Invitation Homes is marketing its third securitization of single-family rental properties of the year, Invitation Homes 2014-SFR3.
The securitization trust is backed by a single, $775.1 million loan secured by mortgages on 4,048 single-family residences with a total value, based on broker price opinions, of $981.8 million, according to a presale report published by Kroll Bond Rating Agency.
Kroll has assigned a preliminary AAA’ rating to the senior, $328 million tranche of notes to be issued by the trust.
The interest rate on the loan is one-month Libor plus 247 basis points; it pays only interest for its two-year term and it can be extended by 12 months up to three times, for a total possible term of five years. Four out of the 10 prior transactions provide for monthly amortization. Kroll’s report notes that, all else equal, interest only loans are riskier than amortizing loans; should the loan default later in its term, it will experience a higher loss because it has a higher principal balance.
The homes have an average value of $424.5 million and have leases with an average term of 16.7 months. They are concentrated in California (37.1%), Florida (32.1%) and Arizona (8.8%); this is typical of the asset class, as sponsors focusing on investment opportunities in regions with distressed home prices and landlord-friendly laws.
The LTV based on KBRA’s “stressed” broker price opinions is 86.2%, which the rating agency is the highest relative to all of the previous SFR securitizations.
The underlying homes in IH 2014-SFR3 have an average home age of 28 years, similar to six of the 10 previous transactions. The average home size of 1,905 square feet is in the middle of the range of 1,698 to 2,045 square feet for the previous deals.