Difference between revisions of "Housing debt research"
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Revision as of 07:41, 19 February 2018
- 1 RENTAL SECURITIZATION - RESEARCH
- 1.1 MACRO ISSUES:
- 1.2 History
- 1.3 Market Overview
- 1.4 Blackstone - Invitation Homes
- 1.5 Market Players
- 1.6 Weaknesses / Opportunities
- 1.7 Invitation Homes Target
- 1.8 Concentrated Locations:
- 1.9 Atlanta Fed Study
- 1.10 Homes for All - CA Study
- 1.11 Invitation Homes 2017 IPO Prospectus :
- 1.12 Market Overviews:
- 1.13 SPAIN
RENTAL SECURITIZATION - RESEARCH
- GSE Sponsorship puts taxpayers on the line for losses
- Lack of access to credit, low new construction, rising rents, continued low rates of homeownership: factors that make this work.
- Widespread Corporatized Housing begins to look a lot like Labor (wrt Strikes)
- Shows obvious flaws in QE policy - people's QE could have done this better
- Government ushered this in by giving bailout funds to finance instead of individuals
- Cash Buyers in traditionally individual market is so disruptive. Could have long term consequences.
- 2012 Bernanke's idea, Warren Buffet said it on TV, and within 6 months Blackstone had started buying properties.
- Why a good market?
- Fucktons of cheap homes.
- Model based on homes that were cheaper to buy than build (and you get the land free)
- Homeownership has declined to 50yr lows (63.5% - Down from about 69% at highs.) 
- Stricter lending standards,
- Mounting student debt 
- Potential buyers whose savings and credit diminished during the recession.
- Low rates of new construction
- Rising Rents in lots of markets
- Initially, Blackstone gets bulk loans (many of which were from Blackstone itself), and goes out to buy houses cash (obviously being able to outbid individuals who need to get mortgages..)
- Quickly tries to diversify funding
- Some New Developments made specifically for rental properties 
- 2013 First Securitization (by Blackstone) for about 500mm. $18bn in issuance has followed.
- Analysts predicted at the time market could go to $70bn per year by 2017. We're nowhere close to that. 
- Lots of people follow suit (see competitors)
- 2017 -Blackstone goes public, readying for an exit  -
- 2017 - Fannie comes in to guarantee financing - putting Taxpayers on line for future losses. 
- 250,000 Homes, about $32bn invested across institutional investors 
- Total Housing Market is $22 Trillion
- Single-family rentals now add up to 13% of overall housing stock, up from 9% in 2005, 
- 1-2% of all Rental Homes owned by Institutional Investors 
- 16mm total SFR units
- Blackstone is 40% of all money spent, 20% of all homes
- In all, big investors have sold about $18.3 billion of rental-backed bonds, with about $16.8 billion of such debt outstanding. 
- Blackstone is 33% of it, $5.3bn
- Current Market Growth slowed to near-stop. Institutional players taking profits. 2017 NSFR Report.pdf
- Cache of cheap houses depleted
- Rising Interest Rates
- Leveraged buyers (vs All cash) are a majority of transactions now, for first time in a decade. 2017 NSFR Report.pdf
- Businesses are NOT PROFITABLE. All of the major institutional buyers have net losses.  
- This means they need to keep raising rents, cutting maintenance costs to break even
- Lower financing costs help
- But lots of value trapped in home price appreciation
- Fannie Mae (ostensibly the Government's arm to encourage home ownership) now insuring securitization debt. 
- Attempt to do so in 2012 was stifled by bank lobby. Not clear if they didn't try too hard this time, now support the measure, or SFR industry sufficiently powerful now to overcome it. 
- Freddie Mac now looking at doing it too. 
- This will significantly reduce funding costs.
- Taxes: One very bad part is how it removes rental income from the communities the homes are in, and also the taxes paid on that income. Further, most of the SFR firms are organized as REITs, which pay no corporate income taxes at all. :
- Shares of American Homes 4 Rent and Colony Starwood Homes made its debut in recent years to tepid demand but surged last year as the homeownership rate fell to its lowest level in at least 50 years, according to U.S. Census Bureau data. [http://quotes.wsj.com/SFR
- Operating margins for institutional owners have expanded from 50% to closer to 65% as operators have built scale and refined their platforms. 
