Minnesota State Board of Investment Pulls $100 Million Commitment to Landmark Partners as Residents Raise Concerns about the Firm’s Investment in Rental Homes

In January 2021, private equity firms Pretium Partners and Ares Management acquired Front Yard Residential/ Havenbrook Homes for an estimated $2.5 billion making this deal the Single-Family Rental industry’s first public-to-private transaction.^[1] Pretium Partners now owns an estimated 66,000 homes and is the second largest rental home landlord in the United States.^[2]

The Minnesota State Board of Investment was considering a $100 million investment in Ares owned Landmark Real Estate Partners IX before its August 25^th Board meeting.^[3] The Minnesota SBI’s Investment Advisory Council recommended the investment at its August 16 meeting.

Tenants’ rights organization Inquilinxs Unidxs por Justicia (IX), a/k/a Renters United for Justice, discovered that many single family rentals in North Minneapolis were being managed by HavenBrook Homes, Chloe Jackson of Renters United explained in March 2021, “We found there were four or five HavenBrook rental homes on a single block, but the neighbors didn’t know they had the same landlord.”^[4] For the past several months, Havenbrook/ Pretium renters have organized and reached out to their neighbors about the conditions of the homes. In May 2021, the Minneapolis Star-Tribune reported “tenant advocacy group Inquilinxs Unidxs por Justicia, or Renters United, represents HavenBrook tenants with a bevy of complaints about unmet repairs: mold, pests, structural deficiencies and electrical problems, burdensome lease provisions and phantom managers. They’ve connected residents with researchers and attorneys.”^[5]

Northside residents working with Renters United attended the August 25^th Minnesota State Board of Investment meeting to provide public comment and ask the Board not to invest Ares Management, Pretium, or Landmark Partners (a unit of Ares Management) private equity funds until the properties they own in Minneapolis were improved.

Seven-year HavenBrook renter Shanika Henderson shared with the board her housing needs as a mother of a premature son with special needs. Ms. Henderson explained, “I have contacted Havenbrook about many issues that I have been having with my son being born prematurely, I needed to move into a bigger unit to be able to provide for him, for his nurses to come and visit him, have home visits.^[6]

Ms. Henderson explained how she confronted some clear obstacles in her search for rental homes after her discouraging  encounter with property management,  “I’m frustrated and I’m to the point to where I would just like to move and I don’t even know where me and my family would go because when I’m trying to look on the websites for single family homes everything that I am coming across is owned by HavenBrook Homes, so I was in tears last night just going down the housing list for single family homes, 3+ bedrooms, owned all by HavenBrook, and I think my back is against the wall. I would like to be moved by this winter. And like I said, I’m to the point we’re just going to pack up and I don’t even know where I even need to start to go because they have everything bought up from HavenBrook. And it is very sad.”^[7]

HavenBrook resident of five-years Takilah Swearegene shared her story of slow management response concerning housing repairs, “We have reached out to HavenBrook Homes. We went to their door. They have Ring® on their door, they seen us, but no one answered, and no one has gotten back to us. I am on Section 8, so when Section 8 comes to do their inspection, they have a list of things they need to fix, and of course they come fix them, but it’s all Band-Aids.”^[8]

Ms. Swearegene explained to the Board her plans to move “I have two kids. One is 18 and one is 12. They are at the age where I’m not concerned about them going down there and touching the surface mold but everyone in my home has asthma. So that is a definite concern of mine. I’m not in a position to move out at the moment, but I do plan on moving from HavenBrook Homes in the future. I do not plan on staying there forever.”^[9]

Tenant Olaxson Koisee has been a resident of Minnesota since he immigrated to this country 10 years ago. Mr. Koisee shared how rent increases affected him and his family, “we have also had an increase in our rent every single year. This has led me to find two jobs which, of course, due to the pandemic have led to me going out to find jobs which led to me contracting the COVID-19. Only because I have to go and fend for my family, and I just couldn’t handle paying my rent which has increased over time, every single year. And I had to go out and that led to me getting the COVID and spreading the COVID to my family.”^[10]

