Blackstone Readies Bonds Backed by Rental Homes

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Investment giant Blackstone Group is preparing to issue the first-ever bonds backed by rental income from single family homes.

Blackstone is the largest owner of single-family homes in the United States, after spending an estimated $7.5 billion to buy 40,000 foreclosed properties.

Deutsche Bank will begin marketing a $500 million offering in the next few weeks, based on the cash flow generated by those rental properties, according to media reports. At least one portion of the issue has received a Triple A rating from one of the top ratings agencies, the Financial Times reported today.

The REO-to-rental business attracted institutional investors in the wake of the market collapse. Funds and REITs spent more than $20 billion to purchase as many as 200,000 homes, Bloomberg estimates. But no group was more active than Blackstone. Earlier this year the company set up its own lending arm to help other groups buy homes to rent.

Securitizing the cash flow from those properties is the logical move for Blackstone, analysts say. It may also develop a new asset class, bringing more liquidity into the market.

"Securitization is the next step in the evolution of the single-family rental business," Rob Bloemker, chief executive officer of investment firm Five Ten Capital LLC, told Bloomberg. "It brings consistent and conforming standards to lending, which will help bring larger pools of capital in and get comfortable investing in these types of loans."