- Average Home Outlay traditionally around $140k.. Now closer to $200k. 
- Most bought through foreclosure
- Starting around 2014, as Foreclosures dried up, Starwood, AMH and others have started purchasing non-performing loans, attempting to modify, but often foreclosing and converting into SFRs. Starwood anticipates converting about half of all their loans into rentals. 
- Between 16-35% of tenants were former homeowners 
- At least one guy was foreclosed, and had to move into an IH rental. Later found out IH had bought his home in foreclosure and was renting it out.
- Securitization Quality Deteriorating as market becomes more comfortable with them
- Deals are requiring lower quality assets
- AND paying lower yields 
- AND accepting higher leverage 
- Good Schools, since you can get away with bigger rent hikes before people will relocate kids. [http://www.salon.com/2016/12/19/wall-street-could-keep-the-rent-too-damn-high/,
- Lax Tenant Protections
Blackstone - Invitation Homes
- 50,000 Homes
- In 2013 peak, it was spending $100mm per week on homes (700 properties per week). Now buys about 20 homes per week, or roughly $3mm. 
- 13 Markets 
- 95% average occupancy
- 3/4 of revenue comes from Western U.S. and Florida, highest concentration in Atlanta 
- 6 Securitizations (see below) - First one matures in November 2018
- Blackstone started a financing company specifically to fund SFR Buyers (5-500 homes) who were struggling to find financing. Its now biggest single lender to rental investors. 
- First Securitization was in 2013 for $400mm.
- 2014 saw a dip in occupancy and income, and everyone was calling it all a failure and naming lots of reasons. "Vacancies up 33%" - Meant they went from 5% to 7%. It was an anomaly. Things got right back on track. 
- January 2017: IH Public issue starts trading $20/share, valued at $6bn
- Blackstone retains 70% stake, but now has a market in which to exit 
o Others (AMH4R, Colony) went public early, didn't do well at first, surged last year. Blackstone waited.
- January 2017: Fannie Mae announced backing for $1bn
- Moody's upgraded the securitizations last year, citing strong demand
- Blackstone anticipates $9500 per property per year. (65% margin)
- A "significant number" of the properties are part of HOAs
- First Securitization: 3207 Homes. 160 (5%) would need to strike.
- No Refinancings yet - first one October 2018 
o Fitch recognized risk around this in ratings process 
American Homes 4 Rent (AMH)
- With cash from Alaska's state oil fund, self-storage magnate B. Wayne Hughes
- owns about 48,000 homes in 22 states. 
- 25% Eviction rate (vs. 15% for all SFR) 
Colony Starwood Homes
- 33% Eviction Rate (vs. 15% for all SFR) , the most of any large real estate firm.
- Tom Barrack, chairman of U.S. President-elect Donald Trump's inauguration committee, and the company he founded, Colony Capital, are the largest shareholders of Colony Starwood.
- Real estate moguls Barry Sternlicht and Thomas J. Barrack Jr. merged their rental-home portfolios in 2016 to make the country's third largest landlord, Colony Starwood Homes, which said it owned 30,407 houses [http://www.wsj.com/articles/big-landlords-in-talks-to-merge-betting-on-rising-rents-1442808003  ,
Progress Residential (Pretium Partners LLC)
- Big Short Guy
- Donald Mullen Jr., a former Goldman Sachs Group LP executive who a decade ago helped oversee the firm's lucrative bet against the housing market 
- Pretium, which rents and manages its homes under the name Progress Residential, owns the fourth-largest pool of U.S. homes. It is raising money for what would be its third fund dedicated to residential real estate.
- The first fund, which raised $1.2 billion in 2012, was used to buy more than 16,500 homes at big discounts. In 2014 Pretium raised another $900 million to purchase roughly 14,000 nonperforming home loans.
PIMCO - Havenbrook Homes
25% Eviction rate (vs. 15% for all SFR)
American Residential Properties
Sylvan Road Capital
Former Morgan Stanley Analyst Oliver Chang
Liar's Poker Lewis Ranieri
Weaknesses / Opportunities
- All of the homes are (ultimately) backed by a single loan to the securitization vehicle and therefore investors. 
