Blackstone Group (NYSE:BX) is a giant in the finance world. It's also an increasingly influential player in the property markets. While you can't do everything Blackstone does, real estate investment trusts (REITs) Brixmor (NYSE:BRX) and American Homes 4 Rent (NYSE:AMH) are two options for investing like Blackstone in real estate.
The birth of a strip maller
One area that has been of interest to Blackstone of late is the lowly strip mall. For example, it just agreed to pay $1.975 billion for multi-tenant properties from American Realty Capital Properties, which was looking to raise cash to buy 500 Red Lobster properties. This deal will bring Blackstone 78 properties that American Realty had previously planned to spin off.
Essentially a collection of strip malls, it marks Blackstone's most recent foray into the space. Last year, the company IPOed 30% of Brixmor, a strip mall owner with over 500 properties across the country. The big news at Brixmor has been paying down debt and increasing rents.
Blackstone bought what is now Brixmor in 2011 from an Aussie company. At that point it owned over 200 more properties, was heavily laden with debt, and it was competing by offering tenants good lease rates. Blackstone sold off lesser properties and paid down the REIT's debts before bringing it public late last year.
With a streamlined portfolio and less debt, Brixmor is now in position to charge higher rents.
According to CEO Michael Carroll, Brixmor's in-place leases average around $12 per square foot. However, new leases in 2013 averaged $13.69 per share foot, with new leases signed during the fourth quarter of last year averaging over $15.00 per share foot.
Essentially, Brixmor has built in growth potential.
Blackstone still owns 70% of Brixmore, which means you can invest in this strip mall owner right along with the asset management giant.
And you get to take comfort in the fact that Blackstone continues to invest in the space on its own.
Not Blackstone, but doing the same thing...
Another space in which Blackstone has been busy the last few years is the nascent single-family home rental market. Blackstone owns properties and has issued bonds backed by its rent roll. With over 40,000 homes in its portfolio, Blackstone is using its clout to lead this new REIT category.
The largest publicly traded option in the space is American Homes 4 Rent. Unlike Brixmor, American Homes isn't controlled by Blackstone, but with over 25,000 properties it is easily in the heavyweight division of the single-family home sector.
The other REIT competitors own closer to 5,000 properties each. And, following Blackstone's lead, American Homes has issued bonds backed by its portfolio of single-family homes.
Like Brixmor, American Homes is still a relatively young company, coming public in mid-2013. However, it has recently started paying an annual dividend of $0.20 a share, marking a key milestone in both its maturation and the development of the single-family REIT sector.
And, perhaps more important, it is starting to develop a portfolio track record.
For example, now that American Homes 4 Rent has started to stabilize its portfolio, the occupancy of rent-ready homes is in line with the multi-family REIT sector at 95%. That said, occupancy across all of its homes is still just around 80%; it still has thousands of properties that it's fixing up so they can be rented.
So, there's still top-line growth to be had as those homes hit the market if you take a positive view of that around 15 percentage point occupancy difference.
Old and new
If you want to tag along for the ride with Blackstone in an old sector that's out of favor, consider buying strip mall owner Brixmor. That sector will remain resilient, regardless of investor sentiment, until we no longer need to shop for groceries.
And while you can't invest along with Blackstone in the single-family home market, American Homes 4 Rent is pretty much the next best thing because of its immense scale.
This emerging REIT sector, however, isn't mature just yet, so it comes with more risks.