The firm got a $600 million line of credit from Deutsche Bank AG in October. It’s in talks with the Frankfurt-based lender to double the financing, according to two people with knowledge of the negotiations. Deutsche Bank will lead a group of banks that will contribute an additional $600 million, according to the people, who asked not to be identified because the talks are private.
Financial institutions have been slow to back single-family rental homes, because large investors have little history to demonstrate cash flows and cost of operations.
“While leverage is currently limited, potential financing options include secured credit lines, lending syndicates, high- yield debt, government sponsored enterprise-provided financing, and securitization,” Jade Rahmani, an analyst with Keefe, Bruyette & Woods Inc. in New York, wrote in a note yesterday.
Citigroup Extended
Citigroup Inc. extended a $245 million line of credit to Waypoint in October, enabling the investment firm to multiply its initial $150 million in capital from GI Partners, a Menlo Park, California-based private equity fund. American Residential Properties, which has 1,500 homes in five states, received a line of credit from Wells Fargo & Co. in June 2010. The company announced plans for an initial public offering of shares as early as the first quarter of this year, depending on market conditions.
Blackstone’s strategy in real estate generally has been to “buy, fix and sell,” said Gray, who in 2007 engineered the largest real estate buyout ever when Blackstone acquired Sam Zell’s Equity Office Properties Trust for $39 billion including assumed debt. Gray’s real estate business brought in $1 billion in profit for the firm in 2011.
In the case of the single-family business, Blackstone will rent and manage the homes through Invitation Homes, which it founded last year with Riverstone Residential Group, an apartment management company based in Dallas.
While Blackstone ultimately will benefit from the properties’ price appreciation, in the meantime, the homes will generate revenue and cash flow, Gray said.
“We’re building a real company,” he said.