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October 20, 2014

Blackstone Offers New Type of Rental Bond

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Blackstone Offers New Type of Rental Bond

Blackstone, the largest investor of single-family rental homes, is introducing a new security-backed investment. The product promises to provide investors with an income stream from rental properties, but also a potential return when the properties are sold. JPMorgan, Deutsche Bank, and Credit Suissee will reportedly market about $500 million of the securities. 

Blackstone has invested an estimated $5.5 billion in 32 homes, buying up mostly foreclosures in Western states and turning them into rental properties. Investors are telling the media they want to know more about the specifics of the plan before they sign on.

"I do believe that securitization serves a great purpose if done well," Laurie Hawkes, president and chief operating officer of American Residential Properties, a single-family REIT, told CNBC. "But I think it takes a little more development coming."

Investors are interested in details such as “where the rental properties are, the prospects for those particular housing markets, and how the properties are being managed,” CNBC reports. “Longer-term investors also want to understand the future of this new asset class.” 

"We're really going to want to talk to management and hear their story," says Bryan Whalen, managing director of U.S. fixed income at TCW. “Some of these companies that have been rumored of coming to the market soon are successful financial companies, but this is a new business for them. ... So not only do we want to know how they're operating and how efficient they are, but we also want to understand their commitment to it."

Despite falling foreclosures and rising home prices, institutional investor purchases remain high. RealtyTrac reported that institutional investor purchases reached a high in September at 14 percent of all residential sales. All-cash sales made up 33 percent of transactions in September, up from 32 percent in August, the National Association of REALTORS® reports.  

Source: “From ashes of housing crisis, a new type of bond,” CNBC (Oct. 25, 2013)

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