Blackstone Group Inc. has agreed to buy a company that buys and rents
single-family homes in a $6 billion deal that’s a sign Wall Street believes the U.S.
housing market is going to stay hot.
The giant investment firm has reached a deal to acquire Home Partners of America Inc.,
according to people familiar with the matter. Home Partners owns more than 17,000 houses
throughout the U.S., which it bought, rents out and offers its tenants the chance to
eventually buy.
U.S. home sales soared last year at their fastest pace in 14 years, when low mortgage
rates and the rise of remote work during the pandemic sent buyers scrambling to
find larger living spaces.
The lack of homes for sale relative to demand and record housing prices have slowed
the pace of home sales in recent months. But on a historic basis, the market remains
red hot, and analysts say that demand from millennials entering their prime home
buying years is expected to fuel demand for years to come.
Blackstone was among the big investment firms to buy houses in bulk in the aftermath
of the subprime crisis, when lenders sold off foreclosed homes at marked-down prices.
The New York firm built a portfolio of tens of thousands of single-family homes,
then rented them out through a company called Invitation Homes Inc.
In 2019, Blackstone exited from the single-family rental business when it sold
its last shares in Invitation Homes, which had become the largest U.S. firm in this
industry with 80,000 homes for lease. The firm put its toe back in the market in 2020
by investing $240 million to buy a preferred equity stake in Toronto’s Tricon Residential
Inc., which buys single-family rentals in North America.
Blackstone’s deal for Home Partners, which people close to the matter say could be
announced as early as Tuesday, shows that Blackstone is turning even more bullish
on U.S. housing.
It is rejoining an expanding roster of Wall Street powerhouses that have acquired
single- family rental companies. Canadian property giant Brookfield Asset Management Inc.
recently acquired a stake in a landlord that owns more than 10,000 U.S. homes. J.P.
Morgan Asset Management and Rockpoint Group LLC also have made big investments
in single-family rental operators.
The business is attractive to investors because growth can come from both rising
home prices and rent increases. The S&P CoreLogic Case-Shiller National Home Price
Index, which measures average home prices in major metropolitan areas across the
nation, rose 13.2% in the year that ended in March, up from a 12% annual rate
the prior month.
The rental market showed signs of softness during the pandemic, especially in
downtowns that saw an exodus of residents. But lately rents, too, have begun to rise.
Median asking rents rose 1.1% annually in March to $1,463 a month across the
country’s 50 largest markets, according to a report from Realtor.com.
Many analysts say that with home price gains showing little sign of easing, rents
can continue growing throughout the U.S. as would-be home buyers are priced
out of the sales market and are compelled to keep renting.
For all their recent activity, big institutional investors own about 300,000 U.S.
homes, or only 2% of single-family rental homes, according to a report by New York-based
financial firm Amherst Pierpont Securities LLC. About 85% of the single-family rental
market is owned by investors with 10 or fewer properties, the firm said.
Home Partners, founded in 2012, has a different business model from Invitation
Homes and some of the other big firms in the single-family rental business. It gives
renters the option to buy at a predetermined price at any time with 30 days notice.
To that end, Home Partners limits its acquisition of new houses to those homes
identified by people as ones they would possibly like to buy after renting.
“What we’re doing is following consumers to acquire our homes and letting them
pick the communities they want to live in,” said William Young, the firm’s chief
executive and co- founder at a real estate conference one year ago.
Home Partners chose Blackstone’s all-cash offer after a competitive bidding
process, according to people familiar with the matter. The deal is expected to
close later this year, people said.