NEW YORK Blackstone Group LP (BX.N) 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 said Wednesday.
"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 units."
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 agencies.
Beazer Homes USA, Inc (BZH.N) 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 (KKR.N).
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 have them.
"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 the team."
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)