- If the performance falls sufficiently (estimated 10% vacancies since 8% is distressed) the loan goes into default
- This would require a sale of ALL the properties backing the structure to recoup.
- When loan term is up, they need to refinance. If vacancies are sufficiently high, even if not at default level, it might be too expensive to refinance and they'd have to sell portfolio.
- Could prevent too much Fannie/Freddie backing taking hold
- SEC is investigating this now. If home values were unrealistically high, this could compound/capitulate if a single issue was forced to liquidate.
- Ratings are based on home values
- Large blocks of sales could depress home values further.
- Numerous issues are outlined in the prospectus with respect to potential title problems from auction transactions.
- 29% of their homes were bought at auction
- Say they can have total loss from these..
Invitation Homes Target
- Protest upon vacancy.
- Be Disruptive - make it impossible to sign a new lease
- How to ensure sales are not to other institutional buyers??
- Monitor Eviction court filings - protest every house after eviction.
- Make it risky to evict - impose on costs for evicting folks
- This could take months/years - needs sustained impact on income.
- Get neighbors to put up signs, park cars in front,
- Spray Paint houses
- 160 properties is 5% for IH1
- Flash point around Refinancing time - the first one comes October 2018.
- Make it impossible to refinance.
- Call business model into quesiton before it becomes real.
Dispute tools - to report to Building Codes? I DO think its possible to target this market with some coordinated rent strike. Hard, but Do-able However, best case scenario is collapsing the market. Which could affect property values and disrupt housing availability in already struggling markets. They just take big profits from home price appreciation and go on with their lives. Seems unlikely that striking for better terms, lower rents, etc are feasible. Business model doesn't work if that's the case. The Market is not all that compelling at this point. You can see a nightmarish world where half of all properties are rented from large corporate landlords - the monopolization of housing. This needs to be prevented.
- Cheap Funding is becoming more available (although interest rates are rising..)
- Securitization Deals are requiring lower quality assets AND paying lower yields AND accepting higher leverage.
- While they're now focused on markets with weaker tenant protections, Opportunity and resources for large landlords to effectively lobby to weaken tenant protections in other markets with compelling financials.
- Tipping point of ownership where they are able to start exerting more and more control.
But the market doesn't seem to be sprinting in that direction. Missed the boat on Blackstone. Its still very small, growth is very low. Should be noted that same dynamics are NOT in Spain, for example.
- Blackstone is still accumulating lots of properties
- More egregious reports of mistreatment
- Deeper pool of distressed properties and enduring recession.
- Terrible anti-tenant rights laws passed recently.
- In Atlanta, evictions are much easier on landlords. They are cheap: about $85 in court fees and another $20 to have the tenant ejected, according to Michael Lucas 
- Evicitions can take place in 7 days
- 2015, buying in bulk 
- One local Atlanta real-estate agent said bulk purchasers are making it more difficult for individual home buyers to compete for new listings.
