Pretium Completes Acquisition of BH Management Services

PRESS RELEASE

Pretium Completes Acquisition of BH Management Services

May 1, 2024

NEW YORK – May 1, 2024 – Pretium, a specialized investment firm with over $50 billion in assets under management, today announced that it has completed its acquisition of BH Management Services (“BH”), one of the nation’s premier property management platforms in multifamily, student, and single-family housing.

The addition of BH to Pretium creates one of the most robust residential ecosystems in the United States, with more than 7,200 employees, over 210,000 homes managed, and approximately 700,000 residents and homeowners served annually. Pretium’s portfolio now includes investments spanning single-family, multifamily, student, affordable, and build-to-rent housing communities.

“The addition of BH enhances Pretium’s residential ecosystem, enabling us to deploy capital across all major residential asset classes in both debt and equity,” said Jonathan Pruzan, President of Pretium. “This transaction creates additional opportunities for our investors and will drive more investment in residential real estate, contributing to a healthier housing economy and increased housing options for families across the country.”

“Combining BH’s multifamily portfolio with Pretium’s residential platform will help us execute on our shared vision to build better communities,” said Joanna Zabriskie, CEO of BH. “As an operating company of Pretium, the BH team is positioned to sustain and grow our leadership in multifamily and deliver on our important mission of creating spaces where people live and thrive.”

As a Pretium operating company, BH will continue to be led by Chief Executive Officer Joanna Zabriskie and the current management team, with its headquarters remaining in Des Moines, Iowa.

About Pretium

Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has over $50 billion of assets, comprising real estate investments across nearly 90 markets in the U.S., and employs more than 7,200 people across 50 offices, including its New York headquarters, Miami, London, Seoul, and Sydney. Please visit www.pretium.com for additional information.

About BH Management Services

BH is a people-first multifamily owner and operator that grew from a small startup into one of the nation’s largest commercial real estate companies. Founded in 1993, BH is celebrated for its simple commitment to doing business the right way and investing in its team. Today, BH manages approximately 114,000 units, employs 2,800 people, and owns its processes in-house. Powered by innovation and a can-do attitude, BH improves daily, striving to construct a smarter way to live, invest, manage, and grow. For more information, visit livebh.com.

Contacts

Lyle Weston / Erik Carlson
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449
Media-SFR@pretium.com

Pretium Highlights Sustainability Efforts in Third Annual Impact Report

PRESS RELEASE

Pretium Highlights Sustainability Efforts in Third Annual Impact Report

April 29, 2024

Pretium Highlights Sustainability Efforts in Third Annual Impact Report

NEW YORK, April 29, 2024 – Pretium, a specialized investment firm with over $50 billion in assets under management, today published its 2023 Impact Report. The report details the firm’s sustainability milestones in 2023 and targets for 2024.

“Our impact initiatives are designed to strengthen the communities in which we operate, supporting residents on their paths to wealth building, fostering community prosperity, addressing the housing shortage, and promoting an inclusive culture across our ecosystem,” said Tatiana Gutierrez, Head of Corporate Impact at Pretium. “We are proud to celebrate our success to date and remain committed to furthering our efforts to build a truly sustainable business for the future.”

Notable achievements in the report include:

  • Financing $1.65 billion of loans to create and preserve housing across the country.
  • Originating more than 3,000 homeowner mortgage loans, including 17% for first time home buyers.
  • Launching Solar Homes and more than 500 Energy Saver Homes across the US.
  • Equipping 12,000 homes with Smart Home technology to reach 63,000 homes, 70% of the portfolio.
  • Increasing Housing Choice Voucher families served by 74% to more than 2,250 families in partnership with more than 120 local housing agencies.
  • Facilitating positive rent reporting for more than 185,000 residents, including first-time credit scores for nearly 8,000 previously credit invisible individuals.
  • Submitting the first United Nations Principles for Responsible Investing (UNPRI) report for the Firm and its largest investment strategies.
  • Increasing scores to the Global Real Estate Sustainability Benchmark (GRESB) for the Firm’s two largest real estate funds.

The full report can be viewed and downloaded on the Firm’s website at Pretium’s Third Annual Impact Report.

About Pretium

Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has over $50 billion of assets, comprising real estate investments across 30 markets in the U.S., and employs more than 4,000 people across 50 offices, including its New York headquarters, Miami, London, Seoul, and Sydney. Please visit www.pretium.com for additional information.

Contacts

Lyle Weston / Erik Carlson
Joele Frank,
Wilkinson Brimmer Katcher
212-355-4449
Media-SFR@pretium.com

Pretium’s Third Annual Impact Report

INSIGHTS

Pretium’s Third Annual Impact Report

April 2024

We build for longevity in our investment strategies and across the markets in which we operate.

