- Blackstone is committed to reducing rents and long-term property assets to combat potential inflation.
- Private equity firms have trillions of dollars in cash to spend on acquisitions.
- Blackstone’s share price topped $ 100 for the first time this month.
This month has been pretty good for Blackstone.
The private equity giant is part of a consortium of investors that bought Medline for about $ 34 billion, its share price celebrated over $ 100 for the first time, and he doubles his residential real estate with his $ 6 billion purchase of Home Partners of America.
This is a bet on maintaining scorching demand for housing, as well as a defensive move as fears of inflation begin to creep into the minds of investors. According to the National Association of Realtors, the median home price surpassed $ 350,000 for the first time in May, the largest price increase on record since NAR began tracking data.
“Whether it’s apartments, storage space for warehouses or single-family homes, private equity is becoming a hedge against inflation,” Nicholas Tsaphos, partner at accounting firm EisnerAmper, told Insider.
Home Partners, which owns more than 17,000 homes in the US, leases these properties, but tenants have the opportunity to buy a home someday.
In single-family rentals, private equity firms can raise rents while maintaining lucrative tangible assets.
“Since interest rates are low and given the potential for inflation to rise, private equity also feels the need to be long in hard assets,” Tsafos said. “In real estate, you buy it today and then transfer it at a higher price.”
John Gray, President and COO of Blackstone, hinted at this during a phone call to the company in April when he said that the multi-family apartments that come with the ability to reset the rent were key to Blackstone.
The firm has bought many homes at remarkable discounts since the 2007 housing crash. She has amassed a number of single-family homes through the former portfolio company Invitation Homes. Blackstone sold its last stake in the company in 2019.
According to a study by UBS released on June 22, the private equity fund also favors logistics spaces such as warehouses, life sciences offices, and media and studios with offices.
Blackstone made a solid investment in October when it sold life science company BioMed Realty for $ 14.6 billion after acquiring it for about $ 8 billion in January 2016.
And it’s not just Blackstone. An associate of a private investor KKR invests in My Community Homes, a platform that buys and manages single-family rental properties, according to Bloomberg…
KKR will invest in My Community Homes through real estate and private loans.
A KKR spokesman was not available for comment.
In May, the Carlyle Group said it had lent up to $ 300 million to the privately held Four Springs Capital Trust.
which purchases and manages a single tenant property on a long-term net lease.
Four Springs will use the money to build its portfolio of 122 properties in 29 states, Carlisle said in a press release.
The real estate movement comes at a time when private equity firms have more than $ 1 trillion in cash. Borrowing costs also remain low as the Fed keeps interest rates at an all-time low.
Given the sheer amount of dry powder available, coupled with adaptive credit markets, private equity tends to over-acquire and is not shy about injection. large amounts of capital in promising investments.
For example, Medline is expected to raise about $ 17 billion in debt markets, while private investors provide a similar amount in equity.
“Large leveraged buyouts are back in vogue,” said Christopher Zuck, chairman and CIO of CAZ Investments, an alternative investment manager. “Whether it’s KKR or Blackstone, they have a lot of capital to make them work. Therefore, they need to conclude a lot of deals. “
Disclaimer: KKR owns a majority stake in Insider’s parent company Axel Springer.