According to an article published on the Wall Street Journal"bond buyers are evaluating a $479 million offering of securities by Blackstone's single-family home-rental business, Invitation Homes LP" The offering is expected to come to market next week, said an executive at Deutsche Bank, which is arranging the deal.
"Theoffering isa test for the home-rental market, which has attracted rising interest since the financial crisis from institutional investors seeking to profit from a drop in U.S. home prices and rising monthly rents.
A successful sale could unlock a new channel for investors such as Blackstone,American Homes 4 rent and Colony Capital LP. The companies have spent billions of dollars in recent years buying homes and renting them out, helping to pave the way for a housing recovery that has boosted home sales and prices following an epic decline during the financial crisis"
"Theoffering isa test for the home-rental market, which has attracted rising interest since the financial crisis from institutional investors seeking to profit from a drop in U.S. home prices and rising monthly rents.
A successful sale could unlock a new channel for investors such as Blackstone,American Homes 4 rent and Colony Capital LP. The companies have spent billions of dollars in recent years buying homes and renting them out, helping to pave the way for a housing recovery that has boosted home sales and prices following an epic decline during the financial crisis"
The plantoselltherental-backed securities underscores investors' desire for bonds that generate more income at a time when yields on government bonds are near historic lows and stocks are near record highs.
The Invitation Homes deal is expected to yield more than typical mortgage-backed bonds, the lion's share of which are highly rated and backed by the government-supported mortgage companiesFannie Mae and Freddie Mac.
Companies have raised about $20 billion over the past 18 months and acquired about 150,000 properties, according to Keefe, Bruyette & Woods. The purchases account for around 10% of sales of distressed properties over that span, KBW said.
Blackstone is the largest buyer of single-family homes, owning more than 30,000, and its real-estate investing has become a major driver of the private equity firm's profits in the past couple of years.
Blackstone invested $5 billion in real estate during the second quarter of 2013. Much of that has been spent acquiring U.S. homes. Invitation Homes has bought about $7 billion worth of houses this year and continues to spend at a clip of about $100 million a week.
Bond ratings firms have expressed concerns about the deals because there is no history to judge how they may fare. They have said they're concerned that absentee corporate owners wouldn't be effective at collecting rents or maintaining their properties, Moody's Investors Service said in a note last year.
Another key question for investors and rating firms was whether bond buyers would have a stake in the underlying property and where they stand in the order of payments in case the rental company goes bankrupt.
Fitch Ratings on Tuesday said that it wouldn't rate deals like this one above single-A because such transactions are new and are "highly vulnerable" to costs such as repairs, capital and property taxes.
