American Residential Properties’ ARP1-2014-SFR1 priced with mixed results on Thursday with most tranches pricing at wider levels than Invitation Homes latest deal that was issued at the beginning of August, a person familiar with the deal said.

The deal follows the same large loan structure used by previous deals to come to market issued by Blackstone's Invitation Homes, Colony American Homes and American Homes 4 Rent.   ARP1-2014-SFR1 is backed by a single loan that is secured by a pool of 2,880 of single-family rental properties.  The floating-rate loan pays only interest for its two-year term and is extendable to a total of five years.

Deutsche Bank and JP Morgan are the lead managers.

The notes were assigned ratings by Moody’s Investors Service, Kroll Bond Ratings and Morningstar. The ‘Aaa’/ ‘AAA’/ ‘AAA’ rated class A notes priced at 110 basis points over the one-month Libor. The ‘Aa2’/ ‘AA’ “AA+’ rated class B notes priced at 205 basis points over one-month Libor.

The ‘A2’/ ‘A-’/ ‘A+’ rated class C notes priced at 250 basis points over one month Libor. Further down the curve, the class D notes rated ‘Baa2’ / ‘BBB+’/ ‘BBB+’ priced at 300 basis points over one month Libor and the ‘BBB-’/ ‘BBB-’, class E notes priced at 425 basis points. The class F notes, which were rated ‘BBB-’ only by Morningstar, priced at 475 basis points over one month Libor.

By comparison Invitation Homes priced the triple-A notes from its third deal, Invitation Homes 2014-SFR2 at the same level of 110 basis points over the one-month Libor.  However the double-A rated notes were sold 45 basis points cheaper at 160 basis points over one-month Libor. At the single-A level Blackstone sold the notes 30 basis points cheaper at 220 basis points over the one-month Libor and the triple-B plus notes sold, 25 basis points cheaper at 275 basis points over one-month Libor. 

Further down the capital stack, Invitation Homes sold the triple-B minus notes and double-B rated notes at 400 basis points and 450 basis points, respectively, over the one-month Libor.

The properties backing ARP1-2014-SFR1 are distributed across eight states and 24 Metropolitan Statistical Areas in the U.S.; however 80.4% of the portfolio is located in three states, Texas (36.9%), Arizona (29.1%), and North Carolina (14.4%). The average cost basis per property, post-rehabilitation, is $156,397 and the average current broker price opinion value is $170,007. The average age of the properties is approximately 12 years and the majority of the properties have three or more bedrooms (97.5%).  

The REIT, headquartered in Scottsdale, Arizona, owns 6,762 homes in 13 states, according to an investor presentation. On average, only $8,771 was spent to rehab the properties backing the securitized loan, which is substantially lower than other issuers, according to Morningstar. By comparison, Invitation Homes spent on average of $24,169 rehabbing the properties backing its most recent deal, according to Moody's. 

The pool has 116 vacant properties (approximately 4.0% by BPO value) and 104 properties are on month-to-month lease (3.4% by BPO value).  However, 114 of these properties have come off a previous lease and are proven rent worthy, according to Morningstar. The upfront delinquency rate was 0.5% of total monthly contractual rents or 0.15% of total BPO value.


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