NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to six classes of Starwood Waypoint Homes 2017-1 (SWH 2017-1) single-family rental pass-through certificates.
SWH 2017-1 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $771.2 million loan secured by first priority mortgages on 4,443 income-producing single-family homes. The subject transaction includes a total of 1,787 homes (35.3% by BPO) that were previously a part of the SWAY 2014-1 securitization, which was fully repaid in July 2017. The floating-rate loan will require interest-only payments and have a fully extended loan term of 63 months. SWH 2017-1 will be the seventh securitization issued by Starwood Waypoint Homes (SWH) or its predecessors.
The transaction will be the second rated SFR securitization that allows the issuer to voluntarily substitute properties in the underlying portfolio. The subject transaction is the second rated SFR securitization to include a voluntary substitution feature that permits the issuer to replace any property or sub-portfolio of properties with a substitute property or portfolio of properties up to a maximum of 5.0% of the homes in the underlying portfolio, by count, as of the closing date. Voluntary substitution is only allowed following the one year anniversary of the closing date of the transaction. SWH is allowed to replace up to 222 properties over the remaining duration of the deal with occupied detached single-family homes. As the substitution threshold is by count, it is conceivable that up to 9.0% of the pool, by value, could be substituted if the assets that were removed from the pool were comprised of those with the highest BPO values.
The subject properties are single-family homes located in eight states, with the three largest state exposures representing 60.1% of the aggregate broker price opinion (BPO) value of the portfolio: California (32.9%), Florida (16.0%), and Texas (11.2%). The aggregate BPO value of the underlying homes was $1.1 billion, yielding an LTV of 68.5%. KBRA adjusted the BPOs, which yielded an aggregate value of $1.0 billion. This represents a 10.1% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 76.2%.
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.
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.
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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 available here.
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