Blackstone Invests in Housing Market, Buys 2,000 Foreclosures
Gambling on a recovery of the U.S. housing market, private-equity firm Blackstone Group LP spent more than $300 million purchasing around 2,000 foreclosed homes that will be turned into rental properties, Reuters reported July 18.
“Our bet is over time, vacant homes will fill up and markets will begin to recover,” said Jonathan Gray, senior managing director and global head of real estate. “Our exit will be to sell the individual homes to renters themselves, or there could be a very large market for public housing units.”
According to Reuters, Blackstone is one of several hedge funds and private-equity firms that have raised money or intend to raise money for the purchase of foreclosed homes in order to rent them out prior to selling them as the housing market recovers.
“There have been a lot of unannounced strategies. There have been few people who have actually raised the capital and are executing today,” Gray stated while addressing the CNBC Institutional Investor Delivering Alpha Conference in Manhattan, Reuters reported.
“I think they’ll be a relatively small number of us who can get the scale and have the kind of organization that can work nationally in the major markets,” Gray said, according to Reuters.
Other new players in the rental market include asset management company TCW, which specializes in fixed-income securities and manages $128 billion in assets. The firm recently started the TCW Home Place Partners fund as a way for wealthy investors to buy into the “housing turnaround” by investing in foreclosed properties held by banks and government agencies, Reuters reported.
Beazer Homes USA, Inc. announced in May the founding of Beazer Pre-Owned Rental Home, Inc., which includes an investor group led and organized by affiliates of the private-equity firm Kohlberg Kravis Roberts & Co.
The Beazer fund seeks to acquire, refurbish and lease recently-constructed, previously owned single-family homes on a massive scale in certain markets in the United States.
A major obstacle facing those who desire to buy thousands of foreclosed homes is how to manage and maintain them once they take possession.
“You have to spend some money to fix it up,” Gray said, Reuters reported. “You have to lease it. The real challenge is the execution and having the team.”
Blackstone is interested in collaborating with sizeable apartment operators in the locations it buys homes.
“It will end up being very positive for the U.S. economy,” Gray said, Reuters reported. “These homes will get repositioned. People will get affordable housing. I see this as an opportunity to move a fair amount of money. But it won’t be around forever.”