Sarasota Real Estate Information

This past week the Sarasota Herald Tribune Reported that an investment firm from New York has begun purchasing single family - 3 bedroom-2 bath homes for rental properties in the Sarasota and Manatee Counties. The real estate market in southwest Florida has made some significant turns and investment groups like Blackstone and others are making significant investments in the area.  Please find the complete article below by John Hielschier and Michael Braga, staff writers for the Sarasota Herald Tribune.

Firm Scoops Up Area Properties

By John Hielscher and Michael Braga,
Staff Writers for The Sarasota Herald Tribune

Giant real estate investment firm Blackstone Group has launched an ambitious campaign to buy distressed properties in Southwest Florida, so far doing it all with cash.

Last month, the New York firm paid $4.4 million for 37 homes in Sarasota and Manatee counties, property records show, part of an $80 million buying spree in 11 Florida counties.

Blackstone wants to acquire "a couple hundred" homes in the Sarasota-Bradenton area, said Scott Corbridge of Sarasota Management & Leasing, who met with Blackstone executives several months ago.

Blackstone's significance regionally, in addition to its sheer size and buying power, is its ability to single-handedly hamstring competing investors and possibly even raise home prices.

"If it fits their model, they are not afraid to pay more than the asking price to get it," Corbridge said.

Blackstone -- the world's largest real estate private equity firm, managing $54 billion -- did not return calls for comment.

The firm's sudden presence in Southwest Florida represents the latest in a bullish push nationwide into real estate of all kinds. For years now, market observers have wondered when the so-called "smart money" would move into a region battered by the Great Recession. The downturn pushed properties of nearly every variety down as much as 50 percent in value.

Since 2009, Blackstone real estate funds have invested or committed $17.6 billion to buying properties, the company says.
The firm's entry into the local real estate game is the latest signal that the recession that rocked residential real estate in Southwest Florida has officially ended. Private equity funds tend to hedge risks for clients with relatively safe investment bets that generate solid, if not always spectacular, returns.

Not alone
Blackstone, which owns Hilton Hotels Inc., Equity Office Properties and a stake in mall investor General Growth Properties, is not alone in seeking undervalued homes to buy.

Colony Capital, Starwood Capital and Waypoint Real Estate Group -- just a few of the equity funds hunting around Florida -- have reportedly raised $8 billion to buy up to 80,000 distressed homes nationwide to manage as rentals. Colony Capital plans to buy and convert 20,000 homes by late 2013.

Last month alone, Blackstone bought 536 properties in Florida, including 23 in Sarasota and 14 in Manatee.

Blackstone could differentiate itself from the well-heeled buying pack, analysts note, by its decision to target a specific property type.

To that end, the company is aggressively pursuing single-family homes with three bedrooms and two baths, of block construction. They are less than 20 years old and priced under $175,000.

Homes in flood zones need not apply.

Blackstone's acquisitions have to date been made through THR Florida LLC, owned by Riverstone Residential Group, a Dallas-based apartment rental and management company, records show. Riverstone is one of two companies that has teamed with Blackstone to orchestrate purchases.

Real estate analysts are split on the impact Blackstone will have on a market that has been rebounding.  "They're taking properties off the market, which is not a bad thing," said John Schaub, a Sarasota real estate investor. "That usually drives up prices."

Blackstone intends to convert the single-family homes it acquires into income-producing rentals, then reportedly package them into real estate investment trusts to sell to investors.

More than one real estate observer notes, though, that Blackstone's presence could have a dramatically negative impact on the local market.

"They're outbidding everyone at auction," said a Charlotte County real estate agent who helps investors buy distressed properties. "They're just mopping the floor in North Port. We've been left twiddling our thumbs."

Apparent good timing
Though Blackstone's arrivals comes as the residential real estate market regionally and statewide is in recovery, the company's timing appears to be sound.

Demand for rentals has spiked throughout Florida because many financially strapped homeowners have lost their houses to foreclosure or short sales, said Jack McCabe, a Deerfield Beach real estate consultant.

In all, there were more than 440,000 foreclosures in Florida from 2007 to 2009, McCabe said, and 339,000 are pending. Those court actions thrown former owners into what has become a shrinking pool for rentals.

Investors like Blackstone, meanwhile, are buying those homes at steep discounts, often for cash. With interest rates expected to stay at record lows for several years, buyers may try to refinance at low rates later to lift their returns.

"Occupancy of those units are probably 90 to 100 percent, and they have good cash flow," McCabe said. "And when it comes time to dispose of these, in three to seven years, they will realize some pretty substantial profits as well over the purchase prices."

Corbridge, the potential asset manager who met with Blackstone, agreed that the firm and others flush with cash could outmuscle individual investors and those looking to buy primary residences but who require financing.

"It's going to edge out the smaller investor who wants to be in this market," Corbridge said. "They will be edged out by the big money, deep-pocket cash buyers."

But still others contend that the interest by Blackstone and other large institutional buyers speaks well for the local market.

Tom Heatherman, a spokesman for residential brokerage firm Michael Saunders & Co., said his firm welcomes the increased activity that Blackstone and others bring.  "Our inventory has been whittled down to four months, but we still have plenty of big investors, plenty of small investors as well as people buying houses for themselves interested in the market," Heatherman said.

Corbridge said Blackstone talked with him about managing its local properties, but also wanted him to scope out homes to buy.

He said he is now in talks with another large investor, whom he declined to identify, willing to spend $350 million on a similar strategy.

Schaub predicts that Blackstone will begin reselling the properties it acquires in as little as two to three years.

Property records show that the bulk of Blackstone's buying activity in Florida has been centered in the Tampa Bay area.

THR Florida bought 250 properties in Hillsborough County last month, another 89 in Polk County and 88 in Pasco County. In total, Blackstone is reportedly spending $100 million on houses nationwide every week.