Skip to comments.Blackstone to buy $1 billion worth of Tampa Bay homes for rentals
Posted on 09/22/2012 11:52:31 AM PDT by ruralvoter
A Wall Street behemoth plans to spend $1 billion on Tampa Bay's hobbled housing market, dispatching teams of brokers to scour neighborhoods and buy hundreds of homes a month.
But rather than resell the homes, the Blackstone Group is opting to become a landlord, renting the homes to tenants including foreclosed ex-homeowners burned by the housing crash.
Blackstone, one of the nation's largest private-equity firms, plans to buy as many as 15,000 homes in Tampa Bay over the next three years, many of them foreclosures, capitalizing on decimated home prices and growing rents.
The shopping spree, and those of half a dozen other big investment firms and hedge funds, could radically change the local home landscape, as big-money brokers compete with first-time buyers and mom-and-pop landlords over homes in tight supply.
"It's a land grab unlike anything we've ever seen," said Peter Murphy, CEO of Home Encounter, the largest manager of rental homes in Tampa Bay. "You're going to drive through parts of town and all of it is going to be institutionally owned."
(Excerpt) Read more at tampabay.com ...
"More than 60 VIP donors who attended a fundraiser at the home Blackstone CEO Hamilton James" Price? $35,800 per person. PHONES were not allowed in the room.
This was an OBAMA fundraiser.
Gee....I wonder how much unspent TARP bailout money Blackstone may have leftover from Obama’s early promises?
I further wonder whether anyone outside the corporate confines of Blackstone wonder whether their possibly-financed buyout of these distressed homes will do to the local rental market? Will they become Section 8 landlords? (Likely).....
Lastly, I wonder what connection the controllers of Blackstone may have to the Administration? To Holder (his people), to Obama (his Muslim Brothers), to Chicago?
Why,one might almost think that Osama Obama *wanted* these folks in Florida to be repossessed so that $$$ would flow into Rat Party coffers!
Giant Democrat hedge funds as monster landlords?
This is creepy and not good.
Section 8 will simply become standard government housing. And if you want a place to live, you had better vote right...
UPDATE FROM THE same newspaper:
Blackstone said it will not spend 1$ Billion, but won’t say how much it will spend. Maybe only $700 Million?
Let’s face it, a bad headline for Obama in Florida is not a good idea right now. Toward the end of this article, the original source for this information admits he had a phone call with a person from Blackstone who told him to “shut up”.
Renters destroy neighborhoods.
Bankers are looking at bundling the future payments as trusts or securities to sell to investors, much like mortgages were pooled and sold during the housing boom.
Not necessarily true.
CERTAIN TYPES OF RENTERS destroy neighborhoods. The kind that have no personal pride, are loud, obnoxious, can’t fix anything, won’t upkeep anything.
Some renters are just saving up to become homeowners and are just fine. If you remember the 70s mortgage rates were double digit and a lot of people with steady jobs and responsible people couldn’t get a loan, or knew paying 17% interest on a loan was too much for their income.
He was an attorney for slumlords in Chicago, so what’s new?
This is true, but interest rates are low. (at least right now) Issues now would be about job stability to save for a downpayment or ruined credit scores from people losing their jobs.
Watch this: There will be “legislation” coming out of Congress during the Obama second term to address this “new” economic activity. The “legislation” will be similar to the Community Reinvestment Act enacted in the 70’s (which eliminated the mortgage lending underwriting convention of “redlining” neighborhoods with poor credit risks in order to safeguard necessary bank assets). It will address a perceived “inequality” in the housing market and mandate a requirement for the landlords to provide rental housing for Section 8 recipients (Section 8 is the program where indigents get their housing rental payments paid entirely by the federal government) for a very high proportion of the available housing vacancies. These Section 8 recipients will be illegals and minorities. They will destroy your and my neighborhood, turning these into slums because they will have NO STAKE in the homes themselves. They will NOT be homeowners. This is the Democrat/Obama dream: the final deconstruction of ALL middle class enclaves, values, and venues.
Having been employed in the past by a company that was taken over by this bunch, I can state with reasonable confidence my opinion that you don’t want to become part of their little feudal fiefdom, and that the neighbors will end up unhappy with whatever they have in mind. Owning that many homes looks rather like leverage over the city to me, and I suspect it’ll be used.
Sounds like a REIT on Steriods.
Anyway I can see why they are doing it, Talk to a Financial Pro on the down low, here is what they will tell you. Their post 08' gun shy clients do not want equites, even Utilities with the Divee, can't build them a bond ladder with Treasuries no yield. Everyone wants yield right now with "no" risk. This sounds made to order and maybe to good to be true...
First thing that popped into my head as well. There a site where one determine where these neighborhoods are and thus avoid them?
But not these renters. These renters are buyers who are on the early stage (Blackstone hopes) of a real estate recovery (a pick up in rentals is the first sign of a real estate recovery).
These buyers are probably folks who once owned and lost in foreclosure. They are hoping to head back up the ladder.
The numbers don’t add up. This is a sham to boost RE numbers in Florida to save Obama’s Presidency. 15000 homes at $100K each totals $1.5 billion. If they buy at their “sweet spot” of $150K it’s $2.25 billion.
Blackstone is a little short if they think they’ll pick up properties for $66K.
A billion dollars worth of Tampa Bay homes? Cool! That would be two with an ocean view and one more without.
