Home Rental Bonds - Signal to Sell?

[zenwalk]

Lord save us. They are doing it again!  

Investors in Blackstone (BX) Group LP’s debut sale of bonds backed by U.S. rental homes are agreeing to accept more risk than in traditional mortgage deals by at least two measures -- along with an unproven business.

Blackstone’s Invitation Homes borrowed more through yesterday’s deal relative to the value of the houses serving as collateral for the bonds than recent residential-mortgage securities, according to data from ratings companies. The cushion to cover interest payments is also smaller than in deals tied to apartment complexes. Monthly rent checks from 3,207 properties will be used to service the $479.1 million of debt.

www.bloomberg.com/news/2013-11-06/blackstone-lures-investors-to-home-rental-bonds-credit-markets.html

[douger]

Too big to fail my ass.

The precedence is set. We will be forced to bail them out yet again.

[kemmer]

Well, there was opportunity to purchase single-family homes during the bust and turn them into rentals. Sounds like Blackstone did that, and now wants to "leverage" their property.

I love the part about some tranches being protected because lower trances will absorb any losses. One suspects the major institutional investors will recall seeing that movie before-- but maybe not. (Let's watch to see if CalPers jumps in with all four feet.)

"Invitation Homes." What a lovely monniker. Who doesn't like to be invited? Me, I'd have called it: "A projected income stream from single-family rental properties (after all our costs of packaging and debt service are covered"), but that's just me.

Personally, I wouldn't buy it. But then, I'm not running CalPers or some other institutional entity. I have to eat my own losses. But, were I running lots of OPM, and I knew I'd never personally suffer (hedge-fund managers can just close the fund when there are losses), I might take a flier.

And, of course, the TBTF crowd knows you and I, and millions of other taxpayers, will always have their backs. So what's not to love?