Blackstone Group LP (BX), the largest U.S. landlord of single-family homes, is working with Deutsche Bank AG (DBK) to sell about $700 million of securities tied to mortgages on rental properties, its third such deal, according to a person with knowledge of the plans.
Deutsche Bank may start marketing the debt to investors this month, said the person, who asked not to be identified because the details are private. The offering would be the sixth of bonds backed by rental homes, the largest of which was a $993 million sale in May, also by New York-based Blackstone.
Wall Street has issued $3 billion of securities backed by houses owned by Blackstone, Colony American Homes Inc. and American Homes 4 Rent (AMH) since last year. Blackstone, which has amassed 45,000 houses since early 2012 through its Invitation Homes LP unit, became the first to tap the securitization market in November by selling $479.1 million of debt.
Securitization was a “huge, watershed event for the industry,” Justin Chang, chief executive officer of Colony American Homes, which has more than 17,000 houses, said in a telephone interview. “The process of companies buying massive amounts of homes and accessing capital markets has all happened really quickly. With the multifamily industry, it took many years for leaders to emerge. This has all happened in 24 months.”
Denise Dunckel, a spokeswoman for Blackstone’s Invitation Homes, and Amanda Williams, a Deutsche Bank spokeswoman, declined to comment on Blackstone’s bond-sale plans.
Hedge funds, private-equity firms and real estate investment trusts have acquired as many as 200,000 homes, mostly in the past two years, and used them to build rental businesses from the rubble of the U.S. foreclosure crisis.
Other Wall Street-backed landlords are looking to the debt market for capital to purchase more houses and increase returns by adding leverage to the properties they bought with cash. Morningstar Inc. is expecting as many as 10 deals to come to market this year, according to Brian Grow and Becky Cao, managing directors at the Chicago-based company. Top-rated tranches of the securities allow landlords to borrow for less than 2 percent above the London Interbank Offered Rate.
Silver Bay Realty Trust Corp. (SBY), the first single-family landlord to go public, said on July 22 that it’s planning an offering of securitized loans. The deal will be for $312.7 million in debt on 3,089 homes, according to a presale report by Morningstar.
Starwood Waypoint Residential Trust, managed by an affiliate of Barry Sternlicht’s Starwood Capital Group, also intends to sell bonds backed by its rental properties. The company owned 7,358 homes and first-lien nonperforming loans on 2,095 houses as of March 31.
American Residential Properties Inc. (ARPI), a landlord with about 7,000 homes, and Progress Residential LP, which was started by former Goldman Sachs Group Inc. partner Donald R. Mullen Jr. and owns more than 10,000 homes, also have announced plans to issue securities.
Companies lending to single-family landlords, including Cerberus Capital Management LP, Colony American Finance and Blackstone’s rental-lending arm, B2R Finance LP, are racing to package debt on homes for the first multiborrower bond sale. All three have said they expect to sell their first bonds this year.
The market for bonds backed by rental houses may eventually exceed $30 billion a year, according to Jade Rahmani, an analyst at Keefe, Bruyette & Woods Inc.
To contact the editors responsible for this story: Kara Wetzel at firstname.lastname@example.org Daniel Taub