- Home prices in Atlanta have jumped 22.5% in two years
Huber Heights, OH:
In Huber Heights, Ohio, Wall Street's newest tactic for extracting profit from Main Street is on dramatic display. The Dayton suburb finds itself 9 percent owned by a hedge fund that played a key role in inflating and exploding the sub-prime mortgage bubble, putting the town's public school and other budgets in jeopardy. . [https://thinkprogress.org/a-hedge-fund-is-now-the-largest-landlord-in-a-small-ohio-town-8a13a1c18b5b, [http://thinkprogress.org/economy/2013/08/07/2427981/is-the-sec-throwing-in-the-towel-on-financial-crisis-investigations/ Magnetar Capital owns one of every 11 homes in 40,000-person Huber Heights after purchasing the rental company that was founded by the town's namesake, Charles Huber. Huber built almost 13,000 houses in the town from 1956 to 1992, and when his widow decided to sell the company that managed almost 2,000 of his rental units, Magnetar jumped at the chance. The deal made Magnetar "the town's largest landlord," according to Bloomberg. Now under new management, the company wants the county tax assessors to cut their assessment of the value of Magnetar's homes by 49 percent - a cut that would gut the town's tax collections and jeopardize public services and school budgets. If Magnetar gets its reassessment, the small town will lose $1.39 million in tax revenue and likely have to lay off 16 teachers. Studies
Atlanta Fed Study
- The Federal Reserve was the first to suggest that private equity firms were the one group with cash on hand to invest in foreclosed homes(Bernanke, 2012). In 2012, the Federal Housing Finance Agency (FHFA), conservator of the GSEs, issued a pilot to develop structured transactions that could be used to sell its REO homes in bulk. The private market followed by developing and standardizing financial instruments to allow broader market investment in converting foreclosed homes into single-family rentals (Fields, Kohli, & Schafran, 2016)
- Today there is high concentration in the single-family rental business, with an estimated 170,000 single-family rental homes owned by the seven largest firms (Fields et al., 2016)
- Four local factors stand out as important: the glut of brand-new homes in construction foreclosure concentrated in the suburbs; swaths of residential mortgage foreclosures concentrated in olderin-town neighborhoods; the expectation that Atlanta's long-term home prices and economic health were bright; and finally,high levels of racial and income segregation that structured the housing market recovery(Raymond, Wang, & Immergluck, 2015).
- Conversely, Kim and Cho (2016)study the post-foreclosure trajectory of REO homes in Orange County, Florida,and find that post-REO properties are more likely to be renter occupied in high-minority neighborhoods, presenting affordable rental opportunities but possibly also reinforcing racial and ethnic segregation
Homes for All - CA Study
- Using public records, we identified a total of 1,402 properties owned by Blackstone's purchasing subsidiary, THR California, as of early March 2014
- In Los Angeles, nearly half of their purchases were from speculative corporations that had owned the home for less than one year, with another third purchased through foreclosure. In Riverside, Blackstone purchased 88 percent of the properties we canvassed from individuals, mostly through foreclosure sale.
- In Los Angeles, 16 percent of our respondents were former homeowners, and in Riverside, 35 percent were.
- Private equity firms and institutional investors have raised and invested upwards of $20 billion to purchase more than 200,000 single-family homes nationwide.
- The Blackstone Group, American Homes 4 Rent, Colony Financial, Silver Bay, Starwood Waypoint, American Residential Properties, former Morgan Stanley analyst Oliver Chang' Sylvan Road Capital, and Lewis Ranieri's Hyperion Homes.
- Firms are having trouble finding homes in their target price range. To ensure the continued acquisition of homes, Starwood Waypoint, American Homes 4 Rent, and other companies have started purchasing non-performing loans, giving them a shot at owning properties while residents are still living in them, struggling to pay a mortgage, and often seeking mortgage modifications in order to stay in their homes. Starwood Waypoint anticipates converting about half of all the non-performing loans they purchase into single-family rentals.
- Instead of seeking out non-performing loans, these companies are finding ways to make loans to smaller investment companies. Blackstone's "B2R" or buy-to-rent lending platform is "focused exclusively on the financing needs of single-family home investors...B2R's products are tailored to serve investors with portfolios of five to five hundred homes nationwide.
- Though Blackstone's acquisition rate for single-family homes has declined 70 percent from its 2013 peak, the firm still spends about $30 million a week to buy properties and in total has spent $8 billion to amass about 43,000 homes. In the brand new institutional single-family rental market, Blackstone is responsible for about 40 percent of all money spent to acquire properties, and it controls about 20 percent of all institutionally rented single-family homes.
- According to its own projections, Blackstone anticipates profits of $9,513 per property per year. This means that Blackstone plans to extract about $13.3 million per year from the homes we identified in Los Angeles and Riverside, Calif.
- Six tenants declined to answer questions regarding their annual household income. Of those that did respond, 33 percent of households were making$70,000 a year or more, 11 percent made between $50,000 and $70,000 a year, another 11 percent made $40,000 to $50,000a year, 33 percent made $20,000 to $40,000a year, and 11 percent made less than $20,000 a year. Sources of income varied, but a large proportion of respondents, 40 percent, worked in the service sector. Twenty percent worked in skilled trades as plumbers or electricians, and 12 percent of our respondents were retired.
