Heather Perlberg & John Gittelsohn |
“Jonathan Gray, global head of real estate at Blackstone Group LP, talks about Blackstone’s investment in residential real estate and the outlook for the U.S. housing and commercial property market. He speaks with Erik Schatzker and Deirdre Bolton on Bloomberg Television’s “Market Makers.” (Source: Bloomberg)
The firm, which already owns more rental homes than any other investor, has set up B2R Finance LP to offer loans starting at $10 million, according to four people who reviewed the terms. B2R is reaching out to landlords with portfolios of properties seeking to grow in the burgeoning industry for single-family homes to rent, said the people, who asked not to be identified because the discussions are private.
The world’s largest private-equity firm said last month that it was entering the later stages of its buying spree after leading a group of institutional investors who’ve spent at least $17 billion on more than 100,000 homes over two years, helping fuel the fastest price gains since 2006. By increasing its stake in the rebound through lending, New York-based Blackstone could benefit from smaller landlords already investing in what Goldman Sachs Group Inc. estimates to be a $2.8 trillion market.
“The more financing that comes to the space, the better to legitimize the industry,” said Sudha Reddy, chief executive officer of Haven Realty Capital LLC, an investor with 1,500 rental homes backed by Leon Black ’s Apollo Global Management LLC. “Not all investors are able to get a large credit facility and small ones from community banks aren’t big enough.”
Term Sheets
At least five rental companies have received nonbinding term sheets from B2R, according to the people. Jeffrey Tennyson, the former chief executive officer of mortgage originator EquiFirst Corp., is running the firm, which stands for buy-to-rent. He previously led EquiFirst to become the 12th-largest wholesale subprime lender in the U.S. by 2007, when Barclays Bank PLC bought it. The London-based bank closed the business two years later after the market collapsed.
Tennyson didn’t return phone messages seeking comment on his role at B2R.Peter Rose , a spokesman for Blackstone, declined to comment.
With the creation of a lending unit, Blackstone would be adding to a big wager on the residential real estate recovery it began making after the crash, when prices fell as much as 35 percent from the 2006 peak.
The private-equity firm in 2011 purchased $220 million in residential nonperforming loans, invested as much as $475 million in homebuilders including Hovnanian Enterprises Inc. through its credit investment arm GSO Capital Partners LP and started acquiring thousands of foreclosed properties.
Market Turning
“This is the kind of thing that happens once — every once in a while, where you see something that’s a market-turning trend and we are loading the boat,” Blackstone CEO Stephen Schwarzman said during an October earnings call.
Firms including Blackstone, Apollo, Thomas Barrack Jr.’s Colony Capital LLC and Public Storage founder Wayne Hughes’s American Homes 4 Rent started emerging as large-scale landlords after more than 7 million homeowners lost their properties through foreclosure or by selling for a loss since 2007, according to RealtyTrac.
That’s helped drive the recovery in home prices , which rose 12.1 percent in April from the prior year, according to a S&P/Case-Shiller index. Even as the economy has strengthened, the homeownership rate declined to 65 percent at the end of first quarter, from a peak of 69.2 percent in June 2004, as fewer Americans have been able to qualify for mortgages.”