Move over mortgage-backed securities, there is a new game in town. The Blackstone Group L.P. (NYSE: BX) is preparing to pepper the bond market with a new investment, bonds backed by single-family home rental income. Under evaluation by bond buyers are $479 million worth of securities. The bonds are backed by Deutsche Bank AG (NYSE: DB) and interest on the securities paid by rental income from Blackstone’s single-family home rental company, Invitation Homes LP.
An executive at Deutsche Bank told the Wall Street Journal that the first offer is expected next week. The paper also covered a conference by the New York University Schack Institute of Real Estate where Richard Saltzman, Colony Capital’s President said, “We’re rooting for them.” Colony Capital is a private real estate investment firm.
It is easy to see why Colony Capital is rooting for Blackstone’s success. The rental market does not appear to be going anywhere soon. Homeownership between 2006 and 2010 slowly but consistently declined according to data provided by the U.S. Census Bureau. Research by the National Multi Housing Council shows that 32 percent of the U.S. population is in a renter-occupied dwelling, and that single-family households account for 40 percent of the rentals.