Invitation Homes is back with a second securitization of single family rental homes, according to a presale report published today by Kroll Bond Rating Agency.
Invitation Homes 2014-SFR1 will issue $1.0 billion of floating-rate securities, including a $483 million senior class with a preliminary AAA’ rating from Kroll.
The transaction is collateralized by a single loan secured by mortgages on 6,537 income-producing single-family homes. This floating-rate loan will require interest only payments and have a two-year term with three 12-month extension options.
The properties are located in or near 28 Metropolitan Statistical Areas across 10, but are mostl heavily concentrated in Florida (32.0%), California (26.8%), and Arizona (10.8%).
While this is the fourth transaction of its kind, and the second issued by Invitation Homes, performance data for the sector is limited. KBRA accounts for the limited historical data by utilizing relevant elements of its commercial mortgage-backed securities and residential mortgage-backed securities. Other rating agencies have indicated that they would not assign their top ratings to a rental securitization.
The houses in the latest deal an average age of 26 years. While this is less than the average age of Invitation Homes’ previous deal, (30 years) and Colony American Homes’ deal (28 years), it is more than twice the average home age in the American Homes 4 Rent transaction (12 years). The average home size of 1,788 square feet is also comparable to Invitation Homes previous deal and Colony American Homes’ deal, it is smaller than American Homes 4 Rent’s deal (2,026 square feet).
“Older homes that are of a relatively smaller size may not appeal to as broad a market segment as larger homes, and may not be as marketable in the event of a default,” the presale report states.
There are also two distinct differences related to tenancy of this deal compared with prior rental securitizations. Homes backing the previous deals were all occupied when those deals closed, while 5.1% of the properties in this portfolio are currently vacant. Also, the credit quality of the tenants in this deal was not as carefully screened as the tenants of homes backing the three previous deals.