Blackstone (NYSE: BX) continues to pour money into single-family rental (SFR) homes. The private equity giant is investing another $45 million into Tricon Residential, an owner and operator of multifamily and SFR properties in the U.S. and Canada. That investment is part of Tricon's plans to seek a dual market listing by completing an initial public offering on the New York Stock Exchange.
Here's a closer look at Tricon and why Blackstone is pouring even more money into the residential home market.
A new option for U.S. investors
Tricon Residential currently owns 33,000 rental apartments and single-family homes in Toronto and across two dozen U.S. states. Overall, 90% of its investments are in the U.S. Sun Belt region, including Florida, Texas, and Southern California.
Rental properties in the South have experienced increasing demand as more people move to warmer and cheaper areas of the U.S. The pandemic is driving an acceleration of this trend, since it has enabled more people to work remotely.
Tricon's U.S. listing will provide investors in the country with another way to play the affordable housing and Sun Belt migration megatrends. There are currently two publicly traded real estate investment trusts (REITs) focused on the SFR market after institutional investors took Front Yard Residential private in a $2.4 billion deal last year, American Homes 4 Rent (NYSE: AMH) and Invitation Homes (NYSE: INVH).
Tricon offers sizable exposure to that fast-growing market, as it owns nearly 25,000 SFRs. In addition, it has a growing multifamily portfolio with almost 7,800 stabilized apartments and another 4,600 apartment units under development.
Wading deeper into the residential market
Blackstone is no stranger to the single-family rental (SFR) market. The private equity giant formed Invitation Homes in 2012 to buy up foreclosed homes following the financial crisis. At its peak, Blackstone was buying more than $100 million in homes each week, primarily in the Sun Belt region. That buying binge paid off, as it brought Invitation Homes public in 2017 and cashed out on its stake in 2019, making about $7 billion on the investment.
Blackstone got back into the SFR market last year. Its non-traded REIT, BREIT, made a $300 million preferred equity investment in Tricon. That entity is now investing another $45 million into Tricon, giving it a nearly 12% stake in the company.
Meanwhile, BREIT made an even bigger bet on the SFR market by agreeing to acquire Home Partners of America. It's paying $6 billion for the company, which owns more than 17,000 homes across the U.S.
The driving factor of these investments is the growing demand for single-family homes by renters. They provide families with the space and privacy they need while also giving them more flexibility than buying at a relatively more affordable cost. Because demand is on the rise, it's driving up rental rates.
According to CoreLogic, SFR rents are up 5.3% over the past year, the largest increase in the last 15 years. That fast-paced rental growth isn't likely to slow, given increasing occupancy levels and demand amid continued low housing inventory levels as builders can't keep up with the demand, especially given recent supply chain issues. These factors are making SFR investments increasingly more valuable, which is why Blackstone is pouring more capital into the sector.
Blackstone's backing makes Tricon worth a closer look
Blackstone is one of the savviest real estate investors around. That makes its increasing investment in Tricon and the SFR market so interesting. It seems to see Tricon as an excellent way to play the growth in demand for affordable housing, which makes it an intriguing new option for U.S. investors to consider now that the company is about to list on the NYSE.