REFILE-Blackstone eyes first-ever REO-to-rental securitization
By Adam Tempkin
March 13 (IFR) - Blackstone is preparing a first-of-its-kind securitization of REO-to-rental properties, and the deal could come later this year, according to sources with knowledge of the plans.
Word of the plans comes a week after the private equity giant got an increased bank loan from Deutsche Bank and others to expand its significant holdings of single-family homes.
Market sources told IFR that Blackstone is planning at least one securitization to help underpin its long-term financing in the REO-to-rental sector.
Blackstone and Deutsche Bank both declined to comment.
REO-to-rental is a relatively new phenomenon, as companies have bought up distressed properties - many foreclosed on in the midst of the financial crisis - in bulk.
Blackstone is the largest asset manager in the sector, and demand for a securitization is thought to be so strong that any deal could go forward without needing credit ratings.
The new Deutsche Bank loan, upsized to US$2.1bn, includes an original US$600m warehouse facility in addition to investments from eight other banks and securities investors.
At least 20 banks and investors looked at participating in the loan, and some passed because their charters would only allow them to participate in bond deals and not bank loans.
Securitization specialists with knowledge of the deal said Deutsche Bank expanded the size of the facility in order to accommodate Blackstone's increased commitment to purchasing distressed single-family homes with the goal of renting them out.
With a nascent recovery in home prices, REO-to-rental has become a big business that has attracted investments from private equity firms, REITs and others.
Starting with equity investments and now warehouse financing from investment banks, the final step would be involvement of the capital markets in the form of a securitization, experts say.
The average size of the houses that Blackstone is purchasing in areas such as Phoenix and Tampa is 1800 to 1900 square feet, typically with three bedrooms and 2.5 baths, according to sources familiar with their investment properties.
Specialists say that once the purchased properties are rehabilitated with a tenant, they become good candidates for inclusion in the traditional securitization process.
Since last year, credit rating agencies have been working on possible criteria that would be used to rate a REO-to-rental securitization.