- Though a number of renters expressed concerns about their lease applications being rejected due to poor credit, when those renters' deposit amounts as a percentage of their rent was compared to others, there seemed to be no systematic way Invitation Homes was using creditworthiness to determine deposit amounts.
- One tenant reported a striking example of how Blackstone's business model prioritizes wealth extraction based on accumulation by dispossession. After living in their previous home for nearly 40 years, this tenant's spouse passed away, and the bank was unwilling to work with them to keep them in their family home. They were foreclosed upon and now find themselves renting from Invitation Homes. Upon speaking with a former neighbor and checking public records, this tenant found out that their previous family home of four decades is now owned by Invitation Homes.
- Of the Invitation Homes properties [in Riverside] acquired from individuals, 88 percent were acquired through foreclosure, meaning that Invitation Homes likely evicted as many as 114 Riverside families who had been struggling to stay in their homes and avoid foreclosure.More than a quarter, 27 percent, of the tenants we spoke with in Riverside were now renting from Invitation Homes after being displaced from previous homes due to foreclosure or inability to modify a mortgage, highlighting the fact that institutional investors like Blackstone are directly benefiting from displacement trends suffered by previous homeowners and tenants in foreclosed properties.
- In October 2013, Blackstone launched the first securitization of single-family rental homes. Invitation Homes received a $479.1 million loan from Deutsche Bank subsidiary German American Capital Corporation to finance the securitization of 3,207 single-family rental homes. The loan is secured by mortgages for each of the 3,207 properties. Unlike individuals, who tend to acquire homes with mortgage financing-and who may then have their mortgage bundled into a security-Blackstone and Invitation Homes acquire properties with cash. These 3,207 mortgages were created for the express purpose of securitizing these properties, enabling capital from bond investments to give Blackstone more liquidity so it can move its money elsewhere.
- So they buy the houses for cash, then mortgage them to the securitization vehicle so the cashflows are actually mortgage payments instead of rent payments? They act as a conduit from rent-to-mortgage payment?
- Invitation Homes 2013-SFR1 is a securitization transaction that will be collateralized by a $479.1 million non-recourse, first lien, floating rate mortgage loan (Loan) that will be originated by German American Capital Corporation on the securitization closing date in November 2013 and funded with the proceeds from the sale of the certificates. The Loan is secured by the borrower's fee simple interest in 3,207 one to four unit residential properties located in five states: Arizona, California, Georgia, Florida and Illinois.
The Loan will be secured by first priority mortgages on the properties, and a grant of a security interest in all personal property of the borrower. KBRA considers the mortgage structure to be superior to a loan secured solely by an equity pledge because the trust will have a first priority lien and security interest in the single family residential (SFR) properties. Therefore, if the trust were to exercise remedies following a default, it would be able to acquire the properties, as opposed to having its recovery limited to the sponsor's equity. The utilization of mortgages in this transaction was essential in assigning an 'AAA' rating. 
Invitation Homes 2017 IPO Prospectus :
- We may become a target of legal demands, litigation (including class actions) and negative publicity by tenant and consumer rights organizations, which could directly limit and constrain our operations and may result in significant litigation expenses and reputational harm.
Numerous tenant rights and consumer rights organizations exist throughout the country and operate in our markets, and we may attract attention from some of these organizations and become a target of legal demands, litigation and negative publicity. While we intend to conduct our business lawfully and in compliance with applicable landlord-tenant and consumer laws, such organizations might work in conjunction with trial and pro bono lawyers in one or multiple states to attempt to bring claims against us on a class action basis for damages or injunctive relief and to seek to publicize our activities in a negative light. We cannot anticipate what form such legal actions might take, or what remedies they may seek. Additionally, such organizations may lobby local county and municipal attorneys or state attorneys general to pursue enforcement or litigation against us, may lobby state and local legislatures to pass new laws and regulations to constrain or limit our business operations, adversely impact our business or may generate negative publicity for our business and harm our reputation. If they are successful in any such endeavors, they could directly limit and constrain our operations and may impose on us significant litigation expenses, including settlements to avoid continued litigation or judgments for damages or injunctions.
- Title defects could lead to material losses on our investments in our properties.
