Blackstone Group enters residential mortgage market
The private-equity powerhouse, through its newly created B2R Finance, will start originating loans to buyers of multiple single-family homes.
The first loan will close this week and go to a buyer of Miami single-family homes, a source close to the situation told The Post. B2R is targeting small investors who own 20-to-100 homes, a slice of the US residential home market that is often ignored by banks because they can’t re-sell the loans to Fannie Mae.
Fannie Mae allows a borrower only 10 home loans.
Blackstone, which owns 40,000 homes, will, through its B2R, borrow money directly from banks, typically at less than 4 percent, and loan the cash to investors at 6 to 7 percent, sources said.
If B2R charges points on the 10-year homes loans its profits will be even greater. The loans will be relatively conservative at a 60-to-70 loan-to-value ratio.
B2R will focus on areas of the country – Florida, Dallas, Atlanta, Chicago, Phoenix and Los Angeles, for example — where investors can buy sometimes foreclosed homes and fix them up and rent them for more than their monthly mortgage cost.
For example, Barry Sternlicht this week brought public Starwood Waypoint Residential Trust. It uses this same strategy.
“What Blackstone is doing avoids the problem of managing this stuff,” a mortgage industry executive said. “They are going to do fine.”
Nearly 5 percent of single-family homes nationally are owned by investor-landlords who don’t live at the address, the source close to the B2R situation said. Of that 5 percent, 60 percent of those investors, a $450 billion market, are the mom-and-pop variety Blackstone’s B2R is targeting.
Private equity firms Cerberus Capital Management (through FirstKey Lending) and Colony Capital are Blackstone’s biggest rivals in the lending to mom-and-pop single family home landlord space.
The B2R first loan comes, ironically, as Blackstone President Tony James last week on its earnings call said the firm was slowing its single home buying pace.
“There are some markets where we’re not putting more money to work, and there are other markets where we still see opportunity,” James said. “We still believe there’s more to go. And we still are very positive on continuing to put capital to work on this. But I’d say we’re in the, I don’t know, seventh inning. It’s slowing down.”
Blackstone, meanwhile, last year was busy buying 28 multi-family apartment buildings with 300-to-400 units each, the mortgage executive said.
This includes a 388 apartment units in Cary, NC, and similar properties in Arlington, Tex., North Las Vegas, Pawtucket, RI, Salt Lake City and Pittsburgh.
Blackstone declined comment on any aspect of its B2R operation.
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