Seeing the reality of Blackstone’s mass purchases

It’s one thing to hear about investors purchasing so many properties in Sacramento, but let’s see it. Even if you’ve only been following real estate casually, you’ve likely heard the private equity fund Blackstone has picked up well over 1000 properties in the Sacramento area since last August. No, that’s not a typo.

Let’s look at a few areas of Sacramento to visualize some of the neighborhoods where Blackstone has been most active. Each red label below represents a property that is owned by Blackstone. The bulk of these sales were purchased since last August, but there are still quite a few that have been owned for years.

Properties owned by Blackstone in Natomas

Blackstone has been purchasing as “IH2 Property West” and “THR California”. They’ve had a strong presence in Natomas as you can see – especially in older Natomas. It is important to note the information above is based on Tax Records alone and could very easily not include MANY other purchases that did not end up listed in Tax Records.

Properties owned by Blackstone in Rancho Cordova

There have also been quite a few purchases by Blackstone in Rancho Cordova. Most of the sales are in the 95670 zip code, while only a small amount have been located in the 95742 zip code.

Properties owned by Blackstone in Rosement and College Glen

There are also a decent number of Blackstone properties in Rosemont and a few sprinkled through College Glen and La Riviera. Neighborhoods that are ripe for first-time owners have typically been the primary target of this investment fund.

Properties owned by Blackstone in South Sacramento

Last but not least, here are Blackstone-owned properties in South Sacramento. This market has been a very affordable area under $200,000, which has been a sought after target price for the investment fund. By the way, Deutsche Bank just gave Blackstone 1.5 billion in additional credit over the past week (on top of their initial 2.1 billion credit line to purchase properties). We’ll see if any of the money finds it’s way into the local market.

Video interview with Blackstone from Bloomberg (worth a watch):

Questions: How do these images stir you? Or what do they make you think of? If you are renting from THR / IH2, what has it been like to rent from them so far? Any stories to share?

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Comments

  1. ricardo says

    Wow. Thanks for the maps, Ryan. Blackstone bought in Gardenland ( Natomas, on your map) between Truxel and Northgate? I know of no one who would chose to live there among the pit bulls, chain link fence and failing schools. And managing rentals in this hood is sure to be labor and materials intensive. Could it be Blackstone has no idea what it’s doing?

    • says

      No problem. I’m sure they’ve made some mistakes. You cannot be an investor and get it right 100% of the time. Generally speaking it seems their strategy has been fairly consistent in the neighborhoods they will and will not purchase in. They’ve had a plan and really worked it. Thanks Ricardo.

  2. says

    I think I have to acknowledge that these big funds coming in have helped stabilize and increase home prices. As a home owner, that is a good thing.

    As an agent, again, sellers should be happy. Buyers, on the other hand, are having it rough. I believe these big companies are creating distortions in the market. I think prices are affected, but it also goes to buyer’s offers. If home buyers know these big companies are in their price range, that many of these investors remove all their contingencies immediately and that investors make solid offers, sometimes sight unseen, then an atmosphere where homeowners feel they have to do the same thing is created. At least, my clients have felt that way. What is safe for a big company is not at all safe for a homeowner with limited funds. Then you have the home seller looking at a great offer from a large, well financed company. Who gets crowded out? I have heard the answer to this question called a “no brainer.”

    Many have worried, what happens when Blackstone and the like start to sell? I think they are rational investors, by and large, and would exit the market in a rational way, affecting pricing, but in a limited way. I hope!

    I worry more about a possible next step of companies converting their inventory to single family residential rental Real Estate Investment Trusts, like Colony American Homes has done. Who trusts these big, out of state companies to manage their inventory well? In the long run, this is probably the limiting factor in the reach of these companies.

    Blackstone is just one of many. There are also American Homes 4 Rent (an arm of Public Storage), Colony Capital, Oaktree Capital, KKR, Waypoint, Och-Ziff, etc. Yes, these companies have helped provide price stabilization, but at what cost? Securitization of the loan market has ended poorly. I do not see why securitization of single family homes will be any better. And single family homes as REIT’s, I think that is a very poor idea.

    • says

      Well said, Ray. I appreciate your commentary. You are clearly doing your homework and paying attention to what is happening all around us. so far it seems the REITs have not started out well. It seems Blackstone is holding out or maybe not jumping in right away like the others at least. I think you’re right about the re-selling strategy. These guys are strategic and savvy. It’s hard to imagine they would gut the market by selling off 1000+ properties all at once. That would hurt them too. I would think their selling would come in waves. Thanks again Ray.

  3. says

    Good article & somewhat daunting. I personally feel a love/hate with the buy up. It certainly has helped push the market but too much of a good thing is sometimes bad. I’m curious if you have a similar map of the Elk Grove area as well as maybe Folsom?

    • says

      Thanks Gena. I think many people feel similar to the way you do. I can make something for Elk Grove. There are definitely less sales in Elk Grove, though there are still quite a few. Last time I checked there were very few Blackstone purchases in Folsom.

    • says

      Thanks Gena. They’ve bought so many properties. My guess is they have properties all across the price spectrum from low to high. I’ve seen them definitely pay much higher than reasonable comps suggest. Is this an Elk Grove listing? I just saw one of your videos for a new listing coming on the market.

    • says

      Thanks Sarah. Wall Street made a huge impact on “Main Street” a few years ago when they gutted the market. We’ll see how it pans out in coming time. It’ll be interesting to see how Blackstone and other big funds handle their properties. They could be in it for the long haul or they may sell eventually. I read an article last week on Alt-A loans, and it was of interest to see Blackstone advocating for them (Maybe to sell to renters???) http://www.calculatedriskblog.com/2016/02/the-return-of-alt-a.html

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