Blackstone Group LP hired John Beacham from Deutsche Bank AG to lead a mortgage-finance unit that will make and securitize loans to smaller investors buying single-family homes to rent.
“This is a very large market with a lot of opportunity to make a significant volume of loans,” Beacham, 39, who will serve as president of B2R Finance LP, said in a telephone interview. “It has the potential to be north of $1 billion within a relatively reasonable amount of time.”
Blackstone’s real estate group has spent more than $7 billion to acquire 40,000 homes, making it the biggest landlord in the burgeoning U.S. house-rental industry. B2R, backed by the firm’s Tactical Opportunities fund, aspires to be the largest provider of mortgage financing to small and medium-sized buyers of rental homes, with loans of $500,000 to $50 million, according to Beacham. It’s targeting individuals and funds with portfolios ranging from five to 500 properties, he said.
“Not many large lenders are focused on this space,” Beacham said.
The company plans to provide fixed and floating-rate loans with terms including five to 10 years, and package the loans into bonds, said Beacham, who previously worked as joint head of single-family rental-home finance at Deutsche Bank. The bank last week sold the first-ever bonds backed by U.S. rental homes for New York-based Blackstone’s Invitation Homes unit.
The Invitation Homes bond “really paves the way for what we’re trying to do at B2R,” Beacham said. “Whereas Invitation Homes was a single-borrower securitization, our deals will have multiple borrowers and much smaller borrowers. Knowing that we have access to the capital markets, knowing there’s investor demand, allows us to finance the loans more efficiently.”
Beacham said B2R is going after the smaller investors who dominate the market, the province of mom-and-pop investors until the housing collapse and foreclosure crisis attracted bargain-hunting institutions.
“Less than 2 percent of this market is owned by the large institutional players,” Beacham said. Smaller investors, from individuals such as contractors and real estate agents to small private-equity funds, own the vast majority of about 14 million single-family homes in the U.S. that are rented, he said.
B2R is in the process of completing its first loans, Beacham said. The firm is “seeing lots of deal flow” in states including California, Florida, Georgia, Arizona and the Carolinas, he said.