Sound, sustainable investment principles inform our long-term objectives and create enduring value for our investors, our employees, and the families, businesses, and communities our investments touch.

Learn more in our third annual report on Pretium’s impact and sustainability efforts.

The Strategic Case for CLO Equity

INSIGHTS

CLO Performance Report, March 2024

March 26, 2024

CLO equity provides a unique format to invest in high-yield corporate loans

Collateralized loan obligations are investment vehicles that securitize a diversified portfolio of senior secured corporate loans – sometimes referred to as leveraged loans – and then distribute the loan portfolio’s cashflows to a range of end investors. The equity tranche of a CLO transaction is entitled to all of the principal and interest payments made by the underlying loan portfolio, net of interest and principal payments distributed to the CLO debt securities senior to the equity tranche. Thus, a key attribute of CLO equity, as it relates to the priority of payments received, is that CLO equity receives regular periodic payments representing the excess interest generated by the difference between the loan portfolio income and the CLO debt security cost, on a current basis.

The senior secured, high-yield corporate loans that back CLO transactions have historically been attractive assets to own, as their spreads have remained well above the loans’ realized credit losses. Exhibit 1 below shows that leveraged loan spreads have averaged 5% (500bp) over the past 25 years while leveraged loan losses have averaged only 1% (100bp) over the same period, highlighting the potential for the loans to generate positive long-run excess returns.

exhibit 1 and 2

CLO equity is, in turn, a particularly unique format through which to gain exposure to high-yield corporate loans. The CLO structure – as shown, e.g., in the Appendix of this report – provides non-recourse, non-mark-to-market term leverage, which enhances the baseline yields of the loans themselves, without incurring risks of margin calls which may occur when using more traditional forms of leverage such as repo financing. Additional positive features of the CLO equity asset class include multiple embedded options, such as the option to refinance senior CLO debt when conditions are favorable and the option to actively manage the underlying CLO loan portfolio through asset sales and purchases, and limited interest rate risk exposure due to the floating-rate nature of the CLO assets and liabilities.

The beneficial features of CLO equity listed above have helped the sector to generate high and consistent quarterly cashflow distributions over time. Exhibit 2 above shows that CLO equity cash-on-cash returns have historically averaged 16.9%, annualized, when expressed as a percentage of the equity tranche par value; when these cash distributions are expressed as a percentage of acquisition value (purchase price), they further increase, as new issue equity is typically issued at a discount to par and seasoned secondary market equity often trades at a significant discount to par. As an example, if the equity tranches are acquired in the secondary market at a $90 price, as is often feasible, then the average annual cash-on-cash return as a percentage of purchase price becomes 18.5%; if the tranche acquisition price is $75, then the cash-on-cash return becomes 22.5% annualized.

Notably, the distributions to CLO equity usually begin on the first payment date and continue on a quarterly basis over the life of the investment, as is shown in Exhibit 3 for a hypothetical equity tranche. The resulting cash flow profile compares favorably to traditional private equity investments, which commonly exhibit a “J-curve” profile in which the investment delivers negative returns/no cash flow in the initial years of the transaction, hopefully to be offset by positive returns and return of capital in later years as the investment matures, as per Exhibit 4.

exhibit 3 and 4

Growth of U.S. CLO market allows equity investors to allocate selectively

The U.S. CLO asset class has expanded to over $1 trillion of securities outstanding, from less than $500 billion in 2017, making CLOs now the largest securitized credit asset class in the U.S. (Exhibit 5). The growth of the CLO market is in large part a consequence of the sector’s historic success in delivering solid returns to investors through multiple cycles including the global financial crisis and COVID-19, while providing a dependable source of financing to a large and growing segment of corporate borrowers. The growth of the CLO market has led to improved trading liquidity for the asset class (e.g., per Exhibit 6) and makes it possible for active CLO equity investors to focus upon specific sub-segments of the market in order to target particularly compelling risk-reward profiles while still remaining discriminating in terms of security selection. For example, as market volatility and price dislocation increased in 2022 and 2023, Pretium adjusted its allocation strategy by overweighting secondary vs. primary market CLO equity positions and by overweighting CLO equity tranches backed by relatively defensive, lower risk loan portfolios. To the extent price dislocation moderates in 2024 and financing markets continue to become more accommodative, Pretium would expect to become more active in new issue markets again in order to lock in favorable debt terms which would benefit new issue CLO equity.

exhibit 5 and 6

Conclusion: CLO equity is an attractive alternative for asset allocators looking to diversify their private credit exposure

CLO equity tranches have the potential to generate double digit returns over the long term while generating high current cash flow. The sector offers insulation from an uncertain future for interest rates and the large market footprint allows active investors to generate excess returns through tactical asset selection. Pretium believes the risk/reward characteristics of CLO equity to be a complementary component to any private credit allocation strategy today.

