Analyzing Blackstone's Tampa Bay housing buy - FOX 13 News

Analyzing Blackstone's Tampa Bay housing buy

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First came the housing boom in the Tampa Bay area, then the bust, then a slow recovery and even now the majority of sales are cash transactions.

But whose cash?

"The trends that we see is more and more toward institutional ownership," real estate broker Nick Pavonetti told FOX 13 News. "There are a number of private equity funds, hedge funds, even the banks themselves that...are accumulating homes and are going to manage them institutionally and sell them off in blocks down the road to continue to be managed institutionally."

Discussion of institutionalized housing was stimulated by a published report claiming the Blackstone Group, a giant private equity fund, plans to invest $1 billion in single family homes in the Tampa Bay area. The Blackstone Group would not confirm that report, but other real estate brokers confirmed Pavonetti's observation.

"Large scale hedge funds, for example, coming in, buying large blocks of properties," said broker John Rurkowski. "They can't get enough properties right now because the tenants are out there to rent and the investors want to buy and then flip and make a buck."

The rental customer base is made up of people who lost their homes in the real estate bust.

"Houses were too easy to buy, financing was too easy to get, and particularly refinancing, where people pulled money out of their houses, was too easy to get and it caused people to get in over their head," Pavonetti said, calling the shift to institutional ownership a structural change. "The structure is broken, and government can't fix it" Pavonetti observed, then claimed the private sector will not only absorb excess inventory, but will keep spending to spruce up and maintain properties.

St. Petersburg city councilman Karl Nurse is skeptical, claiming he can drive through neighborhoods and tell which ones are filled with homeowners and which are predominantly renters.

"Home ownership goes up, crime goes down, code violations go down, property values go up," Nurse observed, dismissing claims the big investors will be better caretakers. "Imagine a company trying to manage 15,000 rental properties. Even a well-run company, that's a huge task."

The realtors confirmed institutions are mostly interested in newer or well-maintained three bedroom, two bathroom homes. That increases Nurse's concerns.

"That will take what should be our most stable neighborhoods, our most stable sort of main line neighborhoods, and make them less stable," he predicted.

But the free market is in play. Prices are now at a point where quality homes can be rented for a positive cash flow. Shrunken inventories will force prices up. Then, when the numbers are right, the institutions will sell.


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