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Companies, investors journey into single-family home rental market.

THE BUDDING SINGLE-FAMILY rental market is garnering an increasing amount of attention now that Waypoint Homes and GI Partners have secured a $245 million revolving credit facility. The companies will utilize part of the funds, provided by Citi in October, to increase the size of its expanding portfolio of rental residences.

Waypoint is quickly advancing in its goal of reinventing renting by increasing its collection of single-family rentals. It got a significant boost in January when private equity firm GI committed to making an initial equity investment of more than $250 million.

* Vulcan Investment Partners is spending as much as $150 million to buy hundreds of foreclosed houses in South Florida at bargain-basement prices. The Miami-based venture plans to renovate and rent most of them for several years before selling.

The state has ranked as one of the country's foreclosure hot spots for some time. Vulcan's plan is to buy approximately 1,200 foreclosed homes, nearly half of which will be split between Broward and Palm Beach counties. The remainder will be in Miami-Dade County.

Vulcan expects to pay roughly $75,000 for homes once valued at $200,000 or more. Vulcan CEO Inaki Negrete says his firm is helping to boost South Florida's residential property market by reducing the number of foreclosures and expanding the region's thriving rental market, according to a report in the South Florida Sun-Sentinel.


* Blackstone Group LP also has emerged as one of the nation's largest investors in single-family rental homes. It has spent more than $1 billion since the beginning of this year to acquire more than 6,500 foreclosed houses in eight major metro areas.

The firm also is finalizing a loan for at least $300 million from Deutsche Bank to support this business. A number of private-equity companies have crowded into the market, some as early as last year, looking for a way to bet on the recovery of the housing market.

Blackstone's growing commitment to this strategy helps to show that the purchasing of foreclosed residences is gaining legitimacy among the largest private-equity firms. Earlier this year, the Federal Reserve expressed support for the strategy as a way to clear the backlog of foreclosures that has weighed down the market. Blackstone has previously stated that it expects to achieve initial yields of 6 percent to 7 percent on rental income; however, the firm also will need rents and home values to rise if it is going to hit the double-digit returns that it typically promises its investors.

Source: NAA's Industry Insider, Commercial Properly Executive, South Florida Sun-Sentinel and Wall Street Journal.
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Title Annotation:Investment
Date:Nov 1, 2012
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