Appendix: Sample CLO Transaction Structure

CLO transaction structures distribute the principal plus interest cashflows from a pool of ~200 senior secured corporate loans to a range of equity and debt tranches.

sample clo transaction structure

Jerry Ouderkirk – Senior Managing Director, Head of Structured Credit

Jerry Ouderkirk is a Senior Managing Director and Head of Structured Credit at Pretium, where he has overall responsibility for the Firm’s corporate credit platform. In addition to overseeing and expanding the Firm’s CLO platform, Mr. Ouderkirk is building out numerous investing businesses across structured credit including Structured Corporate Credit.

Mr. Ouderkirk joined Pretium in 2017 with 20 years of experience building and committing capital around structured credit products and platforms. Prior to joining Pretium, Mr. Ouderkirk was a Partner at Goldman Sachs, where he started the Institutional Lending Group for Goldman Sachs Bank USA which oversaw the Firm’s discretionary lending and investing in the bank. He previously served as Global Co-Head of Structured Credit Trading, where he oversaw multiple capital committing businesses and started Goldman’s CLO Trading business, which he ran for more than 12 years.

Mr. Ouderkirk is a member of the Firm’s Executive Committee. He received a BA with honors in English and Economics from Colgate University. Mr. Ouderkirk serves on the Board of CitySquash in New York.

Confidentiality and Other Important Disclosures

This confidential presentation was prepared exclusively by Pretium for the benefit and internal use of the party to whom it is directly addressed and delivered (the “Recipient”). None of the materials, nor any content, may be altered in any way, transmitted to, copied, reproduced or distributed in any format in whole or in part to any other party without the prior express written consent of Pretium. As used in this presentation, “Pretium” refers to Pretium Partners, LLC and/or its affiliates.

Pretium’s Credit investment strategies are focused on corporate credit, structured products collateralized by corporate credit, distressed debt and equity and legal opportunities financing. The team invests in broadly syndicated loans, debt and equity of public and private companies, as well as securities issued by CLOs. Investments in high yield securities are subject to greater risk of loss of principal and interest than higher-rated securities and are generally considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. Investments in distressed situations expose the investor to the difficulty in obtaining information as to the issuer’s true condition; legal risk, including laws relating to fraudulent conveyances, voidable preferences, lender liability, and bankruptcy; litigation risk; and liquidity risk. In addition, accounts will not be diversified among a wide range of types of securities, industry, markets, or countries. Litigation finance depends on whether the cases in which the fund invests will be successful, will pay the targeted returns and will pay those returns in the anticipated time. Assessing the values, strengths and weaknesses of a case is complex and the outcome is not certain. Should cases, claims, defenses or disputes in which the fund invests prove to be unsuccessful or produce returns below those expected, the performance of the fund could be materially adversely affected. Furthermore, laws and professional regulations in litigation funding can be complex and uncertain and details of certain cases are unlikely to be disclosed because of confidentiality and other restrictions.

There can be no assurance that Pretium’s objectives will be achieved, that any risk management will adequately protect against downside losses, or that an investor will receive any return on its investment. An investment should only be considered by persons who can afford a loss of their entire investment. Past activities of investment entities sponsored by Pretium provide no assurance of future results. Past or targeted performance is not a guarantee, projection or prediction and is not necessarily indicative of future results.

These materials do not constitute, or form part of, any offer to sell or issue interests in an investment vehicle or any other entity. Any such offer or solicitation will be made solely by means of a definitive offering document, which will describe the actual terms of any securities offered and will contain material information regarding the securities. Any information contained herein will be superseded by information delivered to Recipient as part of an offering document. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information or opinions contained herein.

Past performance is not necessarily indicative of future results and there can be no assurance that targeted returns will be achieved. There can be no assurance that Pretium will achieve results comparable to or that the returns generated will equal or exceed those of other investment activities of Pretium or that Pretium will be able to implement its investment strategy or achieve its investment objectives. Pretium does not make any representation or warranty, express or implied, regarding future performance.

Certain information contained in these materials constitute “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “seek,” “expect,” “anticipate,” “project,” “estimate,” intend,” continue,” “target,” “plan,” “believe,” the negatives thereof, other variations thereon or comparable terminology. Due to various risks and uncertainties, actual events or results of the actual performance of an investment vehicle or strategy may differ materially from those reflected or contemplated in such forward-looking statements.

