How subprime player Carrington Investments is milking a housing crisis it helped create.
Back before the housing bubble burst, sending America’s economy into a tailspin, hedge fund manager and former CitiGroup banker Bruce Rose was marketing himself as the guy who single-handedly invented subprime mortgage-backed securities. Indeed, Carrington Investment Partners, part of a cluster of related companies founded by Rose, competed with the big investment banks to package and sell mortgage debt to investors. Now Rose and his companies are positioning themselves to feed off the tail end of the meltdown their business practices helped create, joining a foreclosure-to-rental trend that experts say could hurt homeowners even more.
Earlier this year, Carrington announced a partnership with another hedge fund to buy nearly half a billion dollars worth of foreclosed single-family homes and convert them into rental properties. Carrington is by no means the only one doing this. Silicon Valley-based private equity firm GI Partners is investing more than $1 billion in similar ventures. Other foreclosure-to-rental players, according to Bloomberg, include Starwood Capital Group, which owns the Westin hotel chain, the billionaire media magnate Sam Zell, and Apollo Investment Management—the New York buyout firm led by the billionaire Leon Black.