Blackstone Group's latest sale of bonds backed by rental homes found robust demand from investors, particularly the riskiest portions of the offering, as the market prepares for a new breed of the securities.
A junior-ranking $72.6 million slice of the $604.9 million deal from Blackstone’s Invitation Homes sold Tuesday at a yield that floats 3.7 percentage points above a borrowing benchmark, a person with knowledge of the matter said. That compares with a spread of 4.5 percentage points on a similar portion of a January offering from the firm.
The revival follows a slump in demand last year, and it comes as Blackstone's B2R Finance and Cerberus Capital Management's FirstKey Lending plan to issue the first securities backed by pools of houses owned by multiple landlords as soon as this week. That could accelerate growth for an $8 billion bond market created in 2013 and expand credit for operators with too many properties to borrow via government-backed programs.
Multiborrower offerings would be "a significant milestone" for the industry, Jade Rahmani, a Keefe Bruyette & Woods Inc. analyst, wrote last week in a report.
Annual sales of rental-home securities could eventually exceed $30 billion, he wrote. The B2R Finance and FirstKey transactions may total about $470 million, according to separate people with knowledge of the offerings.
While buyers embracing riskier assets amid central bank efforts to suppress bond yields are accepting significantly lower spreads on junior portions of these deals this year, demand for the larger top-rated pieces has been slower to recover.
Invitation Homes this week sold $282.3 million of senior-ranking securities at a spread of 1.35 percentage points, according to the person, who asked not to be named without authorization to speak publicly. That compares with 1.45 percentage points for the top-rated debt in its last deal.
Typical spreads on top-rated rental-home bonds were at 1.3 percentage points last week, or 0.2 percentage point higher than in early August, according to Bank of America Corp. data. The riskiest securities were at 4 percentage points, unchanged from August.
