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CoreVest carries older housing stock into next SFR securitization

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CoreVest American Finance is sponsoring its second single-family rental securitization this year, this time backed by a pool of its oldest financed homes to date.

CoreVest American Finance 2019-2 is a $242.4 million, multiborrower securitization involving 83 loans to 64 residential real-estate investment sponsors, who collectively own and manage 2,286 properties.

All of the loans were originated by CoreVest, according to presale reports from Kroll Bond Rating Agency and Fitch Ratings.

The collateral consists mainly of older homes that average 53 years (with a range of one to 129 years old). None of CoreVest’s SFR transactions since launching the platform in 2015 have eclipsed that average, with CoreVest’s first 2019 transaction averaging 47 years.

Nearly 67% of the pool balance is tied to loans for single-family houses, with the remaining multifamily dwellings split among two- to four-unit houses (18.5%), apartment buildings (8.4%), condominiums (5.3%) and townhomes (1.2%). The homes have an average size of 1,374 square feet.

The average loan term is 7.6 years, with a coupon of 5.4%. The weighted average loan-to-value ratio is 67.5%, based on third-party appraised values of the underlying properties.

The loans have an issuer-estimated WA debt-serve coverage ratio of 1.36x, according to Kroll.

The 83 fixed-rate loans in the pool include 62 that feature an amortizing balloon payment, and 20 others that are full-term interest-only loans (one large loan, making up 15.3% of the collateral pool, is a partial-term interest-only loan to a Los Angeles-area REIT).

As in its previous securitizations, CoreVest is including no loans with existing additional debt, nor provisions allowing borrowers to add more debt in the future.

Although single-family rental ABS transactions are a new breed – such deals have only been issued since 2015 – CoreVest provides enough credit enhancement protection to the deal at 35.62% to garner an expected AAA ratings from Kroll and Fitch on the $156 million Class A note tranche.

CoreVest will also issue four subordinate note classes: a $26.4 million Class B tranche (AA-); a $17.6 million in Class C notes (A-); $14.2 million in total Class D notes (BBB); and a Class E tranche of $6.97 million in BB+ rated notes.

CoreVest’s trust will retain more than $21 million in subordinate certificates as an eligible horizontal residual interest to meet U.S. risk-retention requirements for securitizations.

CoreVest is owned by global investment manager Fortress Investment Group, which acquired the company in July 2017 from Colony Capital just three years after it was founded.

As of March 2019, CoreVest has originated $5 billion of single-family rental loans to investors purchasing rental properties. It has nine outstanding securitizations with a principal balance of $2.1 billion.

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