Our title to a property may be challenged for a variety of reasons, and in such instances title insurance may not prove adequate. For example, while we do not lend to homeowners and accordingly do not foreclose on a home, our title to properties we acquire at foreclosure auctions may be subject to challenge based on allegations of defects in the foreclosure process undertaken by other parties. In addition, we have in the past, and may from time to time in the future, acquire a number of our properties on an "as is" basis, at auctions or otherwise. Of the 48,431 homes in our portfolio as of September 30, 2016, approximately 29% were acquired on an "as is" basis. When acquiring properties on an "as is" basis, title commitments are often not available prior to purchase and title reports or title information may not reflect all senior liens, which may increase the possibility of acquiring houses outside predetermined acquisition and price parameters, purchasing residences with title defects and deed restrictions, HOA restrictions on leasing, or purchasing the wrong residence without the benefit of title insurance prior to closing. Although we use various policies, procedures, and practices to assess the state of title prior to purchase and obtain title insurance once an acquired property is placed into a securitization facility in connection with a mortgage loan financing, there can be no assurance that these policies and procedures will be effective, which could lead to a material if not complete loss on our investment in such properties.
For properties we acquire at auction, we similarly do not obtain title insurance prior to purchase, and we are not able to perform the type of title review that is customary in acquisitions of real property. As a result, our knowledge of potential title issues will be limited, and no title insurance protection will be in place. This lack of title knowledge and insurance protection may result in third parties having claims against our title to such properties that may materially and adversely affect the values of the properties or call into question the validity of our title to such properties. Without title insurance, we are fully exposed to, and would have to defend ourselves against, such claims. Further, if any such claims are superior to our title to the property we acquired, we risk loss of the property purchased.
Increased scrutiny of title matters could lead to legal challenges with respect to the validity of the sale. In the absence of title insurance, the sale may be rescinded and we may be unable to recover our purchase price, resulting in a complete loss. Title insurance obtained subsequent to purchase offers little protection against discoverable defects because they are typically excluded from such policies. In addition, any title insurance on a property, even if acquired, may not cover all defects or the significant legal costs associated with obtaining clear title.
- We have in the past and may from time to time in the future acquire some of our homes through the auction process, which could subject us to significant risks that could adversely affect us.
We have in the past and may from time to time in the future acquire some of our homes through the auction process, including auctions of homes that have been foreclosed upon by third party lenders. Of the 48,431 homes in our portfolio as of September 30, 2016, approximately 29% were acquired at auction on an "as is" basis. Such auctions may occur simultaneously in a number of markets, including monthly auctions on the same day of the month in certain markets. As a result, we may only be able to visually inspect properties from the street and will purchase these homes without a contingency period and in "as is" condition with the risk that unknown defects in the property may exist. Upon acquiring a new home, we may have to evict residents who are in unlawful possession before we can secure possession and control of the home. The holdover occupants may be the former owners or residents of a property, or they may be squatters or others who are illegally in possession. Securing control and possession from these occupants can be both costly and time-consuming or generate negative publicity for our business and harm our reputation.
Allegations of deficiencies in auction practices could result in claims challenging the validity of some auctions, potentially placing our claim of ownership to the properties at risk. Since we do not obtain title insurance policies for properties we acquire through the auction process until we place the property into a securitization facility in connection with a mortgage loan financing, such instances or such proceedings may result in a complete loss without compensation.
- In particular, under a Florida statutory scheme implemented by certain Florida jurisdictions, a violation of the relevant building codes, zoning codes or other similar regulations applicable to a property may result in a lien on that property and all other properties owned by the same violator and located in the same county as the property with the code violation, even though the other properties might not be in violation of any code. Until a municipal inspector verifies that the violation has been remedied and any applicable fines have been paid, additional fines accrue on the amount of the lien and lien may not be released, in each case even at those properties that are not in violation. As a practical matter, it might be possible to obtain a release of these liens without remedying the property in violation through other methods, such as payment of an amount to the relevant county, although no assurance can be given that this will necessarily be an available option or how long such a process would take.
