http://blogs.marketwatch.com/thetell/2012/10/15/your-rent-check-is-about-to-make-private-equity-investors-richer/ "" Your rent check is about to make private equity investors richer
October 15, 2012, 10:36 AM .
So here’s a quick history quiz to start off the week. What was one of the key triggers of the global financial crisis we’re all still recovering from?
OK, sure, easy enough you say, it was the total breakdown of the subprime mortgage market and the web of financial connections and commitments they built. OK, so you get an A.
Now, if you’re on Wall Street that’s old news, and it’s hardly worth crying about something in the rearview mirror.
Eyes forward folks! Disaster creates opportunity for those in the money game, and boy is there a new opportunity developing in the real estate market these days.
Those brilliant folks who brought you bonds backed by mortgage payments are now set to roll out, drum roll please, bonds backed by rental income.
Let’s turn to Shanny Basar over at Financial News (subscription required) to fill in the details, shall we?
Writes Shanny:
“The first securitization backed by rental income from the US housing market could be on offer to investors within three months.
Private equity firms have spent millions this year buying homes in foreclosure, which they plan to renovate and then wrap the rental income into structured products to be sold to yield-hungry investors.
Kevin Petrasic, partner in the global banking and payments systems practice at law firm Paul Hastings, said: “There are investors with plenty of cash sitting on the sidelines looking for investment opportunities with different levels of risk, and I would not be surprised to see a rental securitisation in the next three to six months.”
The U.S. housing market is showing firm signs of recovery, J.P. Morgan JPM-0.07% chairman and chief executive Jamie Dimon said last Friday: “We believe the housing market has turned the corner. In our mortgage banking business, we were encouraged that credit trends continued to modestly improve.”
Stephen Schwarzman, chairman, chief executive and co-founder of private equity giant Blackstone Group, told investors in a second-quarter results conference call: “I think we are more or less picking another market bottom.”
This month, The Wall Street Journal reported that Blackstone has invested more than $1bn since the start of this year to buy more than 6,500 foreclosed houses in eight metropolitan areas, including Chicago, Miami and Phoenix. On October 10, it also confirmed that it had closed its seventh real estate fund at $13.3bn, which it said was the largest opportunistic real estate fund ever raised. Blackstone declined to comment.
At least five other buyout firms have similar strategies. One has estimated the potential size of the US single-family home rental market at $1 trillion.""
