American Homes 4 Rent priced its third securitization of single-family rental properties.
In a press release, the company said that $530 million of 10-year bonds have a weighted average coupon rate of 4.395%. The bonds are backed by a single loan on 4,503 residences.
Goldman Sachs, JPMorgan Securities and Wells Fargo Securities are the lead managers on the deal. Kroll Bond Ratings Agency and Morningstar rated it.
In the sponsor’s previous deal, AH4R 2014-SFR2, completed in September, a $488 million tranche of 10-year bonds has a coupon rate of 4.386%.
Both deals are backed by a fixed-rate loan with a term of 10 years, the longest loan tenure to date for such deals. This is considered a risk factor, since loans with longer terms can be more susceptible to term default than loans of comparable credit quality with shorter terms. The loans have both a higher term probability of default and a higher lifetime probability of default. “Furthermore, as the asset class is relatively new to securitization, there is less visibility regarding how the loan will perform over a longer, 10-year time horizon,” Kroll stated in its presale report.
Unlike some earlier deals, however, American Homes 4 Rent’s last two deals amortize on a monthly basis.
The three previous transactions in the sector, AH4R 2014-SFR1, Colony American Homes 2014-1 and Invitation Homes 2013-SFR1, are backed by loans that amortize but are floating rate and have fully extended terms of only five years.
By comparison, earlier securitizations of single-family rentals were collateralized by loans with five-year fully extended terms that pay interest only.
The properties backing AH4R 2014-SFR3 are located in 10 states, with the three largest state exposures representing 58.8% of the aggregate broker price opinion value of the portfolio: Texas (23.8%), North Carolina (21.3%) and Indiana (13.7%). The aggregate BPO value of the underlying homes was $799.4 million, yielding a loan-to-value ratio of 66.3%.
Some of the homes (112 properties) are rented on month-to-month leases and 57 properties had assumed tenants in place at time of acquisition, also known as carry-over tenants. This includes two properties that have assumed tenants on month-to-month leases.