Private equity giant Blackstone, $BX, has said this month that it was buying Tricon Residential, a Toronto-based landlord that owns 38,000 homes across the U.S. and Canada for $3.5 billion

Private equity giant Blackstone, $BX, has said this month that it was buying Tricon Residential, a Toronto-based landlord that owns 38,000 homes across the U.S. and Canada for $3.5 billion.


Blackstone, renowned for leading Wall Street's acquisition of houses post the U.S. foreclosure crisis, has sustained its involvement in the housing market beyond its initial 2019 exit from Invitation Homes. The firm's ongoing commitment includes a preferred equity investment in Tricon in 2020 and the 2021 acquisition of Home Partners of America. Now, Blackstone is set to acquire Tricon's 38,000 U.S. rental houses, Toronto-based apartment buildings, and land intended for development.

The $30 billion Blackstone Real Estate Partners X, the largest real estate drawdown fund that concluded last year, and Blackstone Real Estate Income Trust are collaborating for this acquisition. The deal stipulates a cash payment of $11.25 per share for Tricon. Following the announcement, Tricon's shares surged nearly 28% to $11.06. Blackstone intends to fulfill the $3.5 billion worth of projects already in Tricon's pipeline and allocate an additional $1 billion to capital projects in the coming years.

Upon closure of the deal in the second quarter, Blackstone's real estate investment trust (REIT), BREIT, will maintain an approximately 11% ownership stake in Tricon and vote its common stock in favor of the acquisition. The company plans to advance Tricon's efforts in addressing the pressing need for housing supply in the U.S. and Toronto.

Amid a housing shortage, single-family rentals experienced high demand during the early pandemic years, attracting property funds anticipating a surge in household formation. However, a sharp increase in interest rates in mid-2022 temporarily halted transactions as higher borrowing costs threatened rental revenue. Blackstone's latest move comes amidst positive market sentiment, with CEO Steve Schwarzman noting a resurgence in "animal spirits" as investors anticipate declining interest rates.

Tricon, led by former Goldman Sachs banker Gary Berman, seeks to capitalize on the housing shortage in both the U.S. and Canada. Despite facing scrutiny from activist investor Land & Buildings Investment Management, which raised concerns about rent levels and overhead costs, Land & Buildings expressed support for the Blackstone deal as the "right outcome" for shareholders.

Rental housing fundamentals remain robust, driven by a record-low inventory of homes for sale, prompting more families to opt for renting. The persistent trend of underproduction in housing over the past decade, coupled with tight inventory, suggests a sustained demand for rental properties, particularly in areas with high home sales prices. Mizuho Securities analyst Haendel St. Juste emphasized that renting often proves more cost-effective, especially for families seeking access to quality school districts.

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