Blackstone rental bonds revive fears of mortgage-backed crisis
Blackstone is among the firms that have spent billions
buying homes out of foreclosure, helping to bolster demand and
strengthen the US housing market, the WSJ reports.
he private-equity giant has spent $5.5bn buying more than
30,000 houses to rent out. It is now working with Deutsche Bank
to create securities tied to about 1,500 of the properties to
form a rental bond deal worth up to $275 million.
The “securitization” vehicles would be backed by equity and
property worth between $300 million to $350 million, according to
The structure of the deal would be similar to better-known
securities, such as those backed by home or commercial mortgages,
the WSJ reports.
Investors say the new Wall Street-engineered income idea raises
concerns over the stability of the rental market itself and the
structure of these instruments, investorplace.com writes.
“Distressed inventory” — which is what Blackstone calls its
properties — might come back with stronger valuations, or they
might not, and while Blackstone might love its tenants, it
probably would be quick to hand the keys back to any lenders (or
bondholders) if “distressed” turned into “hopelessly
underwater,” writes Marc Bastow, Assistant Editor at
Analysts say one of the causes of the global financial crisis of
2008 was the production of mortgage collateralized bonds. These
tools were not adequately evaluated and caused billions of
dollars in losses in the entire U.S. financial system as the
house market fell.