Double digit price gains on single-family homes last year were supposed to drive investors out of the real estate market, but Wall Street’s spending spree continues in Palm Beach County where one corporate giant has picked up 200 homes since Jan. 1.
The Blackstone Group, which buys and rents through its Dallas-based Invitation Homes, owns an estimated 1,200 Palm Beach County homes, according to property records, and is filing deeds at a rate of up to 18 a day.
Buying has tapered 70 percent in most of Blackstone’s 13 other markets, which include Atlanta, Chicago, Las Vegas, Phoenix, and multiple California regions, but continues in Florida, said Blackstone spokeswoman Christine Anderson. Purchases remained consistent in Palm Beach County through 2013’s median home price increase of 15 percent.
While the company doesn’t reveal details about its purchase patterns, it has spent $8 billion nationwide on 43,000 homes since 2012 when the new industry of corporate single-family home rentals was born.
According to Palm Beach County property records through early January, the firm has paid $240.9 million for homes countywide at an average price of $241,224.
Once the proprietor of only the more easily managed multi-family community, Wall Street serves as a landlord for property throughout the manicured streets of Wellington, in Jupiter townhomes a block from the beach, and behind the security gates of high-end neighborhoods unaware of the infiltration.
“I don’t know who they are but this is a gated, luxury community in a very exclusive area,” said Realtor Diane Jeffers, who lives in a Delray Beach neighborhood where Invitation Homes paid $320,000 in January for a 3,000-square-foot home. “It’s not like they’re buying some super deal. They paid market value, which is odd.”
Buying at bargain basement prices through foreclosure auctions may have been a strategy in the beginning, but Invitation Homes is just as likely today to make traditional purchases in Palm Beach County with cash and at asking price — or higher, Realtors said.
Mold for corporate buyers
The investors have helped raise home values and stabilized the housing market, but their proliferation can block the average homebuyer who comes to the table with financing that requires a home appraisal. Still, it can be a boon for sellers.
In fact, some Realtors said they seek out a corporate buyer when they know the home fits the equation. For Invitation Homes that’s three bedrooms, two bathrooms and 2,000 square feet, said company spokesman and chief marketing officer Andrew Gallina. The average rent for an Invitation Home in Palm Beach County is just under $2,000 a month.
Melissa Bellavigna, a Weichert Realtor, said Invitation Homes also shies from 55-plus communities or those that have restrictions on renting, but has a reputation of not quibbling over price. When she lists a home that meets the right criteria, she will alert the firm to the sale.
“It’s a cash deal, and I know they won’t nitpick the sellers,” she said. “They’ve been very, very reasonable and easy to deal with.”
Wellington’s 33414 ZIP code has the largest concentration of Invitation Homes at about 145. Parts of Royal Palm Beach west of Florida’s Turnpike have also proved popular with about 105 homes bought in the 33411 ZIP.
Gallina said one of the only areas of Palm Beach County that Invitation Homes is avoiding is downtown West Palm Beach, which is heavy with condominiums and older homes. Recent activity has focused in newer communities and “farther north,” Gallina said.
In February, Invitation Homes paid $312,900 for a new home in the Capistara development off Military Trail and South of Hypoluxo Road. The 110-home community, which is being built by Lennar Homes, broke ground in August.
“We are creating a new industry and professionalizing it in a way that’s not been done before,” Gallina said. “There are definitely people out there who are naysayers, but when you are giving birth to a new industry, it’s easy for people to be negative.”
Invitation Homes has about 150 employees in South Florida with an office in Plantation. In the past two years, the company has spent about $50 million renovating its South Florida homes, Gallina said.
The Blackstone Group isn’t the only Wall Street investor purchasing single-family homes to lease, but it appears to be the biggest buyer in Palm Beach County. Blackstone Group also was the first to take the single-family rental business a step further when it securitized 3,500 of its homes nationwide into a $479.1 million bond.
Starwood Property Trust has about 350 Palm Beach County homes. Last week, Starwood and the Waypoint Real Estate Group announced a $144 million purchase of 707 single-family homes nationwide, 20 percent of which are in Florida.
The nascent industry has received mixed reviews by market analysts. Most concerns focus on whether the firms will be able to manage hundreds of homes spread over multiple communities. In Florida, damage caused by a hurricane could strain resources, but Gallina said Invitation Homes buys windstorm insurance for its homes.
Ken Johnson, a professor in the Hollo School of Real Estate at Florida International University, isn’t convinced the single-family home business is right for Wall Street.
“This will not be the financial bonanza they thought it would be,” Johnson said. “I’m not saying it won’t work, but I will be more than moderately surprised if this strategy pans out in the long run.”
The success could hinge on the experience of renters. Gallina said Invitation Homes requires tenants to have rental insurance but that other requirements are standard in the industry, including credit and criminal background checks.
Applications are completed online at the Invitation Homes website, and that’s where Realtor Laura Pearlman said she sees a change from a traditional single-family home rental. While a mom and pop landlord might forgive a credit blemish or be willing to lower a price, the online process is less negotiable.
“It’s the difference between dealing with a human being and a computer,” said Pearlman, who specializes in rentals and has had good experiences with Invitation Homes. “The only complaint is the application process.”
It’s unclear how long Invitation Homes will continue to buy in Palm Beach County. Jack McCabe, chief executive of McCabe Consulting and Research in Deerfield Beach, said, for now, paying higher prices benefits the company because it increases the values of homes overall, including ones they’ve previously purchased.
Also, while South Florida home prices have increased, they are still 37 percent below the peak of the market in December 2006, according to the Standard & Poor’s/Case-Shiller index.
“As long as they still have sums of cash in their war chest, it behooves them to keep buying,” he said.
It certainly worked to the advantage of a client of Palm Beach Gardens-based Realtor Bob Graeves. The client insisted on listing his 2,000-square-foot townhome for $319,500 even though the highest comparable sale in the area was $290,000.
“Lo, and behold, this hedge fund comes in and pays $315,000 in cash,” Graeves said.
The buyer was Invitation Homes.
INTERACTIVE MAP: See where the investors are buying by zip code at mypalmbeachpost.com
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