A two-year revolving portfolio of residential transition loans will secure $200 million in securitized bonds from the Roc Mortgage Trust, 2024-RTL1.
This is the first RTL transaction for Roc360 Real Estate Income Trust, the deal's sponsor, in three years. Also, it is Roc360's first rated transaction. The transaction will sell the notes through five tranches of class A, M and XS notes, according to ratings analysts from Morningstar DBRS.
DBRS is the only listed rating agency on the deal.
Asset Securitization Report's deal database finds that the notes are expected to yield 5.6% on the class A1 notes, which DBRS rated A. Otherwise, the BBB, BB and B rated notes are expected to yield 6.1%, 7.3% and 9.8%, respectively. All the notes are benchmarked to the three-month I-curve.
Residential transition loans, also known as fix-and-flip, are short-term bridge mortgages typically used to fund renovations on residential or multifamily properties with more than five units. The bridge financings usually have terms ranging 12-36 months, DBRS said. Generally, they are on interest-only, balloon terms.
The deal will repay principal to noteholders sequentially after the
interest-only revolving period.
RTL asset repayment is based on the borrower's ability to sell the related mortgage property or rent the property and generate income.
Roc Mortgage Trust 2024-RTL1's revolving portfolio might be either fully funded, including a provision with no obligation to forward advances to the borrower, or partially funded. In the latter there might be a commitment to fund borrower-requested draws to approved rehab, construction, or repairs if certain conditions are met.
The deal does have an A-rated tranche, RTL securitized tranches have yet to gain a AAA rating, according to a recent DBRS panel discussion about the asset class.
The A1 tranche has an average life of 2.3% 2.5 years, while the A2, M1 and M2 notes have an average life of 2.5 years, according to the deal database. DBRS says that the notes have a legal final maturity date of October 2039.
Morgan Stanley and Nomura Securities International are the initial note purchasers and managers.
Five hundred, thirty-two mortgages, with an unpaid principal balance of $186.3 million, are in the pool. The deal $13.6 million, is in the accumulation account and $1.5 million in the pre-funding interest account.
