Blackstone’s Big Bet On Home Rentals

On 22nd June, Blackstone Group reported that it had signed a final deal to purchase "Home Partners of America" for $6.0 billion.

The US-based alternative investment management firm took this decision predicting that the demand for suburban houses will remain high even when the pandemic unclogs.

According to a report, Home Partners possesses more than 17,000 houses across the United States. The company works differently than its rivals as it allows tenants to purchase their rentals. 

Throughout the lockdown, the Americans were away from workplaces, shopping malls, and hotels. This made real-estate investors look for alternative places to invest, thus focusing on single-family rentals. 

As a result of this, single-family rentals became the most popular choice among investors. In addition, remote work and education led to the high demand for suburban homes from buyers and renters, driving up prices and reducing inventories. 

Individuals and families all over the United States benefit from HPA's innovative and resident-led business strategy.  HPA's model increases housing access and options while also laying out a clear route to house ownership.

Blackstone's permanent capital and Choice Lease program

Blackstone's involvement in HPA will be backed by its permanent capital, allowing for a real long-term solution to property management.

Moreover, Blackstone's extensive experience with rental residences and dedication to behaving uprightly in the interests of tenants will provide crucial insights. Blackstone will also provide optimal operating practices to the ownership and management of these residences.

Blackstone will work with the HPA leadership team to find ways to increase access to high-quality dwellings for low-income families, including officially debuting its Choice Lease program.

What is Blackstone Choice Lease?

Choice Lease is designed to give a clear and realistic way for families throughout the country to tackle housing affordability issues.

The company is also determined to proceed and enhance the free financial planning advice service available to all residents.

HPA's co-founder and CEO, Bill Young, will assist HPA in expanding its scheme's reach. Their program to offer access to more properties and fulfill their existing customers' long-term promises will improve. 

The deal is set to close in Q3, 2021, following prevailing closing conditions and permissions.

HPA's financial affairs are led by Goldman Sachs & Co. LLC. And, its legal assistants were Shriver & Jacobson LLP, Fried, Frank, Harris, and Sidley Austin LLP. Blackstone received financial advice from Wells Fargo Securities and BofA Securities. Simpson Thacher & Bartlett LLP acted as the legal representative of the firm. 

After the U.S. housing collapse, Blackstone revived its stake in Invitation Homes Inc., making it the largest single-family renter in the country. It drove a team of investors to buy a minority position in Tricon Residential Inc., a Toronto-based company that owns and runs over 31,000 homes and flats.

There could also be a matter of sellers' remorse for Blackstone. In 2019, the business sold the final portion of its ownership in Invitation Homes for $30.10 per piece.

According to sources,  Blackstone made approximately $7 billion on its investment in Invitation during that period. However, since then, the firm's stock has climbed by 25%.

Founded by  Peter G. Peterson and Stephen A. Schwarzman, Blackstone has a total revenue of 610 crores U.S. dollars as of 2020. Its shares trade on NYSE with a market cap of  69.45 billion. The company's first quarter ended with a report of 649 billion dollars in its assets under management. 

The Chicago-based HPA has total funding of 767.6 million dollars. Currently, its yearly revenue is 17.5 million dollars.