Investment management firm, Oaktree Capital Group LLC (NYSE:OAK) headed by Howard Marks, is planning to exit its investments in foreclosed homes in the United States as return on rents from single family homes begin to decline.
Matthew Goldstein of Reuters reported that Oaktree Capital Group LLC (NYSE:OAK), which specializes in investing in distressed assets, aims to sell 500 fully leased homes, a sign that the investment management firm aims to generate profit as the housing prices in the country have gone up.
Tollymore Investment Partners 2Q20 Letter: ESG ≠ sustainable investing
Tollymore Investment Partners letter to investors for the second quarter ended June 30, 2020. Q2 2020 hedge fund letters, conferences and more Dear partners, Tollymore generated returns of +19% in the first six months of 2020, net of all fees and expenses. Investment results since inception are shown below: Tollymore's Raison Detre Tollymore is a Read More
Based on the S&P/Case-Shiller composite index, the prices of single-family homes climbed by around 12 percent nationally compared to last year. In some markets, such as Las Vegas, the prices of homes were up 25 percent, higher than the national average.
Oaktree Capital Group LLC (NYSE:OAK) and its partner Carrington Mortgage Services are receiving proposals for the portfolio of fully leased homes. According to sources familiar with the plan of the investment management firm, the homes for sale are primarily located in states in the western part of the United States.
Oaktree Capital and Carrington are trying to sell the portfolio of homes
Oaktree Capital Group LLC (NYSE:OAK) and Carrington are trying to sell the portfolio of homes to other large investors in foreclosed homes. The investment management firm agreed to invest $450 million to build a portfolio with Carrington, but decided to stop purchasing foreclosed homes in the country earlier this year because of the declining profits in rent from single-family homes.
According to sources, Oaktree Capital Group LLC (NYSE:OAK) and Carrington are still interested in continuing their partnership to invest in non-performing home loans. Carrinton specializes in this type of investment.
Oaktree Capital’s biggest opportunity is in real estate
In 2012, Morgan Stanley (NYSE:MS) noted that Oaktree Capital Group LLC (NYSE:OAK)’s biggest opportunity is in real estate. The bank discovered the information after the investment management firm went public. According to Morgan Stanley, Oaktree Capital was increasingly optimistic on fund raising diversification to real estate, emerging market, and senior loans.
Last month, the second quarter earnings of the investment management firm increased by 129 percent to $56.6 million, driven by higher incentive income. Over the past year, the stock value of Oaktree Capital Group LLC (NYSE:OAK) climbed from $39 to $59.50 per share. The stock is trading around $55.54 per share on Tuesday morning in New York.
Meanwhile, other investment management firms such as Och Ziff Capital Management sold its portfolio of 300 homes in Northern California.
The Blackstone Group L.P. (NYSE:BX) started spending billions of dollars acquiring distressed properties to be able to make profit from the recovery of home prices. Blackstone is the largest investor of foreclosed homes and owns 32,000 properties in 12 states.
Other entities with large investments in foreclosed homes include American Homes for rent, Colony Capital, and Silver Bay Realty Trust Corp.
