Demand cooling for bonds backed by rental payments?

When Blackstone (BX +1%) in November launched the first-ever securitization of single-family rental payments, the top tranche of the $479M deal priced at just 115 bps over Libor and was 5x oversubscribed, but that aggressive pricing could come back to haunt.

After trading in the secondary market at above face value for the last three months, one dealer recently offered the riskiest slice at below par.

Institutional types have spent about $20B for 150K homes since the crisis and are now looking to monetize or at least get a return on that investment. “Now that there’s been a ground swell of purchasing properties, are we now not seeing the major funds trying to offload," one securitization conference attendee recently asked Deutsche's Ryan Stark - one of those who put together the Blackstone deal.

Blackstone's been going gangbusters of late as single-family housing is but a small slice of its business, but the performance of pure-play rental shops - SBY, AMH, ARPI - leaves something to be desired. A new entrant - Starwood's SWAY - began trading yesterday.

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Comments (2)
  • curbyourrisq
    , contributor
    Comments (153) | Send Message
    And we are surprised by this? Seriously?


    They bundle the worst tranches of cash flow with some of the higher ones and package them off to uneducated investors. Wash, Rinse, Repeat. This has happened before, maybe the public is catchin gon to the shenanigans of Wall Street?


    I would say that's a good thing.
    4 Feb 2014, 11:03 AM Reply Like
  • mostserene1
    , contributor
    Comments (3706) | Send Message
    That's why I'm long BX. Look, people are going to repackage and sell these mortgage/rentals whatever, so why not invest in someone that knows how to work the system.


    Long BX and buying on dips. It is pricey, but pays a good dividend. And is headed by a genius.
    4 Feb 2014, 03:19 PM Reply Like
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