Former Goldman exec behind “The Big Short” looking to raise $1B to buy up foreclosed homes

Donald Mullen Jr.'s Pretium Partners betting on potential of US single-family home rental market

New York /
Oct.October 05, 2016 01:20 PM

A decade ago, when he was the head of Goldman Sachs’ mortgage and credit business, Donald Mullen Jr. bet against the U.S. housing market in what became known as “The Big Short.” Now, his real estate investment firm Pretium Partners is looking to close the loop by raising $1 billion to buy tens of thousands of foreclosed single-family homes and rent them out to tenants, the Wall Street Journal reported.

This will be Pretium’s third fundraising round dedicated to residential real estate. In 2012, with foreclosures still rampant, Pretium raised $1.2 billion and purchased 16,500 homes. In 2014, the firm raised another $900 million and purchased roughly 14,000 non-performing home loans, making it the owner of the fourth-largest pool of single-family homes in the country, after the Blackstone Group, American Homes 4 Rent and Colony Starwood Homes. 

As it did with its first fund, the $1 billion would go towards purchasing homes to rent out to tenants, but the bet is not as obviously lucrative as it might have been several years ago.

With fewer foreclosed homes available, Pretium will likely be buying more homes on the open market. And while home ownership is still at historically low levels, a six-year housing boom has caused the rental market to slow.

Nevertheless, Pretium wrote in a 69-page pitch to investors, cited by the Journal, that “tight credit is preventing households from being able to obtain mortgages to purchase their first home.” Those households become renters, “thus driving high occupancy rates and robust rent growth,” the pitch said. Pretium also wrote that while they won’t find the bargains they used to, they’re buying homes in target markets like Houston, Phoenix, Indianapolis and Atlanta at roughly 20% less than it would cost to build.

Other investors are also seeing a change in the market. “Prices have come up a lot,” Blackstone’s president Hamilton James told investors on a July call, according to the Journal.  “We’re still buying some homes. But it’s harder to buy in the volume we once did.”

Pretium rents and manages their homes under the name Progress Residential. [WSJ]Chava Gourarie


Related Articles

arrow_forward_ios
Sugar Hill’s David Schwartz and 4300 Broadway (TerraCRG, Google Maps)
Major landlord Sugar Hill Capital faces Washington Heights foreclosure
Major landlord Sugar Hill Capital faces Washington Heights foreclosure
Pink Stone's Richard Ohebshalom with 180 Nassau Street (Rich Ohebshalom, Google Maps, Getty)
Pink Stone faces foreclosure on DoBro rental building
Pink Stone faces foreclosure on DoBro rental building
Commercial Real Estate, Foreclosures, Housing Market, Kathy Hochul
Lawmakers push Hochul to restore foreclosure statute of limitations
Lawmakers push Hochul to restore foreclosure statute of limitations
Urban Commons' Salvatore Takoushian and 2-10 West Street (Urban Commons, StreetEasy)
Urban Commons in danger of losing FiDi hotel
Urban Commons in danger of losing FiDi hotel
Eli Karp with 271 Lenox Avenue
Judge appoints receiver on Eli Karp’s Flatbush property
Judge appoints receiver on Eli Karp’s Flatbush property
From left: Hutton Capital's Ron Friedman, BridgeCity’s Allan Lebovits, Toby Moskovits, and Heritage Partners' Michael Lichtenstein along with 225-227 Grand Street in Brooklyn (Getty, Google Maps, Hutton Capital, BridgeCity, Heritage Partners)
Moskovits, Lichtenstein lose another Williamsburg property to bankruptcy
Moskovits, Lichtenstein lose another Williamsburg property to bankruptcy
From left: Omnia Group’s David Paz and Ace Hotel’s Brad Wilson along with 225 Bowery Street (Getty, Google Maps, LinkedIn/David Paz, LinkedIn/Brad Wilson)
Bowery micro-hotel faces foreclosure, $10M judgment
Bowery micro-hotel faces foreclosure, $10M judgment
From left: Arch Companies' Jeff Simpson and Hello Living's Eli Karp along with a rendering of 1580 Nostrand Avenue (Getty Images, Arch Companies, Hello Living)
Eli Karp’s Hello Living says goodbye to Flatbush project
Eli Karp’s Hello Living says goodbye to Flatbush project
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...