Blackstone doubles down on the U.S. housing market with acquisition of Tricon and its nearly 40,000 homes

While on a morning call with Tejas Joshi, director of residential real estate at Yieldstreet, which owns just over 600 single-family homes, someone direct messaged me, saying that institutional homebuyer Tricon was holding an all-hands meeting to tell employees that they were getting acquired by Blackstone.

I let Joshi know. His immediate response pretty much summed up the magnitude of the deal: “That is very big… this is big.”

It’s big for a number of reasons.

For starters, Tricon Residential, which owned 37,478 homes at the end of Q3 2023, is one of three big publicly traded institutional homebuyers. Once Blackstone’s $3.5 billion purchase of Tricon is complete, it’ll be just American Homes 4 Rent (which owned 59,092 single-family homes at the end of Q3 2023) and Invitation Homes (which owned 84,697 single-family homes at the end of Q3 2023). Most single-family rental giants are privately held or consolidated into a broader REIT.

Second, the sale once again pushes Blackstone near the top of the institutional homeownership heap. Back in 2019, Blackstone pulled back from the single-family space as it fully divested from Invitation Homes, which Blackstone had used in the years following 2012 to gobble up homes for dirt cheap prices following the housing crash. But by June 2021, Blackstone Real Estate Income Trust was ready to jump back into the single-family space with its $6 billion purchase of Home Partners of America, which at the time owned 17,000 U.S. homes. Fast-forward to 2024, and once Blackstone’s acquisition of Tricon Residential is complete, Blackstone will once again be a juggernaut in the residential space.

Third, this deal provides us with some clues about the types of consolidations that might be on the horizon in a market that has transitioned from the frenzy period during the Pandemic Housing Boom straight into a rate-induced slowdown. In July, Invitation Homes completed an acquisition of a portfolio of around 1,900 homes from institutional investor Starwood, whose REIT faced an uptick in redemption requests and continues to endure challenges in the commercial real estate sector. Blackstone’s deal for Tricon, of course, is much larger than the Starwood deal and suggests that more consolidation and portfolio trading might be on the way.

“It [this deal] is very big [for the SFR space], there is absolutely consolidation happening in the market,” Joshi tells ResiClub. He added that the lack of resale inventory in the price points/areas sought by institutional operators means the way “to really grow a platform is to go make a big acquisition like this.”

There was a rush of institutional homebuying during the Pandemic Housing Boom—a period when low-interest rates, easy access to capital, and soaring home prices/rents made single-family rentals irresistible to investors.

Toronto-based Tricon Residential was among the operators who piled in during the frenzy, adding net 2,441 homes alone in Q2 2022.

That institutional frenzy ended not long after mortgage rates began to spike in 2022. Unlike during the Pandemic Housing Boom, capital markets are now working against investors, and fewer homes on the market today pencil the returns operators need to see to pull the trigger.

Look no further than Tricon Residential, which only added 316 net homes in Q3 2023.

According to Blackstone, Tricon Residential’s portfolio consists of around 38,000 single-family rental homes in the U.S. Sun Belt and multi-family apartments in Toronto, Canada.

ResiClub reached out to Parcl Labs to get a real-time breakdown of Tricon’s U.S. single-family ownership. According to Parcl Labs, the biggest U.S. markets for Tricon are Atlanta (7,106 single-family homes), Charlotte (3,986 single-family homes), Dallas (2,921 single-family homes), Phoenix (2,864 single-family homes), and Tampa (2,365 single-family homes).

On a national level, institutional home buyers, who own at least 1,000 homes, aren’t massive players yet—they only own around 1% of the U.S. single-family stock, according to Parcl Labs.

That said, in a handful of regional pockets, institutional homebuyers are pretty significant players. In fact, just six markets (Atlanta, Charlotte, Dallas, Houston, Phoenix, and Tampa) are home to 36.8% of all the nation’s institutionally owned single-family homes, according to Parcl Labs. Those also happen to be the very places that Tricon is concentrated.

One final take.

I hosted a Twitter Spaces this morning with Jason Lewris, co-founder of Parcl Labs. He also thinks more SFR consolidation is on the way.

Lewris told the audience that “there is enormous variation in how these portfolios are run, and that deals with the level of sophistication with using data and analytics. That was fine when the [U.S.] housing market was a raging bull. And that’s becoming more of an acute pressure on portfolios that do not really have sophisticated or mature operational efficiencies. So I would imagine there will be other forms of consolidation throughout 2024 and [more] deals like this.”