Blackstone Group Inc., which led Wall Street's initial foray into the single-family rental business, is making a new investment in suburban houses at a time when the COVID-19 pandemic is pressuring traditional commercial real estate.
The private equity giant, which exited its stake in landlord Invitation Homes Inc. last year, is leading a group of investors in a $300 million minority investment in Tricon Residential Inc., which owns and manages more than 30,000 single-family rental homes in North America.
The deal — made through Blackstone's nontraded real estate investment trust, known as BREIT — is for preferred shares issued by a Tricon subsidiary that can be exchanged for a minority investment in the Toronto-based company, according to a statement Thursday announcing the deal. Tricon said it plans to use the capital to pay down debt.
"We continue to see strong underlying fundamentals in the rental-housing sector, and believe the company's high-quality, income-generating assets are poised to generate stable performance under the leadership of its best-in-class management team," Frank Cohen, chief executive officer of BREIT, said in the statement.
The suburbs are in high demand as city-dwellers seek quarantine comforts such as backyards and room for home offices. At the same time, with more than 16 million Americans out of work, many renters have said they lack confidence in their ability to pay for housing, and experts are warning that the country is headed for a massive wave of evictions.
Shares of single-family landlords have been rewarded during the pandemic as their rent collections have held up better than those of multifamily landlords. Tricon's stock has surged 89% since March 23, compared with a 23% gain for a Bloomberg index of apartment REITs.
While rent collections remain a risk for single-family landlords in the coming months, "the current environment has the potential to increase long-term demand" for the properties, Jade Rahmani, an analyst at Keefe Bruyette & Woods Inc., wrote earlier this month.
Single-family rentals have been around for decades, but Wall Street viewed scattered-site portfolios as difficult to manage. That changed following the U.S. foreclosure crisis, when firms like Blackstone began assembling massive holdings and developing new property-management systems.
Blackstone took Invitation Homes public in 2017 and the firm later merged with other rental-home operators to create a landlord with roughly 80,000 houses.
Blackstone isn't the only early Wall Street player to return to the single-family rentals. Barry Sternlicht's Starwood Capital Group began buying houses last year, Bloomberg has reported.
