Photo: Kevin Bauman
Here’s a real test for private equity where Americans can see (and feel) the results. The government is putting 200,000 distressed homes on the auction block, and Bloomberg reports that private equity firms are in line to buy them. From Bloomberg:
GTIS Partners will spend $1 billion by 2016 acquiring single-family homes to manage as rentals, Thomas Shapiro, the fund’s founder said. That followed announcements this month that GI Partners, a Menlo Park private equity fund, expects to invest $1 billion, and Los Angeles-based Oaktree Capital Management LP will spend $450 million on similar housing.
“It’s a massive market,” Shapiro said in a telephone interview from New York. “We’re starting to see this as a billion dollar opportunity to buy rental housing.”
This isn’t the first time that an idea like this has been floated around. Federal Reserve Chairman Ben Bernanke strongly suggested that real estate owned properties held by the government and banks be converted into rentals to help the housing industry.
And renting is a lucrative market these days, depending on where you are. In 2011, the rental price for 2-bedroom units in the top-20 most populated metro areas jumped 3.75%, compared to sales, which fell 1.83%.
Expect major movement soon. Fannie and Freddie plan complete initial transactions on an inventory of 180,000 homes by the end of the first quarter of this year.