FeatherStone Investment Group said it has selected a “major Wall Street investment bank” to act as underwriter and distributor for its first single family rental home securitization conduit.
Kevin Blaser, FeatherStone’s securitization manager, said in a press release that the firm will formally announce the deal “within the next few weeks.” The group did not name the underwriter becasue the deal is in the early stages but said it planed to make an "announcement at some point in the near future."
The deal will be launched in conjunction with the formation of Featherstone Invesment LP, a special purpose vehicle, and the firm will immediately start aggregating single-family rental properties for the conduit.
FeatherStone Investment Group has a program in which property owners and investors can monetize their assets by contributing their properties to our securitization pipeline (conduit) and receive cash at the closing of the securitization. Blaser said that the conduit can securitize over $100 million every 45 days.
“Ownership of these assets can be retained until such closing via a limited partnership with FeatherStone Investment LP,” said Blaser.
Actual title transfer to the special purpose vehicle will happen when the securitization closes. “Upon closing of the securitization, the contributing property owners will receive both a cash payment and a pro-rata share of the securitization residual (equity tranche), thereby allowing them to monetize their assets and also participate in the potential future upside of the deal,” said Blaser.
FeatherStone said it had not selected a rating agency "as of yet" nor had made the determination on whether the deal would be issued as a private placement. "We'll be making those decisions in conjunction with our underwriting partner," said Blaser.
The bonds issued through its program are anticpated to be structured with a five-year maturity, a floating-rate coupon.
Obtaining a rating for this asset class is just one of the challenges that stalled what many see as a potential market for REO-to-rental securitization. Another challenge for issuers has been acquiring enough assets to collateralize deals.
FeatherStone said that it has been purchasing REO properties for conversion to rentals since 2008. Through its joint venture partnerships with mom-and-pop operations across the U.S., it has built a portfolio of 35,000 properties managed by several different property managers. The group did not disclose the other investors in its joint venture.