Certain information contained in this presentation has been obtained from published and non-published sources prepared by third parties, which, in certain cases, have not been updated through the date hereof. While such information is believed to be reliable, Pretium has not independently verified such information nor does it assume any responsibility for the accuracy or completeness of such information. Except as otherwise indicated herein, the information, opinions and estimates provided in this presentation are based on matters and information as they exist as of the date these materials have been prepared and not as of any future date and will not be updated or otherwise revised to reflect information that is subsequently discovered or available, or for changes in circumstances occurring after the date hereof.

These materials are intended to assist the Recipient in connection with its due diligence and to assist the Recipient in understanding the strategies that Pretium intends to pursue to seek to maximize portfolio performance. They are not intended as a representation or warranty by Pretium as to the actual composition or performance of any future investments that would be made by Pretium. Assumptions necessarily are speculative in nature. It is likely that some or all of the assumptions underlying the potential investments will not materialize or will vary significantly from any assumptions made (in some cases, materially so). The Recipient should understand such assumptions and evaluate whether they are appropriate for its purposes.

Recipients should note that COVID-19 has, among other things, significantly diminished global economic production and activity of all kinds and has contributed to both volatility and a decline in all financial markets. The ultimate impact of COVID-19 — and the resulting precipitous and near-simultaneous decline in economic and commercial activity across several of the world’s largest economies — on global economic conditions, and on the operations, financial condition and performance of any particular industry or business, is impossible to predict, although ongoing and potential additional materially adverse effects, including a further global or regional economic downturn (including a recession) of indeterminate duration and severity, are possible. The extent of COVID-19’s impact will depend on many factors, including the ultimate duration and scope of the public health emergency and the restrictive countermeasures being undertaken, as well as the effectiveness of other governmental, legislative and financial and monetary policy interventions designed to mitigate the crisis and address its negative externalities, all of which are evolving rapidly and may have unpredictable results. Even if and as the spread of the COVID-19 virus itself is substantially contained, it will be difficult to assess what the longer-term impacts of an extended period of unprecedented economic dislocation and disruption will be on future macro- and micro-economic developments, the health of certain industries and businesses, and commercial and consumer behavior.

Pretium to Acquire BH Management Services to Expand Residential Real Estate Footprint

PRESS RELEASE

Pretium to Acquire BH Management Services to Expand Residential Real Estate Footprint

February 29, 2024

Marks Entrance into Multifamily Rental Property and Investment Management

NEW YORK – February 29, 2024 – Pretium, a specialized investment firm with more than $50 billion in assets under management, today announced that it has agreed to acquire BH Management Services (“BH”), one of the nation’s premier property management platforms in multifamily, student, and single-family housing. The transaction is expected to close early in the second quarter.

Founded by Harry Bookey in 1993, BH is at the forefront of the institutional multifamily investment and property management industries. BH currently manages approximately 114,000 homes across 370 housing communities in 31 states.

“BH’s multifamily property management platform prioritizes the resident and employee experiences and is critical to enhancing communities at a time when quality housing options are in short supply,” said Don Mullen, Founder and CEO of Pretium. “The addition of BH is a natural adjacency to Pretium’s residential ecosystem and enables us to continue providing diverse housing options for residents based on their preferences and stages of life. We look forward to working with the entire BH team to continue to strengthen BH’s model and market position.”

Mr. Bookey added, “BH has established itself as one of the leaders in the industry, and I am proud of where we are today – one of the largest and most respected companies in multifamily. Therefore, it was personally important to me that we take a thoughtful approach to the future of BH. Beyond being a force in its own right, Pretium shares our core values of embracing evolution and putting people first, making it the right fit for BH.”

“This is an inflection point for BH and an opportunity to further invest in our centralized services platform, as well as advance our proprietary business intelligence systems. This transaction will also expand our operating footprint,” said Joanna Zabriskie, CEO of BH. “What’s exciting to me is what BH and Pretium will do together. We’re cut from the same cloth: we’re both overachievers. However, it’s in the places we’re different – BH as a leader in multifamily, and Pretium as a leader in specialized residential investments – that’s where new opportunities exist.”

“We have a long-standing relationship with BH and are pleased to be joining forces” added Jonathan Pruzan, President of Pretium. “Harry created, and Joanna has scaled, an impressive platform, which is at the forefront of the industry through its technology- and people-focused culture. This combination enhances our existing vertically integrated model and allows us to capitalize on compelling opportunities we see in the residential space.”

