Invitation Homes is sticking to the same large loan model of past single-family rental securitizations in its first deal of 2015.
The Blackstone Group subsidiary, which has been a steady issuer of rental-backed bonds since issuing its first deal in 2013, is securitizing a $540.9 million floating rate loan that pays only interest throughout its two-year term. The deal, Invitation Homes 2015-SFR1, is the issuer’s 5th transaction.
The loan is structured with three 12-month extension options for a total term of five years; and is secured by mortgages on 3,072 income-producing single-family homes. JP Morgan is the loan seller. Kroll Bond Ratings has assigned the deal preliminary ratings. On offer are six tranches rated from 'AAA' to 'BB-'.
Each of Invitation Homes’ securitizations are structured with a fully extend term of five years, which could expose the issuer to the risk of having approximately $3.5 billion of securitized debt coming due from the end of 2018 to early 2020. Kroll, which has rated each of the issuer’s deals, warned that the concentrated debt maturity profile may result in increased financial stress on the company.
The homes are located in 10 states, with the largest state exposures coming from Florida (32.8%), California (14.3%), and Georgia (11.8%).
Invitation Homes structures its deals with less borrower equity when compared to other single-family home deals. Its latest deal has a loan to value (LTV) ratio of 78.9%; deals issued by other originators have LTVs ranging from 65.0% to 78.9% and averaged 71.9%. Lower equity in a deal results in higher default probability; for example Kroll used 90% default probabilities for the AAA’ stress in the 2015-SFR1 transaction.
The deal also has the highest percentage of vacant homes (5.6%) in the pool, relative to previous deals. Five prior transactions also included some unoccupied homes, which were IH 2014-SFR3, IH 2014-SFR2, IH 2014-SFR1, SWAY 2014-1, and ARP 2014-SFR1. These transactions had vacancy rates as of their respective cut-off dates that ranged from 2.1% to 5.2%.
However, the vacancy rate for this transaction is within Kroll’s assumption of a 10% normalized vacancy and credit loss.
Invitation Homes has invested in excess of $8.7 billion in its portfolio of more than 45,600 homes, as of November 2014.