Blackstone Group LP, the private- equity firm that has spent about $US5 billion ($A5.43 billion) on more than 30,000 distressed houses in the US, is preparing to expand its bet on a market recovery by lending to other landlords.
The firm has set up B2R Finance LP to offer loans starting at $US10 million. B2R is reaching out to landlords seeking to grow their portfolios of properties in the burgeoning single-family homes-to-rent sector, sources said.
The world’s largest private-equity firm said last month it was entering the latter stages of its buying spree. Blackstone has led a group of institutional investors who have spent at least $US17 billion on more than 100,000 homes in the US over two years, helping fuel the fastest price gains there since 2006.
By increasing its stake in the rebound through lending, New York-based Blackstone could benefit from smaller landlords already investing in what Goldman Sachs Group Inc. estimates to be a $US2.8 trillion market.
‘‘The more financing that comes to the space, the better to legitimise the industry,’’ said Sudha Reddy, chief executive officer of Haven Realty Capital LLC, which has invested in 1500 rental homes. ‘‘Not all investors are able to get a large credit facility, and small ones from community banks aren’t big enough.’’
With the creation of a lending unit, Blackstone would be adding to its big gamble on the residential real-estate recovery it began making after the crash, when prices fell as much as 35 per cent from a peak in 2006. In 2011, the private-equity firm purchased $US220 million in residential non-performing loans, invested as much as $US475 million in home builders and acquired thousands of foreclosed properties.
‘‘This is the kind of thing that happens once – every once in a while, where you see something that’s a market-turning trend and we are loading the boat,’’ Blackstone chief executive Stephen Schwarzman said recently.
Firms including Blackstone, Apollo, Thomas Barrack jnr’s Colony Capital LLC, and Public Storage founder Wayne Hughes’ American Homes 4 Rent started emerging as large-scale landlords after more than 7 million homeowners lost their properties through foreclosure, or by selling for a loss, since 2007, according to RealtyTrac.
That’s helped drive the American recovery in home prices, which rose 12.1 per cent in April from the previous year, according to an S&P/Case-Shiller index.
Even as the American economy has strengthened, the home ownership rate declined to 65 per cent at the end of first quarter, from a peak of 69.2 per cent in June 2004, as fewer Americans have been able to qualify for mortgages.
Blackstone’s fledgling lending business could help extend the reach of rental-home buyers who can’t access investment-bank funding, a gap Cerberus Capital Management LP is also trying to fill with First Key Lending, which it started this year.