KKR is pulling 10,000 single-family rentals from AvenueOne's management and moving them in-house through My Community Homes. The shift cuts out three major managers: Evernest, Northpointe, and Pure Home River, which will lose 15%, 30%, and 3% of their portfolios respectively. New legislation limiting large investor purchases and a trend toward internalized management are driving the change.
Chapters
Mind, Everest, Northpointe, and Pure Home River were just put on notice about a restructuring that impacts 10,000 single-family residential doors under their collective management. Welcome to this week's property management news. If you don't know me, my name is Peter Lohmann. I write a twice-weekly newsletter for over 20,000 property managers and run a 750-door management company myself in Columbus, Ohio. Now, normally I cover a few stories each week, but this is a big one, so we're going to spend the whole video on it. Let's break it down. So KKR, the multi-billion-dollar private equity firm, is ending its asset management relationship with AvenueOne and bringing the whole thing in-house. Now remember, they own a bunch of single-family rental properties through various funds, and they're overseeing the management of those. This is according to two people with direct knowledge of the situation. For AvenueOne, Mind was managing about 4,000 of the homes, Evernest 3,500, Northpoint 1,500, and Pure Home River 1,000. Quick background on AvenueOne: they were founded by Ryan Stroker and William William Martiner. They were one of the breakout companies of the pandemic era, SFR boom. In 2023, they raised $100 million at close to a billion-dollar valuation with investors like WestCap and MetLife on the cap table. KKR itself, interestingly, also invested in the company. Their pitch to institutional players was simple: let us handle the sourcing, acquisition, renovation, and management through our network of local operating partners so you don't have to build that infrastructure yourself. So why is this shakeup happening now? In other words, like, why is AvenueOne losing the business? It sounds great. So there's two forces at play here, at least two forces. First, legislation passed this summer. You may have heard about that Road to Housing Act that was all over the place and now is finally law, put new restrictions on large investors. They can no longer buy single-family rentals above a certain size, and the fight has cooled investor enthusiasm and put pressure on portfolio pricing for these big institutional groups. Second, and I think this is the bigger story, the largest asset managers keep bringing property management in-house instead of paying a third party to do it. We saw the same playbook earlier this year when Blackstone's multifamily arm, Livecore, told some of its property management vendors the same thing. So KKR is now routing oversight through its own subsidiary, My Community Homes, which was created back in 2021. So My Community Homes, or MCH for short, is taking over for AvenueOne. It's worth noting that for KKR, MCH isn't actually run as a profit center. It allocates the costs of the asset management back to KKR's funds on a prorated basis. And so if you think about it, this represents a cost savings for those funds no longer having to pay profit to the asset management company. MCH is then handing most of the property management work back to its preferred provider, Darwin Homes. You may remember them. Darwin was purchased by Pagaya in 2023 and is one of the largest SFR property managers in the country now, run by CEO Ryan Broderick, with around 20,000 doors as of last year. They work exclusively with institutional investors, having abandoned their retail business entirely. I think they actually sold the remainder of their retail doors to Evernest a year or two ago. Now, my sources tell me that My Community Homes is keeping Mind, M-Y-N-D, on, but Evernest, Northpointe, and Pure Home River are getting cut loose. Sad story. Now, the human side of this— Northpointe and Evernest have both said they'll help place people affected by the likely layoffs. One of my sources says Northpointe is losing around 30% of its store count and plans a restructuring. They're going to diversify and bring small multifamily assets into focus moving forward. Evernest and Pure Home River, based on my own estimates, are looking at roughly a 15% and 3% hit to their portfolios respectively. Anyway, this is a great reminder of what happens when you tether too much of your business to one or two institutional clients. It's a great source of scale, right up until it isn't. That's what I have for you this week. I'll see you next time.
