Oliver Chang, head of U.S. housing strategy at Morgan Stanley, who has written more about foreclosed homes as an investment opportunity than any other Wall Street analyst, is leaving his firm to start his own buy-to-rent housing fund.
Chang announced his decision on Monday in a resignation letter he submitted to Morgan Stanley obtained by Reuters.
"Having followed this market for the past several years, I believe it represents one of the most compelling investment opportunities available across all asset classes today," Chang wrote in a letter to his former Morgan Stanley colleagues.
Chang's move comes at a time when many hedge funds and private equity firms are raising money to acquire foreclosed homes with the intent to rent them out for several years before selling them as the housing recovery takes hold.
As a recent example, asset management firm TCW, which specializes in fixed-income securities and oversees $128 billion in assets, recently launched the TCW Home Place Partners fund, as an opportunity for wealthy investors to invest in the "housing turnaround" by buying foreclosed homes from banks and federal government agencies.
And Beazer Homes USA, Inc in early May announced Beazer Pre-Owned Rental Homes, Inc. (BPRH)-- founded by the company and includes an investor group led and arranged by affiliates of private equity ship Kohlberg Kravis Roberts & Co. The Beazer fund will acquire, refurbish and lease recently-constructed, previously owned single-family homes on a large scale in select markets in the United States.
The wave of new funds marks an indication that investor interest in foreclosed homes is widespread. Some of that interest has been spurred by an initiative by the Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, to accept bids from investment groups seeking to buy an initial round of 2,500 Fannie-owned homes in cities like Atlanta, Chicago, Los Angeles and Phoenix.
Bids for the Fannie pools are expected to be submitted by the end of this month.
Even noted short-seller David Einhorn, founder of hedge fund Greenlight Capital, on Monday said he believes the U.S. housing market is improving and the recovery is "pretty broadly based.
In his letter, Chang, one of the last U.S. housing strategists on Wall Street, said he will be co-founding a new asset management firm "with partners who are some of the most capable and experienced operators and managers of single family rental homes in the business."
He added that he and his partners are currently overseeing a "considerable portfolio" of homes in the Southeast and plan to expand nationally over the next year.
"We are seeing tremendous interest in our fund from investors, and expect to close on a significant allocation shortly," he added.
At Morgan Stanley, Chang covered all aspects of the housing market including home price dynamics, supply and foreclosure issues, demand and mortgage credit concerns, and the relationship between home prices and mortgage performance.
This article is copyrighted by Reuters
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