The Real Deal New York

Rental securities market to hit $5B in 2014

With home ownership tumbling, institutional investors going where the money is

February 20, 2014 02:09PM

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American Homes 4 Rent CEO David Singelyn and members of the company's leadership team at the company's IPO

American Homes 4 Rent CEO David Singelyn and members of the company’s leadership team at the company’s IPO

As home-ownership rates tumble and rental market activity ticks up, institutional investors are following them — driving up the demand for home rental securities.

The market is predicted to hit $5 billion this year, according to a study by lender, investor and servicer trade association CRE Finance Council. The rise in renter households has outpaced home ownership by a factor of ten, while the number of owner households is in its seventh year of decline.

“It’s a function of pricing and mortgage rates, and it’s having a severe impact at many economic levels,” Stephen Renna, CREFC president and CEO, said in a release. “This includes recent graduates who enter the workforce saddled with heavy college debt. Such restrictions on home ownership, however, bode well for the rental market, and for the natural growth of securitizations within that space.”

Blackstone Group, far and away the most active in snapping up rental properties and investing capital, was the first to kick off a single-family rental-backed offering dubbed Invitation Homes 2013-SFR1, shopped by Deutsche Bank, late last year. American Homes 4 Rent followed suit three months later, tapping Goldman Sachs to arrange the sale of its similarly styled securities.

“We estimate that institutional investors have purchased 90,000 homes around the country over the last year or two at a cost of just over $15 billion,” Renna said in the release, adding that the figure is rapidly increasing monthly.– Julie Strickland

  • American Capitalist

    In theory it sounds great. In practicality its a whole other story. I was an investor in a regional company doing the same thing as Blackstone but on a smaller scale. Bought distressed (primarily upside down) properties. Rented five before the opposition took hold. R1 neighborhoods in many areas do not permit rentals – as we discovered after the fact. Only in one circumstance did we prevail. Of the 21 properties 18 are currently on the market and 2 are under contract.

    R1 neighborhoods would rather see these properties rot than live in a community with renters – and in retrospect I can’t blame them. I own my home for a reason. If I wanted renters next door I’d move into a development with others renters.

    • Victor

      You are correct. These securities are nothing but a pumped up pile of Sh*t. If you’ve managed property(residential) then having single family houses like this are very cost prohibited to operate and for many reasons but I don’t want to spend the time needed to give those reasons. Blackstone is smart and they’ll get out with their tails intact after giving wall st. a huge commission for selling this garbage to thousands of suckers.

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