How are stable neighborhoods going to development from renter neighborhoods owned by absent investors?
I don’t see it as being sinister, its just that there aren’t a lot of money making options right now. Buying homes presumably at the bottom and renting them is a decent way to make money.
This would give them a better return than mortgages, which are at historic lows. If the interest rate picks up, then they can sell them off, doing the financing themselves.
Not in Tampa bay .
Blackstone has been takin Wachovia lessons.
This can’t end well for them.
Anyway, that's not what the article is about.
Now, local good citizens owning a few rental properties for investment value is good. They make sure the neighborhoods stay good.
However, giant corporate robber barons rot the heart out of neighborhoods and destroy the economy. We learned nothing from the last decade.
Having properties occupied by renters is preferable to having foreclosure properties stand vacant, so in the short run this rental scheme will itself bring some stability.
And you can be sure this is only a short term idea because Blackstone needs to cash out and repay its investors in the not so distant futures. They are a buyout firm...they need an exit strategy.
This won’t get off the drawing board before the election.
If there were ever a low risk investment on the planet...this wasn't it. I have a friend with two nice homes for rent in gated communities (One on the beach no less.) The market is over-saturated. Jobs are real scarce in Florida.
IMHO, and with all due respect to Tampa, owning 15,000 homes in an area subject to the whims of nature regarding a hurricane does not make good investment sense to me.
I agree with donna in #10 above, "Renters destroy neighborhoods."
BTW, Are these homes under water? I can't find the city of Tampa Bay on my map.
I did, the better half's late Grandma had a place, it was sold, I am aware of the market slide their in values, and no "family-member" has owned something their for a while. I was unaware of the Jobs issue, but aware of the crime in certain parts of town.
But it didn't pass my smell test as an investment to me, and my last sentence in my original post is my jaundice eye to the idea showing...
That’s the optimistic assumption. There are no doubt other means of wringing every red cent out of it and if history is any guide, they’ll do it. In my opinion, if it’s more profitable to go section 8 they will, if it’s more profitable to pack them all twenty to a house with “undocumented workers” they will, if it’s more profitable to scavenge bits and pieces of the structures, raze what’s left and put in parking lots, they will. Obviously, I don’t have a very high opinion of them. Maybe they’ll surprise me with their altruism. Maybe monkeys will fly out of their butts. Who knows?
You’re right about one thing though. They are not focused on the long term.
Probably intentional. Get the votes and then back out of the deal after the election. [/cynicalism ]
Doesnt sound like Tampa is a good place to buy a home
Might find yourself in the middle of a new obamaville, owned by one of his bundlers and with govt subsidies to govt dependent people who will camp there for generations to come
I live in Tampa...bump for later...
I think it will decimate prices
Given what obamaville plans lie ahead for these modest neighborhhods, I would NEVER buy a modest home in Tampa
LOL...no, they didn't make their money being altruistic. But capitalism done right is sometimes a good thing.
Lease/purchase, the fraudsters legal way to steal money from the low income, young, and naive.
Purchaser gets behind, the property is taken back and lease/purchased to the next sucker.
... and sometimes it’s like being set upon by nihilist profit-seeking robots that see you more in terms of the price you’d fetch at a rendering plant.
I don’t think it will go far at all. This is a management nightmare and no sane RE investor would pursue it. 15,000 scattered site homes?
The entire story makes no sense. If they pay $150,000/home and rent them for $1500 they gross $18,000/home less any rent up costs, repairs, etc. prior to renting them out. How much are taxes, insurance and utilities on these homes? How much is maintenance?
If taxes are just one month, insurance one month and utilities are just one month you’ve got a net before maintenance costs of $13,500. Add maintenance of one month’s rent and you’re down to $12,000/150,000 investment for a return of 8% and a lot of hassle. They can’t beat that in stocks or corporate investing? Perhaps they’ll self manage it, but figure vacancies will run 5-7% and you lose another grand. That’s about 7% ROI. I’m not impressed.
I suspect Blackstone is either juicing it’s own game or hoping for massive inflation. Could be they’re taking a HUD portfolio, but the story makes it sound like their shopping the market on an individual basis. If they buy at $66K and rent at $1500 and sell out in 5 years at $150K that’s impressive, but once the Fed stops gaming the interest rate it’s going to level out. Who can afford a home at 16% interest?
A friend knows a guy who told my friend at Blackstone and we put $1 Billion on it right away. We’re too big to fail.
Yep, the vast majority of lease to buy deals go sour. It’s not a good deal to overpay your rent, lose your security deposit (down payment) and often more. You’re better off renting.
Unless, that is, they were planning to farm out the management (and had a good consortium of RE management companies in mind). There is no reason why existing condo and rental management companies wouldn't jump at the chance to get involved.
Hmmm...need to think this through more slowly. There might be something here.
It would be a real boon for the local economy...
Years ago I worked in the mortgage loan assumption department of a bank. Assumption as in someone buys your house and assumes the burden of your mortgage loan.
I saw many a heartbroken young couple lose their nest egg in one of these agreements and then the seller just went out and sold the same house again.
From what I hear from FL is 1500 is no where near enough for hazard insurance. I have a friend in Miami paying 6K.
They will probably average 50k. The whole point is to pick up distressed properties in areas where renters have no chance of leaving. Areas might look slummy but those are the cash cows of the rental industry.
It makes a little more sens if you go to the bottom of the article. It says they want to collateralize the rent payments like regular MBS