In a recent episode of the “New Home Insights Podcast,“ John Burns, the founder and CEO of John Burns Research & Consulting, sits down with Don Mullen, founder and CEO of Pretium Partners, for a fireside chat at the Rental Communities Summit.
Prior to founding Pretium, Mullen was the head of global credit and mortgages at Goldman Sachs. Pretium is a real estate investment firm that focuses on single-family rental (SFR), build-to-rent (BTR) and fix-and-flip properties. During their conversation, Burns and Mullen cover the SFR and fix-and-flip spaces, home remodeling trends, and the future of BTR sector.
They start by exploring the evolution of the SFR industry over time. Mullen explains that in the 1980s, investment firms focused on securitizing small assets to make them available for institutional investors. This process included removing a variety of debt — including commercial mortgages, personal loans and auto loans — from balance sheets and making credit available to traders.
Today, modern technology, including Pretium’s platforms, cut out the middleman by allowing firms to invest directly in assets, decide the kind of leverage they want and determine how Pretium will manage the assets over time. All of this occurs without the need to invest in a securitization. These assets include fix-and-flip loans (RTLs), homebuilder loans, nonqualified mortgages (non-QM) and more. Mullen also clarifies that the term RTL, or residential transition loan, is synonymous with the fix-and-flip mortgage.
Burns explores Mullen’s specialization in housing and how it’s allowed him to build an advantage from a tech standpoint over other Wall Street firms that typically pursue and manage a variety of assets beyond real estate. Mullen describes Pretium’s platform as a residential ecosystem that originates nontraditional mortgages.
With homebuilder loans, for example, Pretium uses a data-driven heat map — populated with Pretium’s assets, assets owned by other firms and potential properties for purchase — to inform their decision-making process. He also mentions Pretium’s evolution from targeting single-family rentals to other assets, with a greater focus on technology and operational efficiency to better serve landlords and tenants.
From an investment standpoint, this data allows Pretium to respond quickly — within 24 hours — when a property comes up for sale, without any external data needs. Burns asks Mullen for a ballpark estimate of how long it takes Pretium to analyze an investment opportunity. Mullen says that Pretium can spring into action within three to 24 hours to start the discussion process.
Burns segues the conversation to explore other areas that Pretium is interested in entering. Mullen shares that the company raised $1.5 billion of equity as part of a $3 billion-plus investment to help homebuilders grow inventory, which he describes as an attractive partnership
Homebuilder and development lending is a growing part of Pretium’s ecosystem for build-to-rent properties. The company’s acquisition of BH Management Services allows them to make these assets more liquid, and Mullen expresses much excitement over the possibilities.
Burns follows up with a question on how Pretium’s construction lending platform sets them apart, as well as the company’s interest in land banking. Mullen explains that Pretium wants to leave the banking system behind in favor of private credit.
“I frankly think it’s much more attractive for the economy overall because banks have a different liability structure that, as we saw last year, can leave very quickly and leave loans in bad shape, and they have much more leverage,” Mullen says.
The conversation ends with Mullen providing his outlook on the future of BTR communities. He says the best way to create housing stock when affordability is low is by offering more rent-to-own opportunities.
“I think the SFR industry can be a bridge, not just helping people improve their credit scores, which we and others do, but also being in a position that we find a product that helps people graduate from rentership to ownership,” Mullen says.