Blackstone Takes Major Advantage of Single Family Investment Vehicle Invitation Houses

Investment giant Blackstone Group sold its remaining stake in Invitation Homes, a company formed by Blackstone following the housing crash of the early 2010s to invest on a large scale in foreclosed single-family homes.

Blackstone has sold its stake in Invitation Homes since the start of the year, with the latest sale (in the form of a share offering) representing approximately 11% of the shares of Invitation Homes, earning Blackstone $ 1.7 billion. dollars. Overall, share sales, along with dividends received in recent years, have earned Blackstone around $ 7 billion, more than double what it invested, reports the Wall Street Journal.

Investors have shown a willingness to buy the shares that Blackstone has sold. In early 2019, Dallas-based Invitation Homes was trading at $ 20.80 / share. By mid-November, that price had fallen to $ 29.50 / share, down slightly from the year’s high to over $ 31 / share in mid-October.

Blackstone successfully bet that Invitation Homes, which is structured as a real estate investment trust, would be able to effectively manage a huge portfolio of single-family homes in various parts of the country, albeit concentrated in Florida and the states. Where is. Currently, the company owns around 80,000 homes.

“The hardest part was not buying the houses, but growing the business,” Blackstone chairman Jonathan Gray, who was leading the company’s real estate business when it launched, told the WSJ. Invitation.

Invitation Homes grew organically during the 2010s buying homes, but became the largest single-family homeowner in the country in 2017 when it acquired Starwood Waypoint Homes, which owned approximately 32,000 homes at the time. Starwood itself was the result of earlier consolidation in the industry. Invitation Homes’ closest rival, American Homes 4 Rent, has a portfolio of just under 53,000 homes.

The company continues to buy houses, but it also sells them. In the third quarter of 2019, Invitation Homes acquired 578 homes for $ 183 million, while in the same quarter the company sold 668 homes for $ 168 million.

Invitation Homes President and CEO Dallas Tanner said in the company’s latest earnings call in late October that Invitation Homes is benefiting from strong fundamentals in its core markets, household formation in the west. of the United States and Florida more than twice the national average.

“We continue to see an attractive opportunity in these markets to buy well below replacement cost and generate attractive returns relative to our cost of capital,” said Tanner.

Since many of the new households are formed by millennials, who are weighed down by student loan debt and other factors, single-family rental housing can meet the needs of the current generation as a starter home for sale might. do for their parents.

Tanner said the demographics favor growth for Invitation Homes.

“More than 65 million people, or about one-fifth of the American population, are between the ages of 20 and 34,” he said. “We believe that many of this cohort will choose the single-family rental lifestyle as they form families and age to the average age of Invitation Homes residents of 39.”

As an institutional lessor, Invitation Homes has also drawn its fair share of criticism. Last year, Reuters reported tenant dissatisfaction with property management and fees.

“In interviews with company tenants in neighborhoods across the United States, the image that emerges is not so much of exceptional service as of leaky pipes, vermin, mold. toxic, non-functioning devices and waiting months for repairs, “Reuters reported.

Invitation Homes contested this qualification. “From time to time things happen,” COO Charles Young told Reuters. “But when there is a problem, we work hard to resolve it as quickly as possible. “

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