- A significant number of our properties are located within HOAs, which are private entities that regulate the activities of owners and occupants of, and levy assessments on, properties in a residential subdivision. The HOAs in which we own our properties may have enacted or may from time to time enact onerous or arbitrary rules that restrict our ability to restore, market, lease or operate our properties in accordance with our investment strategy or require us to restore or maintain such properties at standards or costs that are in excess of our planned budgets. Some HOAs impose limits on the number of property owners who may rent their homes, which, if met or exceeded, would cause us to incur additional costs to sell the property and opportunity costs of lost rental revenue. Furthermore, we may have residents who violate HOA rules and incur fines for which we may be liable as the property owner and for which we may not be able to obtain reimbursement from the resident. Additionally, the governing bodies of the HOAs in which we own property may not make important disclosures about the properties or may block our access to HOA records, initiate litigation, restrict our ability to sell our properties, impose assessments or arbitrarily change the HOA rules. We may be unaware of or unable to review or comply with HOA rules before purchasing a property, and any such excessively restrictive or arbitrary regulations may cause us to sell such property at a loss, prevent us from renting such property or otherwise reduce our cash flow from such property, which would have an adverse effect on our returns on these properties.
Covenants in our debt agreements may restrict our operating activities and adversely affect our financial condition. Our existing debt agreements contain, the credit facility that our Operating Partnership expects to enter into concurrently with or prior to the completion of this offering will contain and future debt agreements may contain, financial and/or operating covenants, including, among other things, certain coverage ratios, as well as limitations on the ability to incur secured and unsecured debt. These covenants may limit our operational flexibility and acquisition and disposition activities. Moreover, if any of the covenants in these debt agreements are breached and not cured within the applicable cure period, we could be required to repay the debt immediately, even in the absence of a payment default. As a result, a default under applicable debt covenants could have an adverse effect on our financial condition or results of operations.
2013: Spending $7.5 billion to buy 40,000 homes in the U.S., Blackstone has targeted mainly foreclosed single-family properties, renovated them, and sought tenants. The firm is taking a different approach in Spain, where it's competing with foreign and domestic distressed property investors who are seeking to make bulk purchases of low-cost housing units, mainly already-occupied apartments, in cities where local governments need to sell assets to trim deficits. "They're focusing on homes complete with tenants and assured rental income in large urban areas like Madrid, where there's high demand and most people's salaries can meet the rent," says Fernando Encinar, co-founder of Idealista.com, Spain's largest property website. 
While Spain traditionally has a lower percentage of renters than the U.S., the government last year introduced measures to increase demand in the rental market by abolishing tax breaks for individual home buyers. Legislation was passed to protect landlords by allowing them to raise rents above the annual inflation rate, speeding up evictions of tenants who don't pay and reducing the length of leases, which means owners can raise prices more frequently.
2015: Blackstone is not the only US investor to face backlash. Goldman Sachs has also received negative publicity over its Spanish mortgage business with local asset manager Azora Capital SL accused of raising monthly direct debits, according to a Reuters article last October. Azora manager Carlos Rodriguez recently told Bloomberg that the firm's policy is to sit down with tenants to discuss each individual situation, adding that the company has a social worker.  [http://www.azora.es/?lang=en 
2016: Blackstone has won one of the largest ever real estate auctions and it did so during the final days of 2015. A few weeks ago, the US fund completed the acquisition of 4,500 rental homes from Banco Sabadell, according to financial sources consulted by Expansión. The homes will be managed by Blackstone's real estate subsidiary, Anticipa, the entity formerly known as CatalunyaCaixa Inmobiliaria, led by Eduard Mendiluce In addition, the fund has three other subsidiaries in Spain, which also manage property investments, namely: Fidere, which focuses on homes for rent (many of which are social housing properties); Logicor, which concentrates on the logistics asset segment; and Multi Development, which specialises in shopping centres. Blackstone completed its largest ever investment in Spain last year, with the purchase of 40,000 mortgages from Catalunya Banc, worth €6,400 million for €3,600 million. Anticipa manages that portfolio, together with a few others acquired from entities such as CaixaBank, taking the entity's total assets under management to €10,000 million. Another one of the most active investors in Spain in recent months has been Oaktree, which competed against Blackstone to take over Sabadell's portfolio.   , ,