Goldman Sachs is behind two residential mortgage-backed securities deals this week, of very different collateral pools, that total $1.3 billion.
Progress Residential 2021-SFR5 is a securitization of financing on single-borrower, single-family rentals that are income producing. The deal is actually secured by just one $328.3 million fixed-rate loan, a first-lien, non-recourse mortgage that Goldman Sachs originated.
The loan itself is secured by mortgages on 1,248 income-producing single-family rental homes. None of the properties are owner-occupied, and Progress is one of the country’s largest single-family rental operators, says Daniel Tegen, a senior director of KBRA’s CMBS group.
Goldman Sachs sold the $328.3 million mortgage into the trust, and acted as the placement agent, according to a pre-sale report from Kroll Bond Rating Agency. The rated final distribution date on the notes is July 2038, according to KBRA.
The properties securing the mortgage are located in or near 22 residential markets in 10 states, and the top three markets represented are Atlanta (45.9 percent), Miami (12.1 percent) and Dallas (10.7 percent).
Pretium True North can release the properties from the pool without prepaying the loan balance, or paying any yield maintenance or additional release premium to the trust.
The deal has a couple of overarching credit considerations, driven mostly by the pandemic recovery and fundamental industry realities, that from KBRA’s point of view, present a mixed credit outlook on the notes.
The COVID-19 related recession was the first that tested the large-scale institutional ownership of single-family rental properties, and the asset performed well, from KBRA’s point of view. Yet as the COVID-19 recovery continues, moratoriums on tenant evictions could affect the tenancy rates of the properties overall, Tegen says.
Another consideration is to what extent operators can raise rent, especially through lease renewals on existing tenants or renter turnover, Tegen says.
Another question that might affect post-COVID demand for single-family rental properties near cities is whether companies and employers might offer work-from-home options and how flexible they are willing to be.
The second major consideration is that securitization collateralized by single-borrower mortgages on single-family rental properties is a maturing business, according to KBRA. Of the 51 deals that were brought to market, none of the underlying loans became delinquent and 28 securitizations were paid off in full before maturity.
Yet those deals that were paid off were done through capital sources other than securitization proceeds.
In the other Goldman-related residential MBS transaction, the GS Mortgage- Backed Securities Trust 2021-PJ6, or GSMBS 2021-PJ6, is issuing $1 billion in notes. The notes are secured by 30-year, fixed-rate, high-quality mortgages. The borrowers have strong credit profiles, with weighted average FICO scores of 766, and low leverage, with a 74 percent sustainable loan-to-value ratio, according to FitchRatings.
Goldman Sachs Mortgage Company is sponsoring the deal, and GS Mortgage Securities Corp., is the depositor.