BH will become a Pretium operating company and continue to operate as BH Management Services, providing the same property management, construction, and investment services to its clients and residents across the country. BH will also continue to be led by Chief Executive Officer Joanna Zabriskie and the current management team, with its headquarters remaining in Des Moines, Iowa.

Advisors

Wells Fargo acted as financial advisor, and Sidley Austin LLP acted as legal advisor to Pretium.

The CenterCap Group acted as financial advisor, and Faegre Drinker Biddle & Reath LLP acted as legal advisor to BH.

About Pretium

Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has more than $50 billion of assets, comprising real estate investments across 30 markets in the U.S., and employs more than 4,000 people across 50 offices, including its New York headquarters, Dubai, London, Seoul, and Sydney. Please visit www.pretium.com for additional information.

About BH Management Services

BH is a people-first multifamily owner and operator that grew from a small startup into one of the nation’s largest commercial real estate companies. Founded in 1993, BH is celebrated for its simple commitment to doing business the right way and investing in its team. Today, BH manages approximately 114,000 units, employs 2,800 people, and owns its processes in-house. Powered by innovation and a can-do attitude, BH improves daily, striving to construct a smarter way to live, invest, manage, and grow. For more information, visit livebh.com.

Contacts
Lyle Weston / Erik Carlson Joele Frank,
Wilkinson Brimmer Katcher
212-355-4449
Media-SFR@pretium.com

Pretium and Hunter Point Capital Announce Strategic Partnership

PRESS RELEASE

Pretium and Hunter Point Capital Announce Strategic Partnership

February 27, 2024

Pretium and Hunter Point Capital Announce Strategic Partnership

NEW YORK – February 27, 2024 – Pretium, a specialized investment firm with more than $50 billion in assets under management, today announced a strategic partnership with Hunter Point Capital (“HPC”). This partnership, which includes a minority investment from HPC, aims to support the long-term growth of Pretium’s existing strategies – residential real estate and corporate and structured credit – and enable the firm to expand into adjacent areas to create additional value for its clients, residents, and employees.

Since its founding in 2012, Pretium has built one of the most comprehensive residential and credit ecosystems in asset management. Today, Pretium is one of the largest investors in non-agency residential mortgage loans, one of the largest residential business purpose lenders, one of the largest investors in the creation of new homes, and the largest owner-operator of single-family homes in the United States.

“This milestone is a testament to the accomplishments of our 4,400-plus person team and the many opportunities that lie ahead for our firm,” said Don Mullen, Founder and CEO of Pretium. “Avi and Bennett have built a differentiated model of partnership and share Pretium’s passion for building businesses. We look forward to drawing upon HPC’s strategic expertise, value-added operational capabilities, and global network to propel Pretium’s development into our second decade.”

“Pretium’s strategic focus and execution have accelerated its growth into a multi-strategy firm with a national presence and an expanding opportunity set,” said Avi Kalichstein, CEO and Co-Founder of HPC. “We look forward to supporting the talented team at Pretium as the firm builds on its success and expands its platform. Under Don’s leadership and with the recent addition of Jon Pruzan as President, Pretium is at an exciting inflection point.”

“During a time of significant growth and consolidation in the alternative asset management industry, HPC’s investment advances many of our top growth initiatives and strengthens our ability to capitalize on the compelling opportunities we see in the residential and credit markets,” said Jonathan Pruzan, President of Pretium. “The persistent undersupply of homes coupled with the disruption in the banking landscape will offer significant investment potential for the foreseeable future.”

About Pretium

Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has more than $50 billion of assets, comprising real estate investments across 30 markets in the U.S., and employs more than 4,000 people across 50 offices, including its New York headquarters, Miami, Dubai, London, Seoul, and Sydney. Please visit www.pretium.com for additional information.

About Hunter Point Capital

Hunter Point Capital is a leading independent investment firm providing capital solutions to alternative asset managers that are poised to build enduring franchises and define the next generation of leading investment firms across the globe. Hunter Point Capital believes that being a strategic partner for growth to investment managers makes it a preferred choice for successful and promising GPs seeking tailored capital solutions. For more information, please visit www.hunterpointcapital.com.

