Wall Street Chickens Come Home to Roost

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The Wall Street housing chickens are coming home to roost.

Less than two year after the Wall Street casino barons opened up the residential real estate buy-to-rent roulette, one of the first gamblers was cashing in their housing chips.

On Monday Reuters reported that Oaktree Capital Group, a Wall Street hedge fund, was getting out of the rent-to-lease business and selling a pool of 500 homes. The homes are mainly located in several western U.S. states.

For real estate investors this is important news. If Wall Street is selling their rental homes now, the question is: What do they know that you don’t?

Over the last two years, private equity firms like Blackstone Group, Colony Capital, American Homes for Rent and Silver Bay RealtyTrust Corp., have ramped up their purchases of distressed properties.

Last year, Oaktree, which specialized in distressed investing, teamed up with Carrington Mortgage Services to build a portfolio of real estate assets and then convert them into a real estate investment trust (REIT). Oaktree had agreed to spend $450 million on building a portfolio of rental properties. But Oaktree has decided to pull the plug on the REIT.

In choosing to sell now, Oaktree and Carrington will profit from the current surge in homes prices. Single-family homes prices are up 12 percent year-over-year, according to the S&P/Case Shiller home price index. In Las Vegas, prices are up 27.5 percent. They are one of the first to run for the exit. Others will soon follow.

Over the past year, the stock value of Oaktree Capital Group has surged from $39 to $59 a share. On Wednesday morning it was trading at $54.66.

Who will be next to sell their inventory of foreclosed homes?

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About the author

Octavio Nuiry

Born in Havana, Cuba, raised in Miami, Fla., and New Orleans, La., Octavio has spent his entire career in the communications industry. Prior to joining RealtyTrac, Octavio worked as a columnist for the New Orleans Times-Picayune, a publicist at Burson-Marsteller in Los Angeles, an account executive at various Orange County advertising agencies and the owner of his own marketing firm, ON Marketing.

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