Colony American Homes paid up for its latest securitization of single-family rental homes, which has a duration- weighted blended interest rate of LIBOR plus 188.8 basis points.
The deal, dubbed Colony American Homes 2015-1, issued $640 million of securities backed by a single floating-rate loan that pays only interest for its entire, five-year term; this loan, in turn, is secured by 3,879 single-family rental homes.
The sponsor did not disclose pricing of individual tranches, which have been assigned ratings ranging from AAA’ to BB- by Kroll Bond Rating agency. However, Standard & Poor’s did. In a report published this week, the rating agency said that the senior class A notes yield LIBOR plus 120 basis points.
The latest transaction has a higher loan-to-value ratio (77.6%) than Colony’s first two deals, completed in June and April of 2014. Both CAH 2014-1 and CAH 2014-2 had LTVs of 70%. The former has a duration weighted blended interest rate of LIBOR plus 164 basis points and the latter LIBOR plus 178 basis points.
Colony’s latest transaction is also fairly highly leveraged compared with recent deals by other sponsors; the LTVs of single-family rental transactions completed over the past 12 months ranging from 65.0% to 78.9%, with an average of 72.8%, according to Kroll.
“Higher leverage generally implies less borrower equity, greater likelihood of default, and higher overall loss severity should an event of default occur,” the rating agency noted in its presale report.
J.P. Morgan Chase Bank is the lead manager of the latest deal.
So far this year, issuance of single family rental bonds is at $6.6 billion; that’s already ahead of the $4.1 billion issued for all of last year.