This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Wall Street Piles Onto Blackstone Rental Housing Bet

NEW YORK ( TheStreet) -- The business of buying, fixing and renting single-family homes that helped kick off the housing recovery has just achieved a significant milestone.

Earlier this week, Blackstone (BX - Get Report) offered the first bond to be backed by rental incomes from over 3,000 U.S. single-family homes.

The $479 million offering, arranged by Deutsche Bank (DB), received significant interest from investors, despite the fact that the business model of operating and maintaining geographically- scattered, single-family homes as rentals on a large scale is untested.

According to press reports, the offer was oversubscribed on the first day, prompting Blackstone to lower the yields on the offering.

KBW analyst Jade Rahmani believes the participation of several ratings agencies lent credibility to the sector.

Close to 60% of the deal received Triple A rating from Moody's Investor Services, Kroll Bond Rating Agency and Morningstar.

The ratings were more positive than expected, although one agency, Fitch Ratings, said the deal would not receive a rating higher than A due to insufficient track record of institutional investors in this business.

Still, the strong demand and attractive pricing of the deal might pave the way for future securitizations, according to Rahmani. The analyst estimates the total addressable opportunity for single-family rental securitization market could top $900 billion. Annual production could total $100 billion.

Deutsche Bank analyst Harris Trifon also sees a boom in rental-backed bond sales. "Considering that almost $20B has already been spent by private equity funds and public companies like American Home 4 Rent over the last year or so, securitized loans backed by home rentals totaling in the billions is not out of the question by this time next year. Indeed, barring another recession, we find it hard to imagine how a relative flood in deals won't happen in the next year or two," he wrote in a note this week.

The analyst believes that all market participants would gain from such transactions. "Bond investors would benefit by having another liquid stable market to participate in, especially in an environment where valuations across the fixed-income credit universe are at or very close to full valuations," he wrote. "Obviously the firms that have already committed capital to the sector would benefit from having a new and potentially deep alternative financing source, but we think the general public could be the biggest beneficiary due to the stabilizing effect that a growing rental market should have on property values and the coffers of local governments."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
BX $41.32 0.00%
CLNY $22.74 0.00%
AAPL $126.44 0.00%
FB $87.28 0.00%
GOOG $523.40 0.00%

Markets

DOW 17,730.11 -27.80 -0.16%
S&P 500 2,076.78 -0.64 -0.03%
NASDAQ 5,009.2140 -3.9090 -0.08%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs