Progress Residential Prices Its First Single-Family Rental Bond

Mortgage & Real Estate









Progress Residential, a single-family rental company founded by former Goldman Sachs partner Donald Mullen Jr., priced its inaugural securitization Thursday, according to a person familiar with the deal.

Deutsche Bank, which last year provided Progress Residential with a $400 million credit line, is the lead manager of the securitization. Morningstar and Kroll Bond Ratings assigned ratings across the capital structure. Moody’s Investors Service is also rating the deal, with the exception of the class E and F notes.

The AAA rated class-A note priced at a spread of 110 basis points over the one-month London interbank offered rate. The class-A notes have 49.1% credit enhancement. The AA, class B notes which received an AA+ rating in one case priced at a spread of 190 basis points. These notes have 39.6% credit enhancement. The single-A class C notes which received an A+ rating in one case priced at 225 basis points and have 31.5% credit enhancement.

The BBB+ (or Baa2 in Moody’s case) class D notes priced at a spread of 275 basis points and have 24.7% credit enhancement. The class E notes, which received BBB- and BBB ratings, priced at a spread of 415 basis points and have 13.1% credit enhancement. The F notes, which received BB and BB+ speculative grade ratings, priced at a discount margin of 485 basis points over one-month Libor and have 5% credit enhancement.

Progress Residential’s single-family rental bond is backed by a single loan that pays interest only for an initial two-year period, after which it can be renewed for three 12-month periods, for a total of five years. The loan is secured by the rental payments on a pool of 3,142 single-family homes. This is a similar structure to that used in the nine deals to hit the market to date, starting with the Blackstone Group’s Invitation Homes in November 2013.

The Progress Residential deal’s class-A note pricing was similar to that seen in American Residential’s recent debut deal in August, but the rest of the American Residential transaction’s capital structure was priced wider than the Progress Residential deal.

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