Source: 401(k) 2013 on Flickr.
With the boom in housing across the country, one Wall Street firm has been aggressively buying homes throughout the U.S. as both investments and rental properties.
Blackstone (BX), a New York based private equity firm, is now the nation's largest homeowner. A recent report from Bloomberg noted that since April of 2012, it has purchased more than 41,000 homes for a total of $7.8 billion. Over the last two years, it has been estimated that the six largest investors in the country have purchased more than 90,000 homes to the tune of $15 billion.
A quick glance at Blackstone's real estate assets under management reveals it's buying both properties around the globe at an astounding rate:
Source: Company SEC filings.
Since 2005, Blackstone has grown its Real Estate assets by almost 10X, or an average rate of 33% per year. It total assets have also grown at a staggering rate, as they are up 5X, however the growth in real estate is one of the key reasons why.
Managing properties
Blackstone operates its rental properties under its Invitation Homes subsidiary. When the firm announced it would be setting up the nationally run rental property firm, it noted it would be primarily buying "distressed homes," which are often the ones that have been for sale and vacant for extended periods of time and are in need of the most work.
Yet the company said it would be spending 10% of the purchase price of each home on renovations and improvements, which would provide jobs and spur economic growth. Jon Gray, the head of Global Real Estate at Blackstone highlighted that the motive behind this was simple, and "at its heart, we're making a bet on America with this investment strategy."
The company also noted in the November 2012 press release:
Through Invitation Homes, we are providing a much needed service for communities across the nation. We are removing distressed inventory from the market, which has been suppressing national home prices, creating jobs and providing high quality, affordable housing for families. These efforts are, ultimately, stimulating economies in areas hardest hit by the housing crisis.
Invitation Homes operates in nine states and 17 areas across the U.S. ranging from some of the biggest areas in the nation like Los Angeles, California to smaller metro areas like Charlotte, North Carolina and Minneapolis, Minnesota:
Making money
Blackstone is collecting rent from most of these properties, but it has also taken some of the rental properties and has issued a nearly $500 million bond that allows other investors to profit from into Blackstone's rental property investments. The bond is backed by the rental incomes from roughly 3,200 homes, and was worth an estimated $479 million. There was incredibly high demand for it when it was issued in November, and the riskiest portion of the bond had a demand that was approximately 4.5 times greater than the supply.
For decades, rental properties were often managed by individuals or local firms, but with the influx Wall Street dollars, the rental property landscape is changing. Often apartment complexes are owned by firms across the nation, but this is the first time a Wall Street firm has so aggressively jumped into the single-family home industry.
Only time will tell what this means for consumers, but if other financial institutions follow, it could lead to lower rental prices as competition edges higher. One thing it means for sure, is that if you live in one of those 17 cities, your landlord may in fact be a banker.
