Five Ten Capital, an asset manager that specializes in fixed income and real estate markets, closed a $100 million financing facility with Deutsche Bank that is backed by mortgages on rental homes, with an eye towards longer term financing for its portfolios of these properties.
The asset manager said in a press release that it will use the facility as warehouse financing for its single-family residential rental property acquisitions until it is able to arrange a securitization in the MBS market. Five Ten currently has 3 funds that purchase single-family rentals and offers rental homes in 7 states across the Southeast, Midwest, and Western regions of the country.
“The mortgage-backed securities market has proven through time to be an efficient and vital source of real estate financing, and we believe will soon finance single-family rental homes as the sector matures and consolidates into institutional managers,” said Five Ten’s CEO, Rob Bloemker.
The asset class has attracted institutional investors over the past few years including Blackstone Group LP, Colony Capital, and American Homes 4 Rent, bringing much needed capital to the more than $600 billion inventory of distressed housing and delinquent mortgages.
Waypoint Real Estate Group is another player in the space that is building its portfolio with an eye towards securitization. The private equity real estate fund owns more than 2,200 homes in California, Phoenix, Chicago, and Atlanta in 2012, plans to ramp up its purchases to 11,000 homes by the end of 2013.
In September 2012, Citigroup made a $65 million loan to Waypoint for investments in distressed single-family houses converted to rentals. By October 2013, Citi had already topped off that loan with a $245 million revolving credit facility for the renovation, long-term ownership and management of Waypoint’s portfolio, according to a press release.
Within the REIT space, some players have broadened their access to debt capital by going public. Silver Bay Realty Trust Corp., a REIT that buys single-family homes to be held for rental or resale, completed an initial public offering in December 2012 that raised $245 million. The company plans to hold their properties over a long time with no pre-set investment horizon, according to a Feb. 1, Barclays report.
American Homes 4 Rent hopes to join Silver Bay Realty Trust Corp. (SBY) in the public markets as they have announced their proposed Initial Public Offering.
