Blackstone Group, the nation’s largest private investor in single-family homes, has ramped up purchases of foreclosed properties intent on adding to its portfolio of for-rent single-family properties before the nation’s home prices get too high, American Banker reported Jan. 9.
Blackstone has purchased 16,000 homes for around $2.5 billion, using the $13.3 billion capital fund it raised last year. In October 2012, Blackstone Chairman Stephen Schwarzman noted that the company was spending $100 million a week on home purchases.
The S&P/Case-Shiller index of property values across 20 cities has gone up 4.3 percent in the 12-month period beginning October 2012, and economists predicted those prices will go up another 3.3 percent this year. Home prices in some of the cities where the group has invested have surged; Phoenix, for example, saw prices increase 22 percent during through the end of 2012.
Other markets in which Blackstone has acquired properties include Atlanta, Chicago, Las Vegas, Miami, Orlando, Tampa, Fla., and several cities in California. The group purchases and renovates the homes before making them available to the rental market, American Banker reported.
Blackstone, along with Colony Capital and Waypoint Homes, have turned what once was a market dominated by smaller investors into an institutional asset class. American Banker reported that JPMorgan Chase estimated that the new asset class could be worth as much as $1.5 trillion, with some 12 million homes to back it.
Blackstone has purchased its properties through auctions and short sales, and Jonathan Gray, the firm’s global head of real estate, told American Banker that it averages about 30 days to renovate each home and another 30 days to lease them.
Colony Capital has purchased 5,500 homes since April for around $500 million and expects its investment in single-family residences to reach $1.5 billion by year’s end. Waypoint Homes owns 2,500 homes and expects to have a portfolio of 10,000 residences by the end of 2013.
Blackstone currently is purchasing its homes with cash then financing pools of houses with up to 60 percent debt. The firm has obtained a $600 million line of credit from Deutsche Bank and is working on doubling that financing. Banks, however, have been slow to back investors in the single-family rental home market because it’s still too new and untested.