Blackstone Group LP bought 1,400 properties in Atlanta, many eligible for federal low-income housing subsidies, in the biggest bulk purchase for the fledgling homes-for-lease industry. Photographer: David Beasley/Bloomberg
Blackstone Group LP bought 1,400 properties in Atlanta, some eligible for federal low-income housing subsidies, in the biggest bulk purchase for the fledgling homes-for-lease industry.
The private-equity firm, which has spent more than $4 billion on 24,000 rental properties in the last year making it the largest buyer in the U.S., purchased the residences from Building and Land Technology, said Marcus Ridgway, chief operating officer of Invitation Homes, Blackstone’s single-family rental division.
Private-equity firms, hedge funds and individuals are racing to buy into a shrinking pool of foreclosed or distressed homes to rent. They’re seeking to profit as prices remain 29 percent below their 2006 peak and potential homebuyers can’t get mortgages with banks restricting credit. Jonathan Gray, Blackstone’s global head of real estate, said in an interview last week that it’s getting harder to acquire properties for a profit as competition intensifies.
“Some of the best deals are gone, so we’re really starting to see a consolidation,” said David Lykken, the managing partner of the Austin, Texas-based consulting firm Mortgage Banking Solutions. “It’s a great time for the small to mid-size guys that got in early to exit and start locking in some of the gains that they have.”
‘No Shift’
Blackstone, based in New York, paid more than $100 million for the properties, most of which are already leased, according to two people familiar with the transaction, who asked not to be identified because the deal was private. About 16 percent of the portfolio is Section 8 housing, another person with knowledge of the deal said. Ridgway declined to discuss the price and said the purchase is consistent with Invitation Homes’ plans.
“There has been no shift in our strategy,” he said in an e-mail. “Our goal at Invitation Homes continues to be that we’re building a company for the long term based on long-term holding and renting homes.”
Blackstone, the world’s largest private-equity firm, is leading investors in transforming an industry that historically was a mom and pop business -- which Goldman Sachs Group Inc. estimates is worth $2.8 trillion -- into an institutional asset class. The firm last month expanded a credit line from Deutsche Bank AG to $2.1 billion for acquiring properties.
Opportunities for bulk deals have been scarce, forcing investors to acquire properties one by one on the open market, at bank auctions, trustee sales and in small portfolios. They’ve targeted states such as Arizona, California, Florida and Nevada that were hardest hit by the housing crash and subsequent foreclosure crisis.
‘Deploying Capital’
“If I had to guess, over the next six to 12 months, it will be difficult for us to continue in our current setup in terms of deploying capital,” Blackstone’s Gray, said in an interview last week.
Competition in Atlanta has pushed out some local investors who’ve complained they can’t compete with institutional firms that are willing to pay higher prices for properties.
At an October courthouse auction in Gwinnett County, northeast of Atlanta, bidders for Colony Capital LLC temporarily ran out of money. They ordered $1 million more in cashiers’ checks to keep buying, since sales at the auction must be paid for on the spot. The firm, run by Thomas Barrack and based in Santa Monica, California, has raised $2.2 billion to buy rental homes.
Investor buying has pushed up prices, with values in Atlanta surging 12.4 percent in the year through February, CoreLogic Inc. reported this month. That compares with a 10.2 percent increase across the U.S. during the period, the biggest year-over-year gain since March 2006.
Buying Competitors
The rush to buy homes at discounts as supply is dwindling means funds wanting to grow are turning to rivals.
“We have plenty of people approaching us to try to buy components of our portfolio or our entire portfolio,” said Jordan Kavana, director of Aventura, Florida-based Transcendent Investment Management, which has been acquiring single-family homes since 2008 and plans to spend $1 billion on properties over the next three years. “We’re not sellers though. We are looking at several of our competitors’ portfolios to buy.”
Over the last year Building and Land Technology’s single-family rental business, known as BLT Homes, has acquired more than 4,000 distressed homes in 10 markets, according to Carl R. Kuehner, president and CEO of the Stamford, Connecticut-based company.
