Kroll Bond Rating Agency Assigns Preliminary Ratings to Tricon American Homes 2017-SFR1

NEW YORK--()--Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to five classes of Tricon American Homes 2017-SFR1 (TAH 2017-SFR1) single-family rental pass-through certificates.

TAH 2017-SFR1 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $498.6 million loan secured by first priority mortgages on 3,480 income-producing single-family homes. The fixed-rate loan will require interest-only payments and have a five-year term. TAH 2017-SFR1 will be the third securitization issued by Tricon American Homes.

The transaction will be the first rated SFR securitization of its kind that allows the issuer to voluntarily substitute properties in the underlying portfolio. The feature permits the issuer to substitute up to 5.0% of the underlying homes, by property count, as of the closing date subject to certain provisions in the loan agreement.

The total underlying portfolio includes 3,143 homes (91.6% of BPO) that were a part of Tricon Capital’s acquisition of Silver Bay (SBY) in May 2017, of which 960 properties (29.5% of BPO) were previously securitized in the SBY 2014-1 transaction, which was fully repaid in connection with the acquisition.

The subject properties are single-family homes located in nine states, with the three largest state exposures representing 64.5% of the aggregate broker price opinion (BPO) value of the portfolio: Florida (32.8%), Georgia (18.2%) and Arizona (13.5%). The aggregate BPO value of the underlying homes was $610.7 million, yielding an LTV of 81.6%. KBRA adjusted the BPOs, which yielded an aggregate value of $526.4 million. This represents a 13.8% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 94.7%.

KBRA used its Single-Family Rental Securitization Methodology to evaluate the transaction. The methodology leverages elements of KBRA’s commercial mortgage-backed securities and residential mortgage-backed securities criteria due to the fact that the collateral underlying an SFR transaction has both commercial and residential characteristics. As the properties generate a cash flow stream from tenant rental payments, CMBS methodologies were used to determine the loan’s probability of default. To determine loss given default, KBRA assumed the underlying collateral properties would be liquidated in the residential property market.

For further details on KBRA’s analysis, please see our pre-sale report, entitled Tricon American Homes 2017-SFR1, which is published at www.kbra.com.

The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of final ratings that differ from the preliminary ratings.

           
Class     Rating     Balance (USD)     Rating Action
A     AAA (sf)     200,000,000     Preliminary
B     AA (sf)     47,328,000     Preliminary
C     A- (sf)     35,114,000     Preliminary
D     BBB+ (sf)     25,954,000     Preliminary
E     BBB- (sf)     51,909,000     Preliminary
F     NR     102,289,000     N/A
G     NR     36,000,000     N/A
 

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled Tricon American Homes 2017-SFR1

Related Publications: (available at www.kbra.com)

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Daniel Tegen, 646-731-2429
Director
dtegen@kbra.com
or
Akshay Maheshwari, 646-731-2394
Associate
amaheshwari@kbra.com
or
Nitin Bhasin, CFA, 646-731-2334
Managing Director
nbhasin@kbra.com
or
Keith Kockenmeister, 646-731-2349
Managing Director
kkockenmeister@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Daniel Tegen, 646-731-2429
Director
dtegen@kbra.com
or
Akshay Maheshwari, 646-731-2394
Associate
amaheshwari@kbra.com
or
Nitin Bhasin, CFA, 646-731-2334
Managing Director
nbhasin@kbra.com
or
Keith Kockenmeister, 646-731-2349
Managing Director
kkockenmeister@kbra.com