Contacts

Pretium
Jon Keehner / Lyle Weston / Erik Carlson
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449
Media-SFR@pretium.com

Hunter Point Capital
Joshua Rosen / Julia Sidi
Prosek Partners
pro-hunterpointcapital@prosek.com

Pretium’s Housing Insights, November 2023

INSIGHTS

Pretium’s Housing Insights, November 2023

November 2023

The popular housing narrative overstates the mortgage rate lock-in effect

Structural supply-demand imbalance is the reason home prices are rising, not higher mortgage rates

Despite the most substantial mortgage rate impact on homebuyers in the modern history of housing, US single-family home prices are up roughly 5% year-to-date through the third quarter.1 The surprising resilience of home prices has confounded housing observers and led most housing narratives to focus in on the mortgage rate lock-in effect as the root cause of rising home prices. Even Federal Reserve officials have publicly stated that rising interest rates have contributed to rising home prices through the mortgage rate lock-in effect.2 Mortgage rate lock-in as a driver of reduced mobility is a documented phenomenon3 and it is likely that some homeowners have not listed their homes as a result of the sharp increase in mortgage rates; however, we believe the lock-in phenomenon has been overemphasized in the popular housing narrative. Moreover, the argument that mortgage rate lock-in aggravates housing’s supply-demand imbalance (and therefore increases home prices) confuses listings of existing homes for housing inventory, in our view. If rates fall, Pretium believes it is more likely that housing’s supply-demand imbalance will incrementally worsen, not improve. As we have written previously, the pandemic structurally increased demand for single-family homes after a prolonged period of underproduction.4 This structural supply-demand imbalance remains a more likely candidate for why home prices have been resilient during 2023 rather than the mortgage rate lock-in effect.

The main argument of the mortgage rate lock-in thesis is that listings of existing homes have fallen due to higher rates but Exhibit 1 shows that this isn’t the case. Active listings fell from 2019-2021 as mortgage rates fell and have been increasing since the beginning of 2022. The pace of transactions has fallen at a faster rate than the pace of new listings, driving up both overall resale listings and months of supply. Fannie Mae’s National Housing Survey asked earlier this year whether mortgage rates were a factor in homeowners’ plans to stay longer in their current homes and the results “…suggest that a fairly strong majority of mortgage borrowers’ future moving plans may not be affected by their mortgage rate”.5 As shown in Exhibit 2, there was little difference in the moving intentions of mortgage borrowers vs. outright owners.

An important underlying assumption of the mortgage rate lock-in effect thesis is that homeowners’ choice not to list their homes reduces housing inventory; however, if rates fell and a greater number of homeowners listed their homes, they would be both buyers and sellers. Furthermore, according to the lock-in thesis these households would largely be discretionary buyers/sellers and therefore unlikely to accept offers that would cause home prices to decline. Finally, to the extent that most homeowners cannot perfectly time the sale of their current home and the purchase of their new home, increased transactions by locked-in homeowners would likely lead to some households temporarily occupying two homes thereby decreasing overall housing inventory.


Statements throughout the research above represent the opinions and beliefs of Pretium. There can be no assurance that these will materialize.


  1. CoreLogic, US Home Price Insights as of November 7, 2023.
  2. “Higher Rates Contribute to Rising Home Prices, Fed’s Harker Says”, Bloomberg, October 16, 2023.
  3. “Mortgage Lock-In, Mobility, and Labor Reallocation”, Fonseca and Liu, June 2023.
  4. “In forecasting home prices, the last housing cycle is a poor guide for this one”, Pretium Housing Insights, September 21, 2022.
  5. “’Lock-In Effect’ not the only reason for housing supply woes”, Fannie Mae as of October 30, 2023.

Pretium’s Housing Insights, October 2023

INSIGHTS

Pretium’s Housing Insights, October 2023

October 2023

The share of US rental housing that is single-family has been falling since 2014

SFR is the only major real estate asset class to see supply shrink in recent years

Measuring single-family rental supply is important to evaluating supply-demand fundamentals; however, there is limited data on the subject. There are several frequently quoted sources that attempt to measure investor buying activity;1 however, they don’t accurately capture trends in supply because they mostly ignore sales of single-family rentals back to the homeownership market; moreover, the difficulty of working with tax and county records results in widely varying conclusions about investor buying activity. We explored this in the October 2022 Pretium Housing Insights.2 The US Census American Community Survey (ACS) provides the only national annual count of the number of single-family rentals in the US. 2022 ACS data was recently released, and it shows that the supply of single-family rentals continued to decline last year.3 The overall supply of single-family rentals has now been falling for six consecutive years, including through the pandemic. Combined with multifamily supply that has increased meaningfully over the past decade, single-family homes have accounted for a steadily shrinking share of US rental housing since 2014, as shown in Exhibit 1. At 31.4%, single-family rental share in 2022 is almost as low as it was in 2006 when home ownership was near all-time highs.4

