don’t want to be in that business. It became clear the banking infrastructure to make these loans and manage them has atrophied.”
The fundraise comes six months after Pretium closed its sixth flagship single-family housing equity fund, Pretium Single-Family Rental Fund VI, on $1.5 billion, beating its $1 billion target by 50 percent. That fund was also backed by a $150 million commitment from the Virginia Retirement System.
Pretium in September bolstered its homebuilder finance team with the hiring of Brendan Bosman, formerly senior managing director and head of US housing investment at Minnesota-based manager Värde Partners, and Karen Kulvin, who was previously senior managing director and co-head of real estate debt at Los Angeles-based Kayne Anderson. Bosman is leading the manager’s homebuilder finance investment activities, while Kulvin is overseeing multifamily financing.
While demand has softened since 2022 in certain rental markets in the Southern US, Pretium remains bullish on the sector’s long-term outlook, with Pristaw estimating a national housing shortage of 4 million to 5 million units, largely concentrated in single-family homes.
“When you combine equity returns with debt risk in a sector that has tremendous long-term fundamentals like housing, where there’s a mismatch between supply and demand, I think there’s a tremendous amount of interest from investors,” he said.