(In second paragraph please read "Our exit will be to sell the
individual homes to the renters themselves, or there could be a
very large market for public housing REITs" instead of "... very
large market for public housing units.")
By Ilaina Jonas
NEW YORK, July 18 Blackstone Group LP has
spent more than $300 million to purchase over 2,000 foreclosed
homes in order to rent and bet on a recovery of the U.S. housing
market, the private equity company's global head of real estate
"Our bet is over time, vacant homes will fill up and markets
will begin to recover," said Jonathan Gray, senior managing
director and global head of real estate. "Our exit will be to
sell the individual homes to the renters themselves, or there
could be a very large market for public housing REITs."
Blackstone is one of several hedge fund and private equity
firms with plans to raise or those that have raised money to
acquire foreclosed homes to rent them out for several years
before selling them as the housing recovery takes hold.
"There have been a lot of announced strategies. There have
been few people who have actually raised the capital and are
executing today," Gray said while speaking at the CNBC
Institutional Investor Delivering Alpha Conference in Manhattan.
"I think they'll be a relatively small number of us who can
get the scale and have kind of organization that can work
nationally in the major markets," he said.
The venture fits into Blackstone's strategy of buying
property at a deep discount to the cost of replacing it.
Asset management firm TCW, which specializes in fixed-income
securities and oversees $128 billion in assets, recently
launched the TCW Home Place Partners fund, as an opportunity for
wealthy investors to invest in the "housing turnaround" by
buying foreclosed homes from banks and federal government
Beazer Homes USA, Inc in early May announced Beazer
Pre-Owned Rental Homes, Inc -- founded by the company and which
includes an investor group led and arranged by affiliates of
private equity firm Kohlberg Kravis Roberts & Co.
The Beazer fund aims to acquire, refurbish and lease
recently-constructed, previously owned single-family homes on a
large scale in select markets in the United States.
A tall hurdle facing those who want to buy thousands of
foreclosed homes is how to manage and maintain them once they
"You have to spend some money to fix it up," Gray said. "You
have to lease it. The real challenge is the execution and having
Blackstone is looking to work with large apartment operators
in the areas it buys homes.
"It will end up being very positive for the U.S. economy,"
Gray said. "These homes will get repositioned. People will get
affordable housing. I see this as an opportunity to move a fair
amount of money. But it won't be around for ever."
(Editing by Muralikumar Anantharaman)