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San Francisco-based private equity firm Encore Capital Management is looking to raise $400 million in a new fund focusing on affordable, entry-level, and senior housing.
Encore is in talks with institutional investors to fundraise, and part of its strategy for the fund is to acquire land in bulk to develop, or sell to other builders. Bloomberg reports that this has allowed the firm to "realize higher returns," per a marketing document on the fund. Encore has said it will also lend money to other developers to buy and build homes, with most of its investments in California and Florida, and others in Arizona, Oregon, and Texas. Firm CEO Oscar Vasquez declined to comment on the new fund.
While private equity firms bought thousands of homes to rent out after the housing crash a decade ago, they don’t usually build and sell them. The market for construction has long been dominated by individual builders and by corporations such as Lennar Corp. and DR Horton Inc. Those groups haven’t kept up with demand in recent years, especially for homes for first-time buyers, leading to a chronic shortage of available properties. Bidding wars and price spikes are frequent news in hot coastal markets like Seattle and Silicon Valley. The dearth of supply is also driving up home values elsewhere and making it harder for buyers to get into the market.
