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Blackstone unit sponsors $264.4M investor-property RMBS

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A real estate investment arm of The Blackstone Group is launching its first securitization of forward mortgages of investor residential properties in a $264.4 million transaction.

Blackstone Residential Operating Partnership is sponsoring FWD Securitization Trust 2019-INV1, a deal backed by an underlying pool of 1,724 fixed-rate mortgages, according to presale reports from Kroll Bond Rating Agency and S&P Global Ratings.

The loans for the non-owner occupied properties were mostly originated by Blackstone-sponsored Finance of America Mortgage. The properties include single-family homes, townhomes, condominiums and 2-4 unit dwellings.

Blackstone Residential Operating Partnership was established in 2016 to manage investments in various non-standard residential asset classes including single-family rental, residential transition, mortgage servicing rights and reverse mortgages.

Kroll states in its report that the unit’s investments in third-party investor-owned properties is limited, however.

The collateral is divided between agency-eligible investor loans underwritten to borrower’s income (33.5% of the portfolio value) and non-agency investor cash flows that were issued based on the property’s rental income. The non-agency investor loans are considered non-prime mortgages.

Future cash flows on the rental income of the properties are based on income from existing leases or projected income from appraiser rent surveys. No borrower or guarantor income is included in the calculation.

All of the loans are exempt from qualified mortgage/ability to pay rules under the Dodd-Frank Act, and are also not exposed to TILA-RESPA disclosure liabilities since the loans are considered business-purpose originations.

The $264.46 million notes stack includes a $192.92 million Class A-1 tranche with AAA ratings from Kroll and S&P.

The notes carry 27.05% initial credit enhancement, and will be priced at the lesser of a 3.3% fixed rate coupon or a net weighted-average coupon of all seven classes of senior and mezzanine/subordinate notes.

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