The STAR 2021-SFR2 trust is preparing to issue $256.4 million in single-family rental pass-through certificates, a follow up to the ‘SFR1’ deal that resembles the deal priced earlier this year, but is smaller in volume.
Citigroup Global Markets, Inc., is the lead manager on the transaction, which uses a capital structure wherein repayments of the certificates follow a sequential-pay structure, according to DBRS Morningstar.
With a December 14 closing date expected, STAR, SFR2 is expected to issue certificates through seven classes.
Credit enhancement is in the form of subordinate classes. The most senior class of certificates, class A, will have a credit support level of 72.3%. Support to the certificates dwindles until the class G certificates have a credit support level of 15.7%, DBRS said.
DBRS expects to assign ‘AAA’ ratings to the $70.8 class A certificates, and the $18.8 million class B. Ratings also range from ‘AA’ on the class C certificates to ‘B’ on the class G.
STAR, SFR2 transaction will rely on Midland Loan Services, Inc., as both servicer and special servicer.
The collateral pool is comprised of a pool of first-priority mortgages on a pool of 1,139 single-family rental homes. The pool also includes 72 multifamily rental properties that accommodate two to four units.
Similar to the ‘SFR1’ transaction, the properties ultimately securing the notes are highly geographically concentrated in Georgia, by percentage of broker price opinion (BPO). The state accounts for 59.6% of the properties in the SFR2 pool. After Georgia, Florida accounts for 13.1%, Arizona accounts for 11.3%, Texas, 9.7% and Ohio, 6.3%.
In ‘SFR1’ the concentration was slightly less, at 56.4%.
STAR, SFR2’s average BPO value is $222,881, an increase of $205,157 from the ‘SFR1’ deal. DBRS assumes a base-case net cash flow of about $8.4 million, which is lower than the issuer’s underwritten estimate of $13.7 million, DBRS said.
Typically, the homes underpinning the portfolio are older. On average, the properties were built in 1971, with construction years ranging from 1900-2020, according to DBRS. Also rehab costs averaged $43,393.
Lessors have an average original lease term of 12.8 months, with an average remaining lease term of 6.7 months.
