Cashing in on the Recovery …

The following interesting news item crossed our desk yesterday (admittedly we have been waiting for this):


Fast buying up every single-family home it can get its hands on, Blackstone (BX) is reportedly prepping the first ever securitization of REO-to-rental properties. The news follows Deutsche Bank upping to $2.1B from $600M a loan to Blackstone allowing it to buy even more homes.”

 

Our occasional guest author Vidoq proposed to us that these securitizations should sport symbols properly identifying their purpose. BAAA, WOOOL, SHEAR, EWE, and SLOTER came to mind. Readers are hereby invited to provide more symbols.

 

Below are photographs of putative buyers, in various stages of these upcoming transactions, specifically the 'before' and 'after' phase:

 

 

 

 

 

 

 

 

 


 

OLYMPUS DIGITAL CAMERA

Before …

 (Photo source: unknown, The Web)

 


 

After

After.

 

 (Photo source: unknown, The Web)

 


 

 

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4 Responses to “Long Awaited Sheep Shearing Imminent”

  • ManAboutDallas:

    I could suggest LOTS of possible trading symbols, but none of them would be printable here in a somewhat public venue.

  • My business is single family rental properties, managing the family accumulations from the distant past. Wall Street is going to find out they aren’t getting into the apartment business. The short term benefit here is you can probably make 6% to 7% on your money and in light of the yields on bonds, this probably isn’t too bad. The missing element is houses get old. They get harder to insure, harder to repair, harder to lease for top dollar unless the location is superior. Long run, if you keep them up, they might appreciate at the rate of inflation. I would venture, though our houses are in good shape, in order to market them to home owners, they would probably take a remodel in the area of 20% of sales price. Thus you can really never sell them and come out.

    • goodrich4bk:

      Blackstone will not need to sell the homes. All they need to do is sell the securitized cash flows via bonds to the unsuspecting sheep. I can just see the prospectus now: lots of risk factors in fine print but the road show will emphasize three things: 1) the homes were purchased at the bottom of the market and will not likely decline in value; 2) low inventory (even though it is being artificially kept low by government/banking collusion) will keep prices from falling; and 3) home renters will become lease-option buyers in a few years time, adding another 10-15% to the rent yield. After all these factors are considered by hired “experts”, the securities will yield a projected 8-12% and BK will have no trouble unloading them.

      Within a few years, the yields on these securities will go negative as investors learn that renting homes is not like renting apartments and that adding professional management costs to the mix wipes out net rental income. And as interest rates inevitably rise, prices will necessarily fall to allow our now greatly debt burdened younger generation to buy their first home. But the real purpose behind this scam will have been served: to remove these homes from the market so that the banks’ remaining REO inventory is worth more and the banks are no longer insolvent. Once these homes are part of a securitization vehicle, they will never be sold, just like the shopping centers which were put into securitized vehicles in the 1980s. Instead, the investors will merely sell their shares at a loss to new investors, until the value of the security reaches the real value of the underlying assets —- a point that is typically about 50% below the offering price.

  • zerobs:

    I’ll throw in this link about Fannie upping its proportion of 3% down mortgages.

    http://finance.yahoo.com/news/no-money-no-worries-home-142247297.html

    New symbol: FLEECE

    Only problem is the buyers of this junk will mostly be public pension funds. So the people really getting butchered will be everyone who avoids it. Sort of a reverse psychology going on: those who volunteer to get butchered will be saved.

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