The long-term trend of declining single-family rental supply stands in contrast to supply trends for other major US real estate asset classes, which have all seen net supply growth over the past five years including through the pandemic. As shown in Exhibit 2, Industrial has added 1.4 billion in square footage over the past five years representing 8.5% growth. The multifamily sector has seen a net increase in units of 2 million or 12.1%. Robust supply growth in the asset types that investors have most focused on makes sense; however, it is more surprising that office and retail have also experienced net growth in square footage of 260 million (+3.2%) and 225 million (+1.9%), respectively, over the past five years. We described in last month’s Pretium Housing Insights5 how investment in single-family housing has grown over the long-term; however, ACS data reveals that most of this investment has gone towards owneroccupied housing, not rental housing. Single-family rental stock has shrunk by more than 700,000 over the past five years, or a decrease of 4.8% while single-family owned stock has increased by roughly 7 million.6 Overall, the increase in investor interest in single-family rentals in recent years hasn’t been sufficient to drive supply higher. Looking ahead, continued home price growth and economic/rate volatility are likely to depress single-family rental supply further in the coming years as smaller investors remain motivated to sell more homes than they buy.


Statements throughout the research above represent the opinions and beliefs of Pretium. There can be no assurance that these will materialize.


  1. CoreLogic, US Home Investor Share as of August 17, 2023; Redfin, Real Estate Investors Data as of August 30, 2023; National Association of Realtors, Impact of Institutional Buyers as of May 2022; Freddie Mac, Drivers of Home Price Growth as of June 9, 2022.
  2. Pretium Housing Insights, “Investor activity in housing had no discernible impact on homeownership during the pandemic”, October 2022.
  3. US Census, American Community Survey 2022 1-Year Estimates as of September 14, 2023.
  4. US Census, Housing Vacancies and Homeownership as of August 2, 2023.
  5. Pretium Housing Insights, “Resilient single-family home prices have diverged from commercial real estate prices”, September 2023.
  6. US Census, American Community Survey 2017 and 2022 1-Year Estimates as of September 14, 2023

Pretium’s Housing Insights, September 2023

INSIGHTS

Pretium’s Housing Insights, September 2023

September 2023

Resilient single-family home prices have diverged from commercial real estate prices

Supply-demand imbalance has supported home prices despite record rate shock

Since the Federal Reserve began its campaign to raise interest rates in early 2022, there has been a marked divergence between the price trends of single-family and traditional commercial real estate. Major commercial property price indices show declines from recent peak values of as much as 10-15%1 ; meanwhile, single-family residential prices declined only briefly during 2H22 and have gone on to set new all-time highs during 2023.2 This price divergence is illustrated in Exhibit 1 and is a departure from prior rate cycles when different real estate sub-sectors had similar rate sensitivities.

Differing financing structures is one widely discussed factor that has likely created greater rate sensitivity for commercial real estate – its financing is typically shorter in term and relies more on floating interest rates. More than 40% of commercial real estate debt matures through 2025; furthermore, roughly one-third is floating rate.3 For single-family homes, 80-90% of mortgage loans originated over the past decade have had fixed 30-year rates with most of the remainder fixed for either 5 or 7 years.4 While financing differences are important, they don’t fully explain why single-family home prices have set new highs despite the largest rate shock in the modern history of US housing. A less discussed but potentially more important factor explaining the surprising resilience of singlefamily prices is a more favorable supply-demand dynamic when compared to commercial real estate.

The pandemic has likely structurally increased demand for housing, especially single-family homes.5 In terms of supply, single-family housing has seen less investment relative to demand since the Great Financial Crisis (GFC). This is illustrated in Exhibit 2, which compares construction spending for different real estate asset types. Multifamily and industrial have emerged as the two pillars of most investors’ real estate strategies and in response investment in new construction has increased more than fivefold over the past quarter century. By contrast, fundamentals for retail and office have proven more challenging and construction has grown slowly. Single-family construction grew during the mid-2000s, but it has seen slower growth during the post-GFC period. Overall, single-family investment has grown in-line with office investment despite a stronger demand profile.

Within single-family housing, single-family rentals have experienced a net reduction in supply over the past few years as described in the October 2022 Pretium Housing Insights.6 Single-family rentals are arguably the only real estate asset type to have seen supply shrink over the past few years. Looking ahead, Pretium expects that favorable supply-demand dynamics will continue to underpin single-family fundamentals in the coming years, both in terms of rent and price growth.


Statements throughout these materials, including these regarding the opportunity, Pretium’s advantages and the market represent the opinions and beliefs of Pretium. There can be no assurance that these will materialize.


