The first residential-transition-loan (RTL) securitization from Groundfloor Finance is structured to give investors a significant premium over traditional RTL asset-backed securities (ABS), the firm said.
The $75 million Rule 144A offering, of which 75% is Class A senior bonds and the reminder retained by Atlanta-based Groundfloor, priced December 12 for a coupon of 7.39% and closed December 17. Maturing in December 2027, the securitization was structured by Performance Trust Capital Partners, which also acted as bookrunner, according to a statement by Groundfloor.
Nick Bhargava, co-founder of Groundfloor, said the bond was widely distributed to credit unions and depositories.
The first rated RTL securitization—a $240 million deal backed by $250 million in collateral—closed earlier this year for Toorak Capital Partners, a nonbank lender specializing in single- and multi-family properties. It was quickly followed by rated RTL securitizations by Genesis Capital and New York Mortgage Trust. The deals were rated by Morningstar DBRS, which had completed its methodology for rating RTL securitizations in late 2023.
Groundfloor's private deal provides its specific group of investors with a spread premium over the rated deals, according to Bhargava.
"Because Groundfloor's unique credit products provide working capital relief to underlying developers, Groundfloor, as the originator, servicer, and issuer, is able to extract a 300-400bps yield premium over traditional RTL credit that carry comparative underlying project risk," he said.
The deal is the first deferred pay-only RTL issuance, Bhargava said, describing it as a static pool, bullet repayment structure that will pay down as the underlying loans reach maturity.
"Deferred pay RTLs differ from standard structures by paying principal at maturity while also paying a very attractive coupon, which enhances their appeal to certain institutional investors," he said. "This bond not only diversifies the investment options within the RTL sector, but positions Groundfloor as a repeat issuer, driving innovation in the space."
Bhargava said that the deal's credit support exceeds market standards by providing the significant risk retention, an interest reserve account, a construction-draw account for future unfunded liabilities, and a blended portfolio of aged loans creating monthly liquidity for bond investors.
"Groundfloor, as issuer, is able to provide more credit support because it also operates a proprietary retail facing investment platform that can absorb risk retention and actually demands the yields it generates," Bhargava said.
Groundfloor was founded in 2013 and describes itself as a pioneer in ABS and private capital, securitizing multiple new types of investment structures and managing more than $1.7 billion in assets.
