FortiFi, formerly known as E3, which provides financing to residential and commercial landlords making clean energy upgrades to their buildings, is getting a $185.6 million in securitization bonds ready to bring to market.
The FortiFi securitization platform issues property assessed clean energy (PACE) bonds, which repay investors from a stream of loans that finance clean energy and conservation improvements on residential and commercial properties. Residential and commercial PACE securitizations are a growing asset class, powered by legislation where authorities want to reduce carbon emissions or otherwise make residential and commercial properties more energy efficient.
PACE assessments constitute a lien against the entire property, not just the specific improvements funded by the PACE loans. Also, the obligation to repay PACE loans transfer to any new owner that buys the encumbered buildings.
FortiFi last came to market in 2021. Compared with that deal, FortiFi 2023-1's portfolio composition is largely the same, according to analysts from Kroll Bond Rating Agency. One feature is new, which is that the current transaction does have a supplemental reserve account, amounting to $6.2 million. FortiFi 2021-1 did not.
ING Financial Markets and Barclays Capital are initial note purchasers. FortiFi 2023-1 will issue two classes of notes, with class A securing a 'AAA' rating and class B a 'A' from KBRA. The notes pay annually and have a legal final maturity date of September 2059, KBRA said.
While both transactions have a 90-day prefunding period, the maximum subsequent PACE bonds is higher for FortiFi, 2023-1, at 21.3%, compared with 14.7% on the previous deal.
The underlying loans are funding properties in California and Florida, just like the previous transaction, according to KBRA. Otherwise the collateral has a higher concentration of Florida, which accounts for 80.4% of the portfolio balance, compared with 32.7% on the previous deal, KBRA said.
FortiFi will issue notes secured by 507 PACE bonds, which are secured by 5,025 assessments. Residential properties account for the overwhelming majority of financed properties, 5,007, while commercial properties account for 18, KBRA said. The average PACE assessment is about $28,990, with an average annual payment of $2,604, the rating agency said.
