Blackstone puts $ 6 billion on home buying and renting

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Blackstone group Inc.

has agreed to buy a company that buys and rents single-family homes in a $ 6 billion deal. This is a sign that Wall Street believes the US housing market will stay hot.

The giant investment firm has reached an agreement to acquire Home Partners of America Inc., according to people familiar with the matter. Home Partners owns more than 17,000 homes in the United States that it has bought, rented, and offered to tenants to buy.

U.S. home sales rose as fast as it had in 14 years last year as low mortgage rates and the rise in remote working during the pandemic pushed buyers to find larger homes.

The lack of homes for sale relative to demand and record home prices have slowed the pace of home sales in recent months. But on a historical basis, the market remains scorching hot, and analysts say demand from millennials entering their prime home buying is likely to drive demand in the years to come.

Blackstone was one of the major investment firms that bought homes in bulk after the subprime crisis, when lenders sold foreclosed homes at reduced prices. The New York firm built a portfolio of tens of thousands of single-family homes and then rented them out through a company called Invitation Homes Inc.

In 2019, Blackstone exited the single-family home rental business when it sold its last stake in Invitation Homes, which had become the largest U.S. company in the industry with 80,000 rentals. The company got its foot back in the market in 2020 by investing $ 240 million to buy a preferred stake in Tricon Residential in Toronto Inc.,

who buys single-family homes in North America.

Blackstone’s deal for Home Partners, which people familiar with the matter say could be announced as early as Tuesday, shows Blackstone is getting even more bullish on US real estate.

It joins a growing list of Wall Street power plants that have acquired single-family rental companies. Canadian real estate giant Brookfield Asset Management Inc.

recently acquired an interest in a landlord who owns more than 10,000 US homes. JP Morgan Asset Management and Rockpoint Group LLC have also made major investments in single-family home rental companies.

The business is attractive to investors because growth can come from rising home prices as well as rent increases. The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the country, rose 13.2% in the year ended March, from an annualized rate of 12% the previous month.

The rental market showed signs of softness during the pandemic, particularly in the city centers, which saw population exodus. But rents have also been rising recently.

Median asking rents in the country’s 50 largest markets rose 1.1% annually to $ 1,463 per month in March, according to a report by Realtor.com.

Many analysts say rents in the US may continue to rise as house price hikes are unlikely to subside as potential home buyers are excluded from the sales market and forced to keep renting.

For all of their recent ventures, large institutional investors own about 300,000 U.S. homes, or just 2% of single-family homes, according to a report by New York-based financial firm Amherst Pierpont Securities LLC. About 85% of the single-family home market belongs to investors with 10 properties or less, the company said.

As US investors buy single-family homes for rental apartments, some investors buy homes through sale-leaseback transactions that provide homeowners in trouble with a way to pay off their debts while staying in their home. However, many experts fear that they may never become a homeowner again.

Founded in 2012, Home Partners has a different business model than Invitation Homes and some of the other big firms in the single family home rental business. It gives tenants the option of buying at a fixed price at any time with 30 days’ notice.

To this end, Home Partners limits new home purchases to those homes that have been identified by those individuals who they may wish to buy after renting.

“We follow consumers as they buy our homes and let them choose the communities they want to live in,” said William Young, CEO and co-founder of the company, at a real estate conference a year ago.

Home Partners selected Blackstone’s cash offer following a competitive bidding process, according to those familiar with the matter. The deal is slated to close later this year, people said.

Write to Peter Grant at [email protected]

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