Blackstone’s $196,000,000 shopping spree in Sacramento

Did you ever dream of winning a shopping spree as a kid? I used to imagine myself having ten minutes to fill up a cart at Toys ‘R Us with whatever I wanted. I would’ve headed straight for the baseball cards, bikes, toy guns and sports equipment. Of course I was never lucky enough to do something like that, but I’m still holding out hope for a Home Depot or Lowes spree one of these days.

$196 Million of Local Real Estate: If you didn’t know, there was a $196 million dollar real estate shopping spree that happened in the Sacramento market over the past year or so. As reported by The Sacramento Business Journal, the private equity fund Blackstone purchased roughly 1,100 homes in the local market since January 2011 (with the bulk of these purchases being after August 2012). In all Blackstone has acquired about 21,000 properties in the United States over the past year. In the Sacramento area they’ve done business as THR California, IH2 Property West and IH3 Property West, and they’re holding their properties in hopes of making more money by creating bonds from rentals. 

housing supply and median sales price by sacramento appraisal blog blackstone

Goodbye Blackstone? Over the past months Blackstone has seemingly begun to pull back on their aggressive purchasing plan. They’re still buying properties, but as of late they’ve been laying low. Some say they are done, but at the same time their system has worked well and they can easily get things moving with IH4 in 2014 if they want. Ultimately their local presence lately has felt nothing like it was last year when they were a definite catalyst in driving up values for the rest of the market. Depending on how you look at it and whether you bought or sold this past year, it’s probably either good or bad to have had one investment fund step in to buy 1,100 properties in such a short time span. Instead of parsing the arguments on both sides though, I’d rather focus on their slowdown and simply say it looks like we are seeing Blackstone’s year of market dominance fade….. for now at least. In the mean time we can expect to continue to see conventional and FHA buyers pick up their slack while Blackstone and other cash buyers are more dormant or pull out of the market. While it’s easy to criticize Blackstone, let’s consider one last thing. If you look at the graph above, you’ll see they came in at just the right time as the real estate market hit bottom after years of decline, and they also look to be slowing down at a good time also. Maybe there is a business lesson here to consider?

Blackstone Invitation Home Signs in Sacramento

UPDATE on 11/21/2013: The Sacramento Bee posted a story that states Blackstone has purchased nearly 1,500 homes in the Sacramento area. RealtyTrac shows closer to 1100 and Tax Records is about half of what RealtyTrac shows. All things considered, it is not easy to track the actual number because different sources say different things.

Questions: Any thoughts on Blackstone as they have been slowing their pace? What store would you like to win a shopping spree at?

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Comments

  1. says

    Another great post and many great points. They sure did have the timing. Marketing perspective: I do like their last sign the best for branding, but I found the second one the most visually appealing. ~ I have many other thoughts, but I’ll keep them offline. 🙂 We saw many of their offers come across and with different names, and different agents. It was a fascinating item to observe on so many levels, whether in offer presentation, follow up, and repackaging with new name. I do see their rental signs around town though 🙂

    • says

      Thanks Heather. I’ll have to ask to share those thoughts offline. I’m curious. I knew you’d have a take when it comes to marketing since you’re so good at connecting with people and thinking through the details. It’s interesting to hear from the Realtor end of things. I suppose the advantage of having different DBAs is that it can look like a different group is making a purchase.

  2. ricardo says

    Hey Ryan:

    I’ll bet the thought has occurred to you that some of the housing recovery in Sac is a self fullfiling prophesy on the part of Blackstone. The question is, will the market hold its value? We’re heading into the final quarter of the year when retail is supposed to go black. That should be some indication, although because this is a gov’t town, the full effect might take some time.

    • says

      Thanks Ricardo. The thought has definitely occurred to me. I think they are definitely manipulating the system to their advantage, which is why they are savvy from a business standpoint. They are making money, and if their bet on continued appreciation is correct, they are going to make even more. It will be interesting to see what they do in 2014. I think what happens with the job market, general economy and interest rates will really impact real estate in 2014. We cannot have another year like we did in 2013 with exponential appreciation. It’s just not sustainable.

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