By Matthew Goldstein
NEW YORK, Sept 23 (Reuters) – Oaktree Capital Group is
leading an effort to put up for sale roughly 500 fully-leased
homes, an indication some early investors are looking to
cash-out on the recovery in U.S. housing prices, according to
sources familiar with the market.
Oaktree, which manages about $76 billion, and its
partner Carrington Mortgage Services are entertaining bids for
the portfolio of fully-leased homes as they seek to exit from
the buy-to-rent trade that has become popular the past two years
with hedge funds and private equity firms.
The homes, mainly located in several western U.S. states, is
being shopped to other large investors in foreclosed homes, said
three sources, who asked for anonymity because they were not
authorized to discuss the matter.
Oaktree, which specializes in distressed investing, and
Carrington had initially planned on converting their portfolio
into a real estate investment trust. But investors have now
decided to simply exit the trade. Their asking price for the
portfolio could not be learned.
Earlier this year, Reuters first reported that Oaktree,
after partnering with Carrington in early 2012, was souring on
the buy-to-rent trade after seeing returns on rents from
single-family homes begin to compress. Oaktree, which had agreed
to spend up to $450 million on building a portfolio, told
Carrington this spring that it did not want to continue buying
additional foreclosed homes.{nL2N0DN0X7}
A year ago, hedge fund Och Ziff Capital Management
put its book of 300 homes in Northern California up for sale, a
process it has just about completed.
In choosing to sell now, Oaktree and Carrington look to
profit from the recovery in home prices. Nationally, the prices
for single-family homes are up about 12 percent compared to a
year ago, according to the S&P;/Case-Shiller composite index.
Prices are up more in markets that investors have targeted.
In Las Vegas, for instance, homes are selling for 25 percent
more than they did a year ago.
People familiar with Oaktree and Carrington said the two
firms remain interested in working together to invest in
nonperforming home loans, a business that Carrington specializes
in.
There has been a transformation in the U.S. buy-to-rent trade
over the past year, which initially began with a number of small
hedge fund and speculators buying the wreckage of the housing
bust in southern California, Florida, Arizona and Nevada. But
single-family homes have emerged as new asset class for Wall
Street firms.
A year ago, private equity firm Blackstone Group, and
a handful of large Wall Street-backed firms began spending
billions in a race to acquire properties in order to get ahead
of an escalation in homes prices.
Fueled in part by the Federal Reserve’s policies, which made
it easy to borrow money to buy distressed real estate, the
buying spree led investors to become more aggressive in seeking
higher-yielding assets.
To date, Blackstone is the single-largest buyer of
foreclosed homes, owning about 32,000 in a dozen states. Other
big acquirers are: American Homes for Rent, Colony
Capital and Silver Bay Realty Trust Corp.
American Homes, Silver Bay and a few other institutional
buyers of foreclosed homes have tried to monetize their
investment by converting their home portfolios into publicly
traded real estate investment trust.
(Reporting By Matthew Goldstein; Editing by Paritosh Bansal and
Leslie Gevirtz)
