Invitation Homes

Meet the Military-Industrial-Wall Street Complex: Blackstone Hires General Wesley Clark

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So how’s a private equity company snatching up homes all across America, pushing average citizens out of the market and then renting these homes back to the once middle class, but now indentured servitude masses supposed to hedge itself against future backlash?  Simple, put a former General and NATO Supreme Allied Commander in Europe on your payroll.  That’s exactly what Blackstone has just done.

According to Bloomberg, Blackstone has hired General Wesley Clark to “to advise on its investments in energy companies.”  This makes perfect sense since General Clark may be privy to information regarding which countries’ oil wells and refineries may be next in line or liberation by America.  From Bloomberg:

Blackstone Group LP hired Wesley Clark, the former NATO Supreme Allied Commander in Europe and a one-time U.S. presidential candidate, to advise on its investments in energy companies.

Private-equity firms hire high-ranking executives and former officials to expand relationships with corporations and governments worldwide, as well as to benefit from their industry experiences. KKR & Co., the buyout company run by Henry Kravis and George Roberts, hired former CIA director David Petraeus last month to run a new unit for public policy and economic research at the New York-based firm.

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Carrington Bails: More Smart Money Leaves the “Buy to Rent” Game

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“Buy to rent” has been one of my favorite topics to write about as of late, since the creation of this “asset class,” combined with the total madness that follows from money printing, has once again created a major housing bubble in many markets in these United States.  In recent months, I’ve noted how some of the earliest participants in this market have pulled back.  Most notably Och Ziff, but now Carrington as well.

The signs are everywhere that this market is not only overheated, but downright filled with insanity, and as Carrington’s head Bruce Rose states “stupid money.”  Las Vegas is a prime example of this, where 8% of single family homes are vacant, yet new construction permits are up 50%.  More from Bloomberg:

Hedge fund manager Bruce Rose was among the first investors to coax institutional money into the mom and pop business of single-family home rentals, raising $450 million last year from Oaktree Capital Group LLC. 

Now, with house prices climbing at the fastest pace in seven years and investors swamping the rental market, Rose says it no longer makes sense to be a buyer.

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

No joke, I actually heard an ad on local Boulder radio that explained how you could “get in” on buy to rent schemes.

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America Meet Your New Slumlord: Wall Street

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And I sincerely believe, with you, that banking establishments are more dangerous than standing armies; and that the principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.

– Letter from Thomas Jefferson to John Taylor, May 28, 1816

Well they aren’t really your “new” slumlord in the sense you have been debt slaves to the financials system for decades.  What I really mean is that it is now becoming overt and literal.  Literal because financiers are now the main players in the real estate market and are buying all the homes ordinary citizens were kicked out of over the past few years.  Yep, we bailed out the financial system so that financiers with access to cheap credit can buy up all of America’s real estate so that they can then rent it back to you later.

Of course, my opinion is that this will ultimately backfire on all the private equity buyers once they find out multiple generations will start living together and a weak economy will not provide the rental income they envision going forward.  Particularly once we have another severe slowdown…which always happens eventually.  Incredibly, Blackstone has spent $1.5 billion to buy homes in the last 2-3 months alone!

From Bloomberg:

Blackstone has spent more than more than $2.5 billion on 16,000 homes to manage as rentals, deploying capital from the $13.3 billion fund it raised last year, said Jonathan Gray, global head of real estate for the world’s largest private equity firm. That’s up from $1 billion of homes owned in October, when Blackstone Chairman Stephen Schwarzman said the company was spending $100 million a week on houses.

“The market is moving much faster than anybody thought possible,” Gray said during an interview in Blackstone’s New York headquarters. “Housing is much stronger than people anticipated.”

Of course the market is improving.  Not because citizens are buying, but because financiers with access to cheap credit are in a bidding war to become America’s slumlords.

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