A third company has securitized rents from a portfolio of single family homes, and this deal was a bigger hit with investors than last one.
American Homes 4 Rent sold a total of $480 million of notes backed by rental payments this week. In a press release issued late Tuesday, the company said it anticipates gross proceeds from the sale of its certificates of approximately $481 million, with a duration-weighted blended interest rate of LIBOR plus 154 basis points.
The deal has been assigned ratings by Kroll Bond Ratings Agency, Morningstar and Moody's Investors Service. Moody’s will not rated the class E and F tranches. Goldman Sachs, JP Morgan and Wells Fargo are the lead managers on the deal.
The dea'ls $269.4 million senior tranche, which has an initial maturity of two years and fully extended maturity of 4.9 years and is triple-A rated by all three rating agencies, priced at 100 basis points over Libor, according to a person familiar with the deal.
That was 20 basis points less than the comparable tranche of a deal that Colony American Homes completed in April. Pricing on the latest deal also compares favorably with the Libor plus 115 basis points that Invitation Homes pays on the triple-A rated, 4.9-year tranche of a deal completed in November of 2013.
American Homes' $37.6 million of class B notes, which are rated AA+’/ “AA+’/ Aa2’, $37.6 million class B notes priced at Libor plus 135 basis points; $40 million of A+’/ A+’/ A2’ rated, class C notes priced at Libor plus 175 basis points; and $38.5 million of A-’/ BBB+’ /’Baa2’-rated class D notes priced at Libor plus 210 basis points.
The class E notes, sized at $62 million and rated BBB’/ BBB’ priced at Libor plus 250 basis points and the class F notes sized at $32.6 million, rated BB+’/BB+’ priced at Libor plus 325 basis points.
The class B through F notes are structured with an initial maturity of 2.1 years and a fully extended maturity of 5.1 years.
The certificates are backed by a single loan that is in turn secured by 3,852 homes sold to an affiliate from the company's portfolio of single-family properties. The transaction is intended to reduce the American Homes 4 Rent’s long-term cost of capital. It is expected to close on or about May 21, 2014.
Colony America Homes 2014-1 is collateralized by a single floating rate loan that is secured by 3,399 single-family residential properties. Properties in California and Florida constitute the majority of the pool, representing 37.7% and 20.3% of the assets, respectively.
Invitation Homes 2013-SFR1 is backed by 3,207 one to four unit residential properties located in five states: Arizona, California, Georgia, Florida and Illinois.
However the homes backing American Homes 4 Rent’s deal are larger than those backing the first two transactions. Larger home sizes appeal to a broader segment of potential renters; this may have given investors more comfort that they will stay rented.