“Absolute distrust, leading to absolute liquidity preference is the incurable consequence, it seems to me, of financial fraud. I say incurable. This is the diagnosis of an irreversible disease. The corruption and collapse of the rule of law, in the financial sphere, is basically irreparable. It’s not just that restoring trust takes a long time. It’s that under the new technological order in this field, it can not be done.” James K. Galbraith
Blackstone Group wants to sell you a new bond securitized by single family rentals. Yippee! The world’s largest private equity firm, and now the largest owner of rental homes in the U.S. owns 41,000 homes and they are going to pay you 1.31% on a AAA bond for the privilege of buying in to their new offering. The bond is backed by just a fraction (3,207) of those rental properties they own, and the monthly rent checks from the properties will be used to service the $479.1 million security. If this sounds reminiscent of what happened before the subprime bubble collapsed, it should. But this is what happens when the pampered princes of private equity get to feed off of government largesse and bastardize the U.S. real estate market in the process.
So what exactly is in those 3207 homes comprising the Blackstone/Deutsche “Invitation Homes“, first-ever rent-based bond offering? That’s a good question, and it gives you some insight as to the rosy assumptions that have been made. Fitch says a triple-A rating is not appropriate for this investment. While Moody’s rates 42% of the deal as Aaa Prime, Fitch rates none of it AAA prime. 18 percent of the deal is not rated at all, so we can probably assume it’s not worth much of anything.
Leave it to Wall Street to find new and inventive ways to screw people out of money. Looks like the Blackstone rental securitization is poised to do just that.