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Progress assigns rollover properties to new $513M single-family rental ABS

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Progress Residential is launching its first single-family rental securitization of 2020, featuring collateral that had been assigned to prior asset-backed transactions through its master trust.

Progress Residential 2020-SFR1 is a $513 million master trust securitization, featuring nine classes of notes backed by a single loan secured by a portfolio of 2,317 single-family rental properties managed by Progress Residential. Most of the properties (2,185) were originally part of Progress’ 2015-SFR3 deal, which will be repaid through note-sale proceeds.

The properties have a combined broker-price opinion value of $530.7 million, which is a 27.4% increase for the respective properties since they were first securitized between 2015 and 2016.

Progress has borrowed against the higher valuations, as the amount of debt on the rollover homes has increased to $504.2 million from the original $315.8 million allocated amount of the homes' original securitizations.

The capital stack includes a $186.3 million Class A notes tranche with preliminary triple-A ratings from Moody’s Investors Service and Kroll Bond Rating Agency.

The notes are funded by the rental income as well as asset sales of the properties in the new pool. This is the fourth Progress transaction in which the issuer is permitted to substitute properties from the original pool.

Moody’s notes the deal have a higher total leverage (95%) than previous Progress deals. The lower equity levels means the borrower has “less incentive to maintain or create value” in the portfolio of properties.

The homes in the portfolio have an average age of 18 years, with an average 1,889 square feet.

Approximately 5.7% of the homes in the new portfolio were vacant as of the property cutoff date for the pool.

The Progress master trust (organized as a Maryland real estate investment trust) will retain the lowest-ranked Class I tranche, representing about 7% of the total BPO (broker price opinion) value of the property portfolio.

The residences are in nine states.

As of Dec. 31, Progress held more than 32,000 single-family residential homes in 15 states, primarily Florida, Georgia, North Carolina, Tennessee, Arizona, Texas and Nevada. The trust has invested over $6.4 billion in the homes, including acquisition, renovation and other capitalized costs.

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Mortgage backed securities: Single family rental MBS