FirstKey Homes 2022-SFRA is preparing to issue $582.6 million in mortgage-backed securities (MBS). A single, fixed-rate loan funding 1,827 first-priority, single-family rental properties, will collateralize the notes.
The trust will issue notes that pay principal and interest, mostly, while other classes of notes will pay principal only. The mortgages are financing income-producing properties, according to a pre-sale report from Kroll Bond Rating Agency.
RM1 SFR Holdings I are acting as the transaction sponsor, while Midland Loan Services is acting as servicer and special servicer on the notes.
Morgan Stanley, BofA Securities and Apollo Global Securities are placement agents on the deal, which will issue the notes through 17 classes of notes. The notes will repay investors through a simple sequential structure. Eleven of the classes are entitled to monthly distributions of principal and interest, beginning with class A that will repay investors until they are paid in full, before moving to principal and interest payments on class B. The payment schedule will follow the same structure to class G.
KBRA expects to assign ratings ranging from ‘AAA’ on the $196 million, class A notes to ‘B-’ on the $13.4 million H2 notes.
Six of the classes are entitled to principal only, while the remaining class will pay residual interest. KBRA also notes that class G can defer interest under certain circumstances, in a pay-in-kind feature.
The subordinate classes will absorb the losses in reverse sequential order, according to KBRA’s explanation of the capital structure.
The underlying loan has an initial term of five years, according to KBRA. The loan is financing properties distributed across 14 states. Georgia, Florida and North Carolina are the top three states represented in the pool, representing 54.3% of the pool’s broker price opinion (BPO).
All of the properties are income producing. The average home is 23 years old. Rehab costs account for 3.9% of the homes’ purchase prices, and the homes have a vacancy rate of 11.5%, according to KBRA. On a weighted average (WA) basis, the homes have an original lease term of 12.9 months, with a remaining term of 9.4 months, and monthly rent of $1,948. Just two percent of the properties are designated as section 8.