  1. Real Capital Analytics, Commercial Property Price Indices as of July 20, 2023; Green Street, Commercial Property Price Index as of August 4, 2023.
  2. CoreLogic, Home Price Index as of September 5, 2023.
  3. Mortgage Bankers Association, Quarterly Commercial/Multifamily Mortgage Debt Outstanding as of June 29, 2023.
  4. CoreLogic, “Rising Rates Lead to Increase in Adjustable-Rate Mortgage (ARM) Activity”, June 26, 2023.
  5. Pretium Housing Insights, “Increased long-distance migration persisted in 2022”, January 2023.
  6. Pretium Housing Insights, “Investor activity in housing had no discernible impact on homeownership during the pandemic”, October 2022.

Jonathan Pruzan, Former Morgan Stanley COO & CFO, Joins Pretium as President

PRESS RELEASE

Jonathan Pruzan, Former Morgan Stanley COO & CFO, Joins Pretium as President

September 5, 2023

Jonathan Pruzan, Former Morgan Stanley COO & CFO, Joins Pretium as President

NEW YORKSept. 5, 2023 /PRNewswire/ — Pretium, a specialized investment firm with more than $50 billion in assets under management, today announced that Jonathan Pruzan has joined the firm as President and a member of the Executive Committee, effective immediately. In this newly created role, Mr. Pruzan will oversee many of Pretium’s strategic and operational initiatives, reporting to Don Mullen, Pretium’s Founder and CEO.

Jonathan Pruzan

Mr. Pruzan brings over 30 years of financial services and asset management experience, a proven track record of creating and capitalizing on growth opportunities, and a demonstrated ability to develop and lead high-performing teams across diverse economic environments. Mr. Pruzan spent the last 28 years with Morgan Stanley, serving in a variety of leadership positions, including Chief Operating Officer, Chief Financial Officer, and Head of Corporate Strategy. As part of Morgan Stanley’s leadership team, Mr. Pruzan played a key role in Morgan Stanley’s acquisitions of E*Trade Financial, Eaton Vance, and Solium Capital. Prior to holding these corporate positions, Mr. Pruzan built his career as an investment banker and was Head of the Global Financial Institutions Group, where he advised financial institutions and governments around the world on hundreds of billions of dollars of capital raisings, mergers, restructurings, and other strategic transactions.

“Adding a strategic leader of Jon’s caliber demonstrates the strength of Pretium’s model and market position as one of the leading investors in real estate and credit,” said Don Mullen, Founder and CEO of Pretium. “Pretium is a fast-growing, integrated firm that supports the entire asset lifecycle by embracing opportunity where others resist complexity. Jon is part of an elite class of financial services leaders, having excelled as an operating executive and a dealmaker. At a time of significant consolidation in the asset management space, we look forward to benefiting from Jon’s long history of success driving organic growth and identifying compelling acquisitions and partnerships to take the firm to the next level.”

“Pretium’s unique ecosystem is built on Don’s pioneering vision to produce, curate, and manage assets with a high barrier to entry across the residential and corporate credit markets,” said Mr. Pruzan. “Successful acquisitions such as Anchor Loans, Deephaven Mortgage, and Selene Finance are a testament to the Pretium team’s entrepreneurship and ability to effectively integrate new platforms. I am extremely excited to be joining the firm and to work closely with Don and the entire team to capitalize on the tremendous opportunities ahead to grow the business.”

Mr. Pruzan earned a Bachelor of Arts in Political Science and Economics from Tufts University and serves on its Board of Trustees. Mr. Pruzan is also a member of the Board of Trustees of the New York-Presbyterian Hospital, the Board of Directors of the Peterson Institute of International Economics, the Board of Directors of The American Ditchley Foundation, and a Trustee Emeritus and past Board Chair of the educational nonprofit, Summer Search NY.

About Pretium

Pretium is a specialized investment firm focused on U.S. residential real estate, residential credit, and corporate credit. Pretium was founded in 2012 to capitalize on investment and lending opportunities arising as a result of structural changes, disruptions, and inefficiencies within the economy. Pretium has built an integrated analytical and operational ecosystem within the U.S. housing, residential credit, and corporate credit markets, and believes that its insight and experience within these markets create a strategic advantage over other investment managers. Pretium’s platform has more than $50 billion of assets, comprising real estate investments across 30 markets in the U.S., and employs more than 4,000 people across 50 offices, including its New York headquarters, Dubai, London, Seoul, and Sydney. Please visit www.pretium.com for additional information.

Contacts

Jon Keehner / Kate Thompson / Lyle Weston
Joele Frank, Wilkinson Brimmer Katcher
212-355-4449
Media-SFR@pretium.com

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June 2022

Pretium’s State of ESG Report

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