Colony American Finance is preparing its first securitization of loans to single-family landlords, according to Kroll Bond Rating Agency.
The $252 million Colony American Finance 2015-1 is only the third multi-borrower single-family rental securitization issued in the U.S. to date. It will be collateralized by 69 fixed-rate loans secured by first priority mortgages on 4,140 rental units in 3,488 income-producing single-family, 2-4 family, and multifamily properties.
KBRA has assigned preliminary ratings to six classes of notes with a final maturity of October 2047; the most senior class, which benefits from credit enhancement of 33.25%, is rated ‘AAA.’
The first securitization of single family rentals by a single-borrower closed in November 2013 and although there have been 22 such securitizations and two multi-borrower securitizations issued to date, there has been limited seasoning of the transactions and the sector lacks long term credit performance data.
The granularity of the underlying assets in regard to property count is not too dissimilar to the prior multi-borrower transactions, from FirstKey and B2R, which were comprised of 3,628 and 3,160 properties (3,948 units). Similarly, the 13 prior single-borrower transactions were, on average, collateralized by 4,082 homes.
These properties backing Colony American’s deal are located in 21 states, with the largest five exposures comprised of Ohio (20.9%), Texas (15.6%), Georgia (11.8%), Florida (10.9%), and California (10.7%). The loans have principal balances ranging from $200,000 to $20.4 million for the largest loan in the pool, Camillo A (8.1%), a 191 unit (190 assets) portfolio. The five largest loans, which also include Huber Heights A (7.9%), Huber Heights B (7.9%), Camillo B (6.2%) and Intrepid (5.0%), represent 35.2% of the initial pool balance, while the 10 largest loans represent 52.7%.
The loans have original terms to maturity of approximately five years (57 loans, 71.3%) or 10 years (12 loans, 28.7%). Approximately half of the transaction collateral consists of amortizing balloon loans (48 loans, 57.0%), while the balance of the pool is comprised of loans that pay only interest, and no principal for their entire terms (21 loans, 43.0%). The amortizing loans all provide for monthly amortization based on a 30-year schedule.
None of the loans are cross-collateralized or cross-defaulted and the provisions of the loan documents generally prohibit the borrowers from incurring future subordinated debt secured by the related mortgaged properties without the consent of the lender. The combined loan to value ratio of the portfolio is 64.4%.