Starwood Waypoint is joining the ranks of landlords securitizing single family rental property. Its first deal, for $505 million, is backed by properties that are older than others in this emerging asset class, according to Kroll Bond Rating Agency.
Starwood Waypoint Residential Trust 2014-1 (SWAY 2014-1) will be the thirteenth single family rental transaction overall; it brings year to date volume to $6.6 billion.
The transaction is collateralized by a single loan secured by mortgages on 4,095 single-family rental homes. The underlying properties are located in or near 20 Core Based Statistical Areas (CBSAs) across seven states. The top three states represent 70.3% of the portfolio and include Florida (30.1%), Texas (24.0%), and Georgia (16.3%), while the top three CBSAs represent 46.6% of the homes, and include Miami (16.7%), Atlanta (15.9%), and Houston (14.0%).
The homes backing the deal have an average age of 33 years and are the oldest of any of the single family rental pools. Only 43 of the underlying properties were constructed after 2007.
All of the other single-family rental deals are collateralized by properties that have average home ages ranging from 12 to 30 years, with an average age of 21 years, according to Kroll.
Kroll plans to assign a 'AAA' rating to $234 million of class A notes, a 'AA' rating to $61.2 million of class B notes, an 'A-' to $55.8 million of class C notes, a 'BBB+' to $39.6 million of class D notes, a 'BBBB-' to $80.3 million of class E notes, and a 'BB+' to $33 million of class F notes.
Starwood Waypoint Residential Trust was created in January 2014 as a merger between Starwood Property Trust and Waypoint Real Estate Group (Waypoint). Prior to the merger, Waypoint had already been an active participant in the acquisition, rehabilitation, and leasing of single family rental properties since 2009. The publicly traded real estate investment trust (REIT) with has a market cap of approximately $962.9 million as of November 28, 2014.
Kroll noted in the presale report that the transaction is structured with less equity than previous single-family rental deals. The transaction’s loan to value ratio is 73.7%, which is higher than the average of 71% from the last 12 deals to be placed.
Similar to the prior single family rental transactions, the deal is backed by a loan that pay only interest for their entire terms; in this case the fully extended term is five years.