The following article in its extended version was published by Bloomberg on the 3rd July. It highlights the fact that major institutional investors are now entering the single family home market. For more information on how to access this market please contact us.
Blackstone Group LP, the biggest buyer of U.S. commercial real estate since prices bottomed, is jumping into residential property as housing recovers.
The private-equity firm has spent more than $250 million this year buying foreclosed single-family houses with the intention of renting them out, said two people with knowledge of the effort. The goal is to acquire enough assets to potentially take public as a real estate investment trust, or sell to another company or even to tenants, said the people, who asked not to be identified because the plans are private.
Blackstone Group LP has acquired more than 1,500 houses around Phoenix and Southern California.
Blackstone, which has loaded up on strip malls, warehouses and suburban office buildings in the past two years, is turning to residential real estate after a 34 percent plunge in prices since the 2006 peak.
The New York-based company is the biggest investor seeking to enter the single-family leasing market as rents climb and the U.S. homeownership sits at a 15-year low, joining rivals including KKR and Colony Capital LLC.
“It’s turning into a $10 billion industry,” said Colin Wiel, managing director and co-founder of Waypoint Homes, an Oakland, California-based company that has bought about 1,800 distressed homes for rent with backing from investors including GI Partners and Columbia University. “There’s a lot of competition.”
Blackstone’s real estate group has teamed with principals of Treehouse Group LLC of Temp e, Arizona and Dallas-based Riverstone Residential Group to buy and fix up the homes, find tenants and maintain the rentals, said the people familiar with its strategy. Riverstone is an apartment-management company founded by brothers Nick and Peter Gould, owners of U.K. property-investment firm Regis Group Plc.
The venture marks Blackstone’s first major foray into the U.S. residential market. The company was the top buyer of commercial real estate in 2010 and 2011, spending about $16.7 billion, according to Real Capital Analytics Inc. in New York. Deals included the $9 billion purchase of more than 500 shopping centers from Centro Properties Group and industrial properties valued at $1 billion from Prologis.
U.S. commercial-property prices have gained about 26 percent from a post-crash low in January 2010, according to an index compiled by Moody’s Investors Service and Real Capital.
In the housing market, price declines are easing. The S&P/Case-Shiller index of values in 20 U.S. cities fell 1.9 percent in April from a year earlier, the slowest pace since 2010.
While mortgage rates are at record lows, rental demand has climbed because many Americans can’t buy homes because of insufficient income or bad credit, or because they prefer the flexibility of renting. Monthly apartment rents in the U.S. have jumped almost 6 percent since the end of 2009, to an average $1,018 in the first quarter, according to Reis Inc.
Blackstone has an advantage over competitors in the housing rental market in terms of readily available capital. The firm is raising $13 billion for what will be the largest-ever private equity real estate fund.
Others are using a series of small private funds. KKR is working with Atlanta-based homebuilder Beazer Homes to raise money by selling shares for a non-public REIT.
Buyers of foreclosed houses face the challenge of managing properties scattered among different neighborhoods and states, compared with managing an apartment building with hundreds of units within one property. Bargain-seeking investors also are finding that home prices have begun to rebound in many markets, making it harder to accumulate homes at deep discounts.