Riskiest of Blackstone Rental-Home Bonds Said to Fall Below Par

Dealer bids for some of the first-ever securities backed by U.S. rental homes have fallen below face value, according to two people with knowledge of trading in the market.

JPMorgan Chase & Co. offered 99.3 cents on the dollar today to buy the lowest-ranked portion of a deal issued in November at par by Blackstone Group LP’s Invitation Homes, said the people, who asked not to be identified because they aren’t authorized to speak publicly. The dealer, which sent out the offer in an e-mail to clients, said it would sell the notes at about 99.8 cents.

The bank quoted below-par prices for about $87.5 million of the $479.1 million deal, with the rest trading at about face value, according to the people.

The riskier pieces have declined with bankers planning more offerings of debt tied to homes snapped up during the housing recovery by private-equity firms, hedge funds and others that turned them into rental properties. American Homes 4 Rent, the second-largest single-family landlord in the U.S. after Invitation Homes, selected Goldman Sachs Group Inc. to underwrite its planned sale of as much as $500 million of the bonds, people with knowledge of the transaction said this week.

Investment firms have spent $20 billion the past two years buying as many as 200,000 homes to lease, according to Jade Rahmani, an analyst with Keefe Bruyette & Woods Inc.

The Blackstone deal should have helped create “a good market, but I think it’s been mispriced terribly,” Vincent Fiorillo, global sales manager at investment firm DoubleLine Capital LP, said last week at an industry conference in Las Vegas.

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