Blackstone Group Inc., which made Wall Street's first entry into the single-family home business, is making a new investment in suburban homes at a time when the COVID-19 pandemic is putting traditional commercial real estate under pressure.
The private equity giant, which last year abandoned its stake in landlord Invitation Homes Inc., is leading a group of investors into a minority stake of $ 300 million in Tricon Residential Inc., which owns more than 30,000 single-family homes in North owns and manages America.
The deal, made through Blackstone's non-traded real estate investment trust known as BREIT, relates to preferred shares issued by a Tricon subsidiary that can be exchanged for a minority stake in the Toronto-based company. This emerges from a statement in which the deal was announced on Thursday. Tricon plans to use the capital to pay off debt.
"We continue to see strong fundamentals in the rental housing sector and believe that the company's high quality, income generating assets can achieve stable performance under the leadership of its world-class management team," said Frank Cohen. Chief Executive Officer of BREIT said in the statement.
The suburbs are in high demand as city dwellers seek quarantine comforts like backyards and space for home offices. At the same time, many renters, with more than 16 million unemployed Americans, have said they have no confidence in their ability to pay for housing, and experts warn that the country is headed for a massive wave of evictions.
Shares from single-family landlords were rewarded during the pandemic as their rental collections held up better than those of multi-family landlords. Tricon's stock is up 89% since March 23, compared with a 23% gain on a Bloomberg index for apartment REITs.
While rental income is a risk for single-family landlords in the coming months, "the current environment has the potential to increase long-term demand for the property," Jade Rahmani, an analyst at Keefe Bruyette & Woods Inc. wrote earlier month.
Single-family homes have been around for decades, but Wall Street viewed portfolios with dispersed locations as difficult to manage. That changed after the US foreclosure crisis when companies like Blackstone began building massive holdings and developing new property management systems.
Blackstone listed Invitation Homes in 2017 and later partnered the company with other landlords to create a landlord of roughly 80,000 homes.
Blackstone isn't the only early Wall Street gamer to make a return to single-family homes. Barry Sternlicht's Starwood Capital Group started buying homes last year, Bloomberg reported.