American Homes 4 Rent is joining the Blackstone Group in providing bonds for investors backed by single-family rental homes, the New York Times and CNBC are reporting.
This is part of the growing trend by Wall Street to find a new way to secure debt tied to single family rental homes. Basically the way this new industry works is by selling bonds to investors all over the world from debt tied to a growing single-family rental market. Wall Street has estimated the potential market as high as $1.5 trillion according to a story on the world property channel.
This works because a growing number of large and private investors are purchasing single-family homes in bulk and renting them, thus creating an opportunity for banks and investors to buy into the market.
“The latest company to test this emerging frontier in securitization is American Homes 4 Rent. The company talked to prospective investors at a conference in Las Vegas last week about selling securities tied to $500 million of debt, according to people briefed on the matter,” CNBC said in the story. The debt deal is expected to be sold by the end of the first quarter.
The private equity firm Blackstone Group sold the first single-family rental securitization of its kind last fall, a $479 million bond, attracting six times as many investors as the private equity firm could accept, a person involved in the deal said according to the story.
In addition to these large bond programs, Blackstone and Cerberus Capital Management have opened programs for the the majority of real estate investors, frequently called “mom and pops” because they own only a few rental properties. Blackstone’s program, called B2R Finance, provides buy to rent financing for small investors.
“That’s the part of the business that will take off,” said Stephen D. Blevit, a lawyer at Sidley Austin. “Providing cheap financing to mom-and-pop investors who save their pennies, buy a few properties and do all the maintenance themselves.”
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