Blackstone Group profits from Stolen Middle Class Homes

Editor’s Note: Blackstone Group’s special relationship with banks and county recorder’s offices allowed them to buy blocks of illegally foreclosed homes for pennies on the dollar.  A significant percentage of these homes purchased in the foreclosure crisis had fraudulent paperwork, forged signatures, and were “owned” by MERS. At some point, when rentals are not so profitable, Blackstone will turn around and resell these homes that lack clear chains of title to unsuspecting buyers.

Blackstone Group LP US home rental giant created in $20bn deal Merger of Blackstone and Starwood units covers 82,000 houses after buying foreclosed properties

by: Javier Espinoza in London and Kara Scannell and James Fontanella-Khan in New York

Two companies that bought thousands of homes after the US foreclosure crisis that began a decade ago are planning to merge, creating the country’s largest owner of rental houses and marking the culmination of a huge private equity bet on the US housing market. Blackstone’s Invitation Homes and Starwood Waypoint will together have a portfolio of 82,000 single-family homes in 17 markets across the US. Invitation Homes shareholders will own roughly 59 per cent of the merged company, with the remaining 41 per cent held by Starwood’s investors, in the all-share deal announced on Thursday.

Both firms’ founders saw an opportunity in the wake of the financial crisis to consolidate the disparate US housing market and to prove that owning and managing a portfolio of single-family homes could be a lucrative business. Houses had historically been rented out by small-time landlords, rather than large corporations. Barry Sternlicht’s Starwood Waypoint merged with Colony American Homes, backed by real estate mogul Tom Barrack, a close friend to President Donald Trump, in 2015. Mr Barrack sold his stake in the combined company in June.

Blackstone floated Invitation Homes earlier this year. The combined portfolio will still represent less than 0.1 per cent of the more than 90 million single-family homes in the US, and just 0.5 per cent of the nearly 16 million homes for rent, the groups say. Invitation Homes’ “emphasis on local density and boots on the ground . . . should help create a leading, sustainable residential rental platform that over the long term has growth potential within both the single-family rental and broader residential housing markets”, Jade Rahmani and Ryan Tomasello, analysts at Keefe, Bruyette & Woods, said in a note to clients.

The group’s combined portfolio is concentrated on middle class homes, and nearly 70 per cent of its revenue comes from the western US and Florida. The merger will result in $45m-$50m in annual savings to the costs of managing the portfolios, which have substantial geographical overlap.

Blackstone, which owns 70 per cent of Invitation Homes, will emerge with 41 per cent of the combined group. The total enterprise value, including debt, of the combined company will be roughly $20bn. The business will be led by Starwood Waypoint chief executive officer Fred Tuomi. The companies have sought to take advantage of the post-crisis decline in home ownership rates, when mortgage rules tightened and a growing numbers of families rented homes instead. The current US home ownership rate of 64 per cent is down from more than 68 per cent a decade earlier, according to Census Bureau statistics. Invitation Homes says it provides rental homes to middle class families looking to live in “desirable neighbourhoods in convenient proximity to major employment centres, good schools, and transportation corridors”.

Yet the institutional ownership has also generated some criticism. A December 2016 study by the Atlanta Federal Reserve found that some large private equity investors have uniquely high eviction rates. “One possible reason large corporate landlords backed by institutional investors may have higher eviction filing notices is that they may routinely use eviction notices as a rent collection strategy,” the study found.

Additional reporting by Judith Evans

6 Responses

  1. I’m trying to buy my property back and the lawyer said will sue WFB & BSI

  2. So get “polled” today. No questions on bank fraud. And, I asked them — why NOT???

  3. Reblogged this on California freelance paralegal and commented:
    The large corporate landlords not only charge higher rents than most other landlords they also fail to maintain the rental properties. All they care about is profit and nothing else.

  4. There are no laws, it is a gold plated Somalia. The only real question is which gang is going to rob you.

    Make it a Great Day.

    Scott Thompson

  5. This is old news and who is the mortgage holder of blackstones rental properties, jp morgan chase. I saw the pattern a long long time ago when they were working on stealing my home in desirable deerfield beach Florida in their opinion anyway not mine and thats check iut eastway park subdivision in deerfield beach. Invitation homes bought quite a few homes up in foreclosure in that subdivision. No wonder Chase bank reneged on 2 loan mods with me. They were out to steal my home and they were not going to let up. Some small investors bought it at foreclosure auction. I fought as long and as hard as i could.

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