Oct. 31–TAMPA — Private-equity giant Blackstone began marketing the nation’s first rental-backed security on Wednesday, a $480 million deal based partly on the cash flow from Tampa-area rental homes, Reuters reported.
Investors in the securities will pocket income from monthly rents and potential returns if the homes are sold. More than 3,200 homes, many of which had been in foreclosure, back the deal, Reuters reported. Most of the homes are in Tampa, Atlanta, Phoenix and three cities in California.
Through subsidiary Invitation Homes, Blackstone has spent upward of $326 million buying up more than 2,000 local single-family homes to fix up and rent, a Tampa Bay Times analysis found this month.
The new bonds are similar in structure to mortgage-backed securities, which were popular during the housing boom. Many of those securities were packed with toxic loans and helped crash the housing market. The new securities will likely include some of the homes that were foreclosed on in the resulting crisis.
Blackstone has spent $7.5 billion buying 40,000 American homes, becoming the nation’s largest single-family landlord. The New York private-equity firm’s portfolio also includes SeaWorld, Universal Orlando, Hilton hotels and the Weather Channel.
Demand for the bonds could spur investors to binge on more homes to fuel the securities. Seven investment groups have spent $800 million buying Tampa Bay homes since last year, though their buying slowed as home prices climbed.
About 300 potential investors were expected to look over the deal in New York before a roadshow of investor meetings in Boston and Los Angeles later this week, Reuters reported. Typical investors, called institutional investors, include pension funds, banks and other funds.
Deutsche Bank, Credit Suisse and JP Morgan are marketing the security, called Invitation Homes 2013-SFR1. Moody’s Investors Service, Kroll Bond Rating Agency and Morningstar gave the deal’s $280 million top slice, or “tranche,” the highest rating, AAA.
At least one agency, Fitch Ratings, pushed back, saying the securities were too untested and vulnerable to variables like maintenance costs or property taxes to warrant the stellar ranking.
“While some participants have the financial wherewithal to withstand declining rents or rising costs,” the agency said Tuesday, “none have yet fully demonstrated their commitment to this asset class, which may leave investors shouldering a disproportionate amount of the risks should the operators’ motivations and abilities become compromised.”
Contact Drew Harwell at (727) 893-8252 or [email protected].
