Tampa Bay homes included in Blackstone's first rental-backed security deal

The financial instrument that became Public Enemy No. 1 during the housing crisis is back with a new set of stripes, as private-equity giant Blackstone shops a new rent-backed security based partly on the cash flow from Tampa Bay homes.

The $480 million deal, the first of its kind in the country, was first marketed on Wednesday to potential investors in New York. Bond investors would pocket income from monthly rent payments and potential returns if the homes are sold.

More than 3,200 single-family homes back the security, including 257 from Tampa Bay, investment reports show. Blackstone subsidiary Invitation Homes has spent upward of $326 million buying more than 2,000 local homes to fix up and rent, a Tampa Bay Times analysis found this month.

The new bonds share a strategy with mortgage-backed securities, which investors clamored for during the housing boom. Many of those securities were packed with toxic loans and helped crash the housing market.

The new securities will likely include some of the homes that were foreclosed on in the resulting crisis. Investment groups like Blackstone targeted foreclosed and bottom-dollar homes to repair and rent to tenants.

The average home included in the security is more than 25 years old, with three or more bedrooms and a pre-rehabilitation price of $149,000, ratings reports show. The average Blackstone-owned home in Tampa Bay, Lakeland and Sarasota cost $17,000 to renovate.

Demand for the new bonds could spur investors to binge on more homes to fuel the securities. Seven investment groups have spent $800 million buying Tampa Bay homes since last year, though their buying slowed as home prices climbed.

Blackstone has spent $7.5 billion buying 40,000 American homes, becoming the nation's largest single-family landlord. The New York private-equity firm's portfolio also includes SeaWorld, Universal Orlando, Hilton hotels and the Weather Channel.

Hundreds of potential investors were expected to look over the deal during a road show of investor meetings this week in New York, Boston and Los Angeles. The deals are driven by institutional investors like banks and pension funds.

Deutsche Bank, Credit Suisse and JPMorgan are marketing the security, called Invitation Homes 2013-SFR1 (the last part of which means "single-family rental"). Moody's Investors Service, Kroll Bond Rating Agency and Morningstar gave the deal's $280 million top slice, or "tranche," the highest rating, AAA.

At least one agency, Fitch Ratings, has pushed back, saying the securities were too untested and vulnerable to variables like maintenance costs or property taxes to warrant the stellar ranking.

"While some participants have the financial wherewithal to withstand declining rents or rising costs," the agency said, "none have yet fully demonstrated their commitment to this asset class, which may leave investors shouldering a disproportionate amount of the risks should the operators' motivations and abilities become compromised."