🏠 Can Real Estate Become Blackstone's Cornerstone?

Microsoft's $2T milestone, Peloton's new initiative.

Hey Global Investor, here’s what you need to know before the US markets open.

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🏠 Blackstone: Is Real Estate Its Cornerstone?

Blackstone Group (BX) has acquired Home Partners of America for $6B and is betting on home rentals in the US to grow. This is not Blackstone’s first foray into the real estate market. Will the private equity major be able to replicate past success in this space? (Tweet This)

Getting Real With Real Estate

2009-2010 marked some of the lowest lows of the housing market in the US as the subprime mortgage fueled the real estate bubble burst. Blackstone started dabbling in real estate just as the recovery from the Great Recession took hold.

It set up IndCor Properties in 2010 and embarked on a buying spree of industrial properties. By 2014, it had assembled a portfolio of 117M square feet of warehouse space in 29 cities. Blackstone sold IndCor to GIC, Singapore’s sovereign wealth fund in 2014 for $8.1B for a $2B profit.

Blackstone also saw an opportunity in single-family homes. In 2012, when the housing market had bottomed out, the company founded Invitation Homes in order to acquire, maintain, lease, renovate and manage single-family homes.

By 2016, Invitation Homes had acquired nearly 50K single-family homes in 13 cities across the US worth nearly $8.3B, becoming the largest owner of single-family rental homes in the country. Invitation Homes raised $1.54B in its 2017 IPO.

Two years later, Blackstone fully divested its shares in Invitation Homes garnering more than $7B in total, more than double its investment. Perhaps a premature move since the share price of Invitation Homes (INVH) is up 25%.

Blackstone re-entered the market late last year with a $300M minority investment in Tricon Residential, which owns and manages over 30K single-and-multi-family rental homes in the US and Canada.

Home Is Where The Cash Is

Yesterday, Blackstone announced the acquisition of Home Partners of America for $6B. Home Partners, also founded in 2012, owns over 17K homes across the US and is backed by KKR & Co. and BlackRock Inc. Home Partners of America had also explored going public in 2018.

This move comes amidst a shift in buyer behaviour, who are choosing to rent apartments and homes instead of owning them. Existing home sales in the US fell for the fourth straight month in May.

On the other hand, home rental prices have risen 7.5% across the country to their highest level in two years. Blackstone had been at the receiving end of criticism that it profited from home foreclosures during the Great Recession. Home Partners’ business model will help parry those blows this time around as the company allows tenants to buy their rented homes.

With the acquisition of Home Partners of America, Blackstone hopes to repeat its Invitation Homes success. While things may not be as dire as they were a decade ago, the pandemic and concomitant tepid economic recovery will come with its own set of challenges. Still, if the track record is anything to go by, Blackstone seems to have done its homework this time around as well.

Market Reaction
BX ended the day at $98.41, up 0.10%.

Company Snapshot 📈

BX $98.41 +0.10 (0.10%)

Analyst Ratings (16 Analysts) BUY 62%  HOLD 38%  SELL 00%

Newsworthy 📰

No Entry: Morgan Stanley to bar unvaccinated employees, clients from NY offices (MS -0.29%)

Tailwinds: Boot Barn CEO says sales boost from return of concerts, rodeos still ahead of us (BOOT +4.43%)

New Way: Peloton launches corporate wellness program as it aims to reach new users (PTON +8.38%)

Later Today 🕒

  • IHS Markit Ltd. Earnings (INFO)
  • KB Home Earnings (KBH)
  • Patterson Companies, Inc. Earnings (PDCO)
  • 6 PM IST: Current Account Deficit
  • 7:15 PM IST: Market Manufacturing & Services PMI
  • 7:30 PM IST: New Home Sales

Fun Fact of The Day 🌞

Starbucks spends more on health care insurance for its employees than on coffee beans

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