Starwood Waypoint Homes’ seventh single-family rental securitization is backed by the oldest properties to date — but also features the highest rents.
The $771.2 million transaction, dubbed Starwood Waypoint Homes 2017-1, includes single-loans secured by the income generated from the monthly leases for 4,443 homes in 18 states. The two-year loan with multiple options pays only interest of Libor plus 161 basis points, and no principal, for its entire term, according to Kroll Bond Rating Agency.
A total of six tranches of notes will be issued; the senior, $408.1 million Class A notes carry preliminary triple-A ratings from Kroll, Moody’s Investors Service and Morningstar Credit Services.
The deal is Starwood Waypoint’s first of the year, and arrives just weeks after the company announced a
Starwood Waypoint (NYSE: SFR) itself was built up through a January 2016 merger between Starwood Waypoint Residential Trust and Colony American Homes.
The homes included in SWH 2017-1 have an average age of 30 years, well above the average 21 years for other KBRA-rated SFR transactions. (Other SWH transactions had an average age of 26 years, per the agency). However, the weighted average monthly rent for the portfolio is $1,778, the highest among KBRA’s rated deals since January 2015 which averaged $1,505 monthly.
Both figures are subject to change as the result of a new feature for the deal: an allowance to make voluntary substitutions for up to 5% of the homes in the existing pool.
The portfolio of homes includes 1,787 properties that were rolled over from Starwood’s 2014-1 transaction that was fully repaid in July.
The $771.2 million loan, originated and sold by Deutsche Bank subsidiary German American Capital Corp., represents 68.5% of the aggregate broker price opinion values of the underlying properties, making it one of the lowest-leveraged-rated SFRs to hit the market. The homes have an aggregate value of $1.13 billion, after a collective purchase price of $994.2 million. The figure does not including nearly $40 million in rehabilitation and other related costs to the homes, most of which are concentrated in California, Florida and Texas.
(BPO valuations
KBRA states that 31 single-borrower SFR securitizations have occurred since November 2013, with eight having been repaid through refinancing or other sources. While still a fledgling asset class, none of the 23 outstanding securitizations have experienced a delinquency or default of the underlying loans in the deals — which ratings agency warn could result in a problematic resolution.
“Due to the loan and related collateral being of a customized nature, there may be a limited universe of buyers willing to purchase the loan in a distressed situation, and substantial workout negotiations may be required to restructure the loan,” the ratings agency’s presale report states.
