closed its latest US residential land fund on $360 million, surpassing its target of $300 million.
Launched in May 2018, JEN Partners VI will deploy capital to finance and develop new housing throughout the southern and western US. The New York-based firm will focus on growing metropolitan areas in Maryland, Virginia, North Carolina, Georgia, Florida, Texas, Colorado, Arizona and California.
Prior to the fund’s first close in August 2018, the manager had projected commitments that would exceed its $360 million hard-cap on commitments this summer, before its first close, a spokeswoman told PERE. JEN then spent the next several months working with investors to renegotiate the commitment sizes. The final close for the fund occurred in November but was not previously reported. JEN VI is JEN Partners’ largest fund since launching the series in 2006.
More than 80 percent of the commitments for JEN VI came from repeat investors, most of which are endowments and family offices, according to the firm’s spokeswoman.
JEN Partners is a residential lot-banking and development manager. It invests in undeveloped, infill lots and provides equity financing to homebuilders.
With JEN VI, its third fund raised with institutional capital, the firm provides off-balance sheet financing to homebuilders in its targeted markets, according to the , which committed $50 million to the vehicle. MassPRIM, the fund’s lone public pension limited partner, also invested in the predecessor vehicle, JEN V, . Since launching JEN IV in February 2013, the firm has raised $820 million for its institutional funds. It has also raised at least $40 million for two co-investment vehicles, according to PERE data.
JEN VI’s strategy is supported by demographic trends in the rapidly-growing metro areas in the Sunbelt and suburban Washington, DC. Additionally, the firm hopes to satisfy unmet housing demand stemming from a development market that has lagged since the last housing bubble burst more than a decade ago.
“From 2007 to 2017, over 85 percent of population growth in the US occurred in the south and west census zones,” the JEN spokeswoman wrote in an email. “Over the same time period, residential construction added fewer units to the housing stock than in any other 10-year period dating back to 1968.”
Between 2008 and 2017, an average of 610,000 single-family homes were added to the US market annually, according to a 2018 study from Harvard University – well below the long-run average of 1.1 million units. Multifamily development fared better after the housing crisis, but construction starts in that part of the market have fallen in recent years too.
The Harvard report credits these slowdowns to an abundance of caution among homebuilders, rising construction costs and a lack of available space. In 21 of the 25 largest metro areas surveyed, vacant lots can support less than 24 months of residential development. JEN, however, will look for opportunities in areas that have gone unexplored in recent years.
Transactions involving residential development land likewise have declined. From 2009 to 2015, the market increased from 103 sites sold cumulatively for $785 million, to 1,300 parcels sold for a total of $14 billion, according to data from Real Capital Analytics. Both figures have fallen steadily since 2016, totaling 612 transactions for $6.6 billion last year.