Chloe Jackson, IX organizer, explained the urgency to the MBSI board about the state of the single-family rentals owned by Front Yard Residential & HavenBrook homes, “The State is basically investing money into companies that exploit and extract from housing, primarily on the Northside of Minneapolis.” Ms. Jackson asked the Board to stop investing in Pretium, Ares, or Landmark “until the cycle stops.”^[11]

In response to the public comment, Minnesota Governor Tim Walz, who chairs the board, thanked all public commentors for sharing their stories. Minnesota Attorney General Keith Ellison, who also serves on the board, stated that his office had received complaints about HavenBrook, stating “When the Attorney Generals’ office gets complaints, we are not in a position to disclose, say publicly, what we are going to do with them. I can say we have received complaints about HavenBrook, and we’re working on those.”^[12]

He then encouraged the public to submit complaint forms when necessary, explaining “If you google the Minnesota Attorney General’s office, go to our complaint form we would appreciate you doing that. I know some of you have already filled out complaint forms, but if you know anyone who has not – the more data we get the better case we can make. And I’m not talking about any particular potential defendant I’m talking about that in general. So please, to the leaders, to Chloe, please get your folks to file their complaints if they filed already, they don’t need to do it again, but if have not – we’re looking at as many data points as we can remembering and keeping in mind that we have to have witnesses in order to make a case.”^[13]

Although the SBI’s Investment Advisory Council (IAC) had recommended investing $100 million in Landmark Partners, the board did not ultimately make the commitment to Landmark Partners and also held off on other commitments that the IAC had recommended.^[14]

[1] Kalinoski, Gail. “Pretium, Ares Close $2.5B Acquisition of Front Yard Residential,” January 13, 2021. https://www.multihousingnews.com/post/pretium-ares-close-2-5b-acquisition-of-front-yard-residential/.

[2] Campbell, Kyle. “Deep Dive: A Market That Brings Bad Press.” Content. PERE (blog), September 1, 2021. https://www.perenews.com/single-family-rentals-a-market-that-brings-bad-press/.

[3] Peterson, Jon. “Minnesota SBI Mulls Commitment to New Blackstone Asia Real Estate Fund.” IPE Real Assets, August 20, 2021. https://realassets.ipe.com/news/minnesota-sbi-mulls-commitment-to-new-blackstone-asia-real-estate-fund/10054556.article.

[4] Collins, Chuck. “Taking on a Billionaire Landlord in the Twin Cities.” YES! Magazine (blog), March 17, 2021. https://www.yesmagazine.org/economy/2021/03/17/landlord-tenant-twin-cities.

[5] Du, Susan, and Jeff Hargarten. “North Minneapolis Renters Wage a Fight with Private Equity Landlords.” Star Tribune, May 29, 2021. https://www.startribune.com/north-minneapolis-renters-wage-a-fight-with-private-equity-landlords/600062754/.

[6] AdminMinnesota. MN SBI Executive Council Meeting August 25, 2021, 2021. Shanika Henderson public comment https://youtu.be/yNFl4MxePpA?t=2896

[7] Ibid.

[8] AdminMinnesota. MN SBI Executive Council Meeting August 25, 2021, 2021. Takilah Swearegene public comment https://youtu.be/yNFl4MxePpA?t=2629

[9] Ibid.

[10] AdminMinnesota. MN SBI Executive Council Meeting August 25, 2021, 2021. Olaxson Koisee public comment https://youtu.be/yNFl4MxePpA?t=2496

[11] AdminMinnesota. MN SBI Executive Council Meeting August 25, 2021, 2021. Chloe Jackson public comment https://youtu.be/yNFl4MxePpA?t=2783

[12] AdminMinnesota. MN SBI Executive Council Meeting August 25, 2021, 2021. Minnesota Attorney General Keith Ellison public comment https://youtu.be/yNFl4MxePpA?t=3083

[13] Ibid.

[14] “Private Markets Commitments For Consideration, Second Quarter 2021.” Minnesota State Board of Investment, August 16, 2021. https://msbi.us/sites/default/files/2021-08/Private%20Mkts%20Commitments%20for%20Consideration%20-%20August%2016%2C%202021_0.pdf.

“Minnesota State Board of Investment Board Approvals.” Minnesota State Board of Investment, August 25, 2021. https://msbi.us/sites/default/files/2021-08/MSBI%20Board%20Approvals%20-%20August%2025%2C%202021.pdf.