Colony American Homes' $513.6 million securitization of single-family rental income priced at significantly wider spreads the inaugural deal in this asset class, which was completed by Blackstone’s Invitation Homes in November.
The latest deal, Colony America Homes 2014-1 priced on Thursday, with some spreads on some tranches as much as 95 basis points wider than comparable tranches of the Invitation Homes deal.
The deal is the first for Colony American Homes and the second-ever single-family rental securitization.
The $291 million, 4.9-year, triple-A rated tranche priced at 120 basis points over one-month Libor, according to a source familiar with the deal.
The 5.1-year, $42 million double-A plus rated notes priced at 155 basis points over one-month Libor. The 5.1-year, $56 million double-A minus notes priced at 200 basis points over one-month Libor.
The 5.1-year, $40.5 million, single-A rated, class D notes priced at 235 basis points over one month Libor. The 5.1-year, $84.1 triple-B minus, class E notes (only rated by KBRA) was 350 basis points over one month Libor.
By comparison, Blackstone’s Invitations Homes deal priced its similarly structured notes up to 95 basis points tighter on the subordinate notes.
By comparison, the 5.1- year, class D notes of Invitation Homes' deal priced at 215 basis points over one month Libor and the 5.1-year class E notes, which are rated triple-B-minus, priced at 265 basis points over one-month Libor.
At the top of the capital stack, Invitation Homes' deal priced up to 20 basis points tighter than comparable tranches of Colony American Homes 2014-1.
The two deals have similar structures. Colony America Homes 2014-1 is collateralized by a single floating rate loan that is secured by 3,399 single-family residential properties. Properties in California and Florida constitute the majority of the pool, representing 37.7% and 20.3% of the assets, respectively.
Invitation Homes 2013-SFR1 is backed by 3,207 one- to four-unit residential properties located in five states: Arizona, California, Georgia, Florida and Illinois.
The latest deal prices as this relatively young asset class has been experiencing some growing pains.
In late February, Morningstar (which rated both single-family home rental securitizations) said that the January cashflows reported by Blackstone’s inaugural securitization fell short of expectations.
Moody’s Investors Service also published a report on the asset class in Febuary saying that rising housing prices have pushed down rental yields in many single-family markets. “If rental yields are unattractive, fewer investors will purchase homes because their profitability will decline,” the report stated.
However widening on the notes may be welcomed by some investors who found the market's inaugural deal expensive. Vincent Fiorillo, global sales manager at the DoubeLine Group, for example said that he found the pricing on the Invitation Homes deal too tight.
Some people are also blaming securitization for rising rents. In March, Rep. Mark Takano(D-CA) sent letters to four federal entities asking for a detailed investigation into the growth of REO operations and REO-to-rental as an investment — and asking how they plan to regulate the asset class.