Blackstone (BX) Rental Bond: Rents Fall Slightly In First Meaningful Data

Blackstone (BX) Rental Bond: Rents Fall Slightly In First Meaningful Data

By Nat Rudarakanchana

on February 20 2014 12:14 PM

http://www.ibtimes.com/blackstone-bx-rental-bond-rents-fall-slightly-first-meaningful-data-1556931

The first test of rental income behind the Blackstone Group LP’s (NYSE:BX) closely-watched rental-backed bond saw collected rents fall 7.6 percent over the last quarter of 2013.

Investment adviser Morningstar Inc. (NASDAQ:MORN) noted that renewals on rent leases exceeded its expectations, however, Bloomberg reported Wednesday.

The bonds, the centerpiece of a $480 million offering of a new type of financial product, were marketed by Blackstone and major Wall Street banks late last year. They allow investors to capitalize on Blackstone’s ownership of tens of thousands of single-family homes in the U.S., snapped up at bargain foreclosure prices after the financial crisis.

Regulators and lawmakers have worried about the fallout if tenants fail to pay rent or if Blackstone abruptly sells back significant real estate onto the market.

A Blackstone spokeswoman declined comment to Bloomberg.

Falling rental rates, as housing supply expands, may factor into the complex mechanics behind the bond, finance blog Naked Capitalism noted.

“The big test for Blackstone will be the first quarter, the peak period for rent renewals in this transaction,” the blog stated.

One issue with the bonds involves the different risk levels accepted by investors. If rental income from the homes decline, investors suffer to a greater or lesser degree, depending on their risk appetite and the bond’s tranche structure.

“The prices on the riskier tranches which are the first to take the hit if cash flow comes up short fell after the Morningstar news was made public,” the blog noted. “And that alone could prove fatal to this type of deal.

“Dealers do not want to wind up stuck with the riskiest inventory from securitizations, so the ability to sell these deals is constrained by the ability to place the more speculative tranches.”

The bond has an initial two-year term, with extension options. The number of vacant homes among the 3,207 homes backing Blackstone’s security is a key metric for investors and analysts.

Morningstar Inc.

Joseph D. Mansueto is the chairman & founder & CEO for Morningstar, Inc., and a member of the Commercial Club of Chicago.

Note: Commercial Club of Chicago, Members Directory A-Z (Past Research)

Tuesday, December 17, 2013

http://thesteadydrip.blogspot.com/2013/12/commercial-club-of-chicago-members.html

Rahm I. Emanuel is a member of the Commercial Club of Chicago, the Chicago (IL) mayor, Ari Emanuel’s brother, and was the White House chief of staff for the Barack Obama administration.

Ari Emanuel is Rahm I. Emanuel’s brother, and a founding member of the Core club.

Stephen A. Schwarzman is a founding member of the Core club, and the chairman & CEO & co-founder for the Blackstone Group.

John J. Studzinski is a senior managing director at the Blackstone Group, a director at the Atlantic Council of the United States (think tank), and a director at the Human Rights Watch.

Wesley K. Clark is a director at the Atlantic Council of the United States (think tank), and a senior adviser for the Blackstone Group.

Open Society Foundations was a funder for the Atlantic Council of the United States (think tank), the Human Rights Watch, and the Committee for Economic Development.

George Soros is the founder & chairman for the Open Society Foundations, was a benefactor for the Human Rights Watch, and the chairman for the Foundation to Promote Open Society.

Foundation to Promote Open Society was a funder for the Human Rights Watch, the International Rescue Committee, the Brookings Institution (think tank), the New America Foundation, and the Committee for Economic Development.

Jeffrey E. Garten is an overseer at the International Rescue Committee, and was a managing director for the Blackstone Group.

Glenn H. Hutchins is a trustee at the Brookings Institution (think tank), and was a general partner at the Blackstone Group.

Committee for a Responsible Federal Budget was housed at the New America Foundation.

Paul H. O'Neill is a special adviser at the Committee for a Responsible Federal Budget, and was a special adviser for the Blackstone Group.

David A. Stockman is a director at the Committee for a Responsible Federal Budget, and was a partner at the Blackstone Group.

Peter G. Peterson is a director at the Committee for a Responsible Federal Budget, a trustee at the Committee for Economic Development, and was the chairman & co-founder for the Blackstone Group.