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November 1, 2014

Firms Eye First Bond Backed by Home-Rental Payments

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Firms Eye First Bond Backed by Home-Rental Payments

The Blackstone Group and Deutsche Bank are reportedly in talks to create the world’s first bond that would be backed by home-rental payments. The Blackstone Group, a private equity firm that has become the largest investor of single-family rental homes in the United States, reportedly plans to bundle monthly rental payments on up to 1,700 of its homes. 

The bonds would be marketed by Deutsche Bank AG and is expected to be valued at about $240 million to $275 million, The Wall Street Journal reports. 

“Some investors and analysts have said they are wary of a bond backed by rental payments, citing the dearth of long-term data on how often tenants living in previously foreclosed homes pay their rent on time,” The Wall Street Journal reports. “But investors still are hungry for the high returns that are likely to accompany a first-of-its-kind deal, which would be viewed as more risky than well-known securities.”

The bond may be available to investors in August or September. 

Since the beginning of last year, Blackstone has spent more than $5.5 billion on purchasing about 32,000 homes in about 12 major U.S. markets, The Wall Street Journal reports. 

Source: “Blackstone, Deutsche Bank in Talks to Sell Bond Backed by Home Rentals,” The Wall Street Journal (July 30, 2013)

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