Unstructured Finance

By Matthew Goldstein

It started slowly but the push by Wall Street into the single family rental market is fast becoming a Main Street play as well.

Last year, one of the big stories on Wall Street and in the U.S. housing market was the push by institutional investors to raise billions of dollars to snap-up foreclosed homes and rent them out while waiting for the right time to sell them. It’s become the biggest “long” bet on housing for private equity giants like Blackstone, which has already spent close to $3 billion buying up more than 16,000 foreclosed homes.

And with Wall Street firms all projecting they can get an 8% return from renting out the the homes they acquire, the foreclosed home market has become a great yield play for yield-starved wealthy investors.

But now it’s time for retail investors to get in the game too.

Late last year two firms that are buying foreclosed homes and renting them out went public—Silver Bay Realty Trust (SBY) and Altisource Residential Corp. (RESI). Silver Bay, set up as a real estate investment trust, raised $245 million in its December IPO. Altisource Residential is a spinoff of Altisource, a real estate portfolio management company, and is buying both non-performing mortgages and single family homes at foreclosure auctions.

In the coming weeks, American Residential Properties, an Arizona-based acquirer of foreclosed homes, expects to soon file for an IPO. But the most anticipated IPO in this burgeoning market will be one from American Homes 4 Rent, which ranks right behind Blackstone in gobbling up foreclosed homes. Last week, the Malibu, Calif.-based firm, led by Public Storage founder Wayne Hughes, issued a press release saying it will soon filed for an IPO.

By Matthew Goldstein and Jennifer Ablan

Big money managers do not always agree–that’s what makes a market–but if there was one consensus coming out of our just concluded Reuters Investment Outlook Summit, it’s that next year will probably be another bang up one for the bond market.

Now the credit markets will have a tough time repeating the kind of numbers put up this year, especially with the Federal Reserve doing its darndest to push down borrowing costs and yields by buying  mortgage backed securities and even Treasuries. Speaker after speaker who joined us in New York said “junk” bonds, corporate debt, mortgage- and commercial-backed securities and even Treasuries “on a trading basis”  should do well for no other reason than credit markets still aren’t showing anything close to the kind of froth we saw in the run-up to the financial crisis. The sense is that it may be another 2 or 3 years before we see excesses build up in the system again.

Oh sure, there are exceptions such as, bonds being sold by companies to pay special dividends to their private equity backers (several speakers said to avoid these). Other guests also are wary of the junk bond market, noting with yields coming down the risk to reward premium isn’t looking as good as it did earlier this year. And at least one speaker said he would avoid mortgage REITS because there’s too much leverage baked into their holdings.

Here’s to getting out exclusive stories fast when need be. This week, pay close attention to Jamie Dimon, who will be on the congressional hot seat as he deals with questions over JPM’s $2 billion plus trading loss. And without further ado, here’s Sam Forgione’s weekend reads:

From Fortune:

Peter Elkind and Doris Burke add more arc to the “human drama” of MF Global’s collapse.

From The New York Times:

Ron Lieber has some tips to resolve the fear of falling behind on finances.

From Institutional Investor:

JP MorganChase’s trading loss could signal big changes for investment banks, writes Charles Wallace.