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Blackstone Lender Taps Irvine Firm on ‘Buy-to-Rent’

Irvine-based real estate advisory firm Johnson Capital has been tapped as the primary source of funding for a residential “buy-to-rent” lender recently established by one of the world’s largest private equity firms.

New York-based Blackstone Group LP has set up B2R Finance LP to lend in the buy-to-rent market, a segment in real estate investment that has drawn “a lot of new interest … and a lot of new players” since the recent recession, according to Johnson Capital President Cliff Carnes.

The steep drop in prices for single-family homes after the 2008 mortgage meltdown and through the recession—fueled by a wave of foreclosures—laid the groundwork for the buy-to-rent trend.

The recent yearlong recovery in home values has led some industry observers and investors to grow wary of the model, but Blackstone and its B2R Finance see more business ahead.

Charlotte, N.C.-based B2R Finance is “lending money to people buying homes in bulk,” Carnes said. “We are [B2R Finance’s] only correspondent right now, but they [could be] … getting more correspondents over time.”

Johnson Capital calls itself a “capital intermediary” to investor groups and developers, specializing in debt and equity placement services. It finances various types of properties, including office, industrial and multifamily.

The firm has arranged more than $38 billion in commercial real estate transactions since its inception in 1987 and is looking to wrap up this year with about $2 billion in transaction volume, according to Carnes.

Johnson Capital has 22 offices across the U.S. and employs nearly 100 executives and staffers.

B2R Finance is headed by Jeffrey Tennyson, former chief executive of mortgage originator EquiFirst Corp. in Charlotte. The firm had become one of the largest wholesale subprime lenders in the U.S. by 2007, when it was sold to London-based Barclays Bank PLC for $76 million. Barclays closed the division two years later.

B2R Finance is expected to provide loans starting at $10 million. It’s difficult to gauge the potential level of investor demand or to estimate the size of loan volumes that will be arranged by Johnson Capital.

“We’ve done a number of transactions in the last few years in this industry,” Carnes said. “There are numerous emerging capital sources that will finance these types of deals. We hope to capture those.”

Blackstone has been active in acquiring single-family homes for some time. The publicly traded firm, which had $28 billion in total assets as of the end of March, has spent about $5 billion on more than 30,000 distressed houses nationwide. That’s more rental homes than any other investor.

There are an estimated 14 million single-family rental homes in the U.S. valued at about $2.8 trillion, according to a report by New York-based investment banking firm Goldman Sachs Group Inc.

“It’s a product type that won’t exist forever,” Carnes said. “It’s [getting] more challenging to be able to buy. People who can still do this … are buying 20 or 30 houses in a single purchase and aggregating those into a pool. There are a number of investor groups in OC who are doing this around the country.”

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