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Tricon American refinancing more Silver Bay single-family rentals

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Tricon American Homes is securitizing $365 million of single-family rental properties.

The transaction, Tricon American Homes 2017-SFR2, is ultimately backed by 2,821 homes, 1,417 of which (52%) were obtained through the May acquisition of Silver Bay Realty. Just over 500 of these (19.4%) were previously securitized in a 2014 transaction.

Morningstar Credit Ratings expects to assign an AAA to the senior tranche of notes to be issued in the transaction, which benefits from 56.9% credit support.

Deutsche Bank Securities and Bank of America Merrill Lynch are the lead managers.

The notes represent a beneficial ownership in a six-year, fixed-rate, interest-only loans with an initial aggregate principal balance of approximately $394.2 million. This loan, in turn, is backed by the rental portfolio.

The properties are distributed across eight states and 20 MSAs, but 60.1% of the portfolio, by broker price opinion (BPO), is concentrated in Georgia (22.8%), Florida (20.1%) and Nevada (17.2%).

The average purchase price per property is $138,214, and the average BPO value is $199,413. The average age of the properties is roughly 31 years old. Most properties have three or more bedrooms. All of the renovations on the hurricane-affected properties have been completed.

Among Morningstar’s considerations in rating the deal is the fact that it has a higher concentration of tenants on month-to-month leases, relative to other single-family rental transactions: 254 properties, or 10.4% by BPO value.

The transaction also allows for discretionary substitutions of up to 5% of the number of properties as of the closing date, as long as certain restrictions are met. This is a fairly new feature that was also included in a recent transaction from another single-family rental operator, Invitation Homes.

In the case of Tricon Homes’ deal, each substitute property must be a detached single-family residential property that is occupied has a BPO at least as high and rent at least as that the property being replaced. In addition, the substitution cannot result in any metropolitan statistical area increasing by more than 2.5% from the level at the time of the deal’s closing.

Midland Loans is the servicer and special servicer.

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RMBS Morningstar