Updated: Jul 27, 2021
Recently, a Twitter thread uproared the social media world by blaming BlackRock for buying every property they find while outbidding ordinary American citizens as real estate buyers. However, before we totally pin the blame on them. Let's know first who or what exactly is BlackRock and why are they buying up properties?
Who is BlackRock?
BlackRock, the country's leading investment manager, recently emerged as a key Wall Street operator in Washington, DC, serving as a symbol of the revolving door connecting politics and money.
BlackRock provides a variety of solutions to institutions, professional investors, and people around the United States. For more than 30 years, BlackRock has assisted individuals in taking charge of their financial independence, from retail clerks at your local grocery store to advocacy groups and not-for-profit organizations.
BlackRock Inc. (BLK) is the world's largest investment management firm. According to Pension & Investments, they have approximately $8.7 trillion of assets under management (as of December 31, 2020).
Moreover, BlackRock is a significant publicly listed corporation with a market valuation of around $106 billion, providing financial and technology solutions to both domestic and international clients worldwide.
The company provides several solutions and investment funds that participate in securities such as stocks, marketable securities, and alternative investments. Investors go to BlackRock for investment funds, assets focusing on pension savings, and college funds, including exchange-traded funds (ETFs).
Why Are They Buying Up Properties?
On February 1, 2021, BlackRock published the results of its acquisition of Aperio, a company that specializes in delivering tailored index investment to high-net-worth customers. Its solutions are tailored per each client's specific risk, taxes, and personalized value choices. The $1.05 billion agreement was disclosed last November 2020.
The U.S. Federal Reserve entrusted BlackRock with assisting the central bank's bond-purchasing system as part of its larger reaction to the COVID-19 epidemic in March 2020. The New York Federal Reserve directed BlackRock to acquire agency residential mortgage-backed assets on its behalf.
BlackRock had also been charged with administering two massive bond-buying initiatives. First, for fed-backed facilities in buying additional investment-grade bonds from the U.S. firms. Second, for purchasing previously issued investment-grade securities, like real-estate properties.
On the other hand, for some period, capitalists like BlackRock were already buying up family houses and apartments to rent out, often in diverse groups in areas where the majority of residents own private homes. Renting properties, as well, that don't have landlords around anymore.
In addition, built-to-rent projects are totally new subdivisions intended just for tenants. These properties are handled more like modern apartment complexes, with specialized maintenance and repair staff. This optimal-wise type of property is offered by institutional investors, like BlackRock.
Several models have taken off nationwide in recent years, and they are expected to become a dominating force in the housing stock market. Soon, consequences for the neighborhoods around them and the character of owning, again caused by institutional buyers.
Ultimately, the purpose of the massive buy-outs of BlackRock is to chase more profit from renting it out. This instance would significantly affect housing affordability and the American dream to own a house.
● Per AUM, BlackRock is among the nation's biggest investment management firms.
● On February 1, 2021, BlackRock finalized its $1.05 billion purchase of customized indexing company Aperio.
● The majority of the firm's profits come from investment consultancy and administrative fees.
● The corporation is organized into a single business sector.
The Bottom line
It is critical to recognize that institutional investors have a role in the American property market, and they truly affect several factors in the market. There are large businesses that invest in flats and other multi-family residential buildings. But, no same amount of investment with single-family houses in the past. If addressed, a viable option would be at hand in improving housing affordability.
Clearly, yield-seeking investors such as BlackRock have resorted to the real estate market since this has become a very rewarding area to engage. The position of large investors is still being explored, but somehow the narrative's prevalence hints at something alarming.