Blackstone Slams the Brakes on Local Real Estate Purchases

Rising prices to blame?

We just closed on the sale of a Mallory Creek town home to The Blackstone Group but there is little doubt their buying patterns of local real estate has changed; dramatically. Sources tell me they are down by over 80% which is a huge reduction. Potentially a market changing reduction. Remember this is the largest investment group that has purchased at least 4,293 properties throughout Dade, Broward and Palm Beach County over the past couple years.

Abacoa Townhome

With all data showing our current market is very strong we have to go back and remember what started this amazing rebound. It was investors like Blackstone entering the market that held the key. Some people have told me they felt the Government was involved in getting these large companies to jump into the fray to help shore up what was a very sick market. Many do not understand just how many homes these groups have purchased but when things were in full force Blackstone alone was purchasing 75 to 100 properties a week here in our area.

Much of the slowdown has been blamed on higher prices and fewer buying opportunities. There indeed may be some merit to this. If you work in the industry locally you know that Blackstone is utilizing a new negotiation technique to their advantage. In practice once a strong offer has been accepted and the seller is engaged the investment group will cancel the purchase contract. If it is a property they still like they will offer a discounted price to stay in the transaction. Typically this new price will be in the 90%+/- range of the original contract amount.

Blackstone initially stated their intent was to buy and hold these properties for 5 to 10 years until the market rebounded. During that time they would manage the properties as rentals through their Invitation Homes Group. But the realities of managing thousands of homes have set in and from what others have told me Blackstone alone has well over 2,000 properties sitting vacant here locally. There are whispers that large blocks of homes will be sold as real estate investment trusts. Because of the volume of homes my mind wanders back to the mortgage backed securities that got us into trouble in the first place.

Let’s look at just one of Blackstone’s 4,293 properties to illustrate the issues of managing property. In December through their IH3 Group a home was purchased in the Candlewood neighborhood at Boca Country Club for $350,000. The seller in that transaction had paid $285,000 in 2012 so we know Blackstone wasn’t in at the bottom. They listed the home for rent on our multiple listing service for $2,800 a month on March 22nd only to cancel the listing after it was on the market for 28 days. Property taxes on this home will be running them about $400 per month. Monthly association fees add on another $435 a month. You add in real estate commissions, the cost of improvements to bring property into rentable commission, property insurance and you start to see the picture of what managing one property is like. And it presumably is still sitting out there empty with the costs adding up. Now multiply that by 4,293.

With less energy spent on purchasing more properties one would hope that companies like Blackstone can focus more on the efficient management of these properties. Or the packaged sale of them? So far the local markets are holding their own despite these pullbacks but keep a keen eye open for changes that may be heading your way. Always interesting, always fun.

Fins up……..

Tom Priester
Principal Broker

Paradise Sharks Real Estate
Direct Line 561 308-0175
tom@tompriester.com

http://www.paradisesharks.com

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Tom Priester

After spending years among the top individual performers at one of Palm Beach County’s largest and most successful real estate brokerages, Tom Priester knew there was another way to do real estate. A better way. Real estate services focused on the customer. Like the old days when the customer truly was #1. He tired of listening to why he should be going out to have his customers sign one sided buyers’ brokerage agreements. He tired of hearing how he should be selling customers why paying higher commissions, like 7% and 8%, was to their benefit. He tired of hearing how he should sell his clients on why they should be paying hundreds of dollars in additional “transaction fees”. The business had slid way too far from being focused on the customer. His customer. So he decided the time was right to be different…..by design. To start his own unique boutique real estate firm truly focused on his customers. They will now have access to a process focused on them. Only the best marketing techniques to sell their homes. No cutting corners. Commission structures based on his clients needs not his. Paradise Sharks was born out of Tom’s passion to return this business to the customer. Where it belongs. If you want a real estate experience that benefits you, just give Tom a call at 561 308-0175 or send him an e-mail at tom@paradisesharks.com. You can always pay more and receive less but that just would not make any sense. Would it?

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