NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to six classes of Tricon American Homes 2017-SFR2 (TAH 2017-SFR2) single-family rental pass-through certificates.
TAH 2017-SFR2 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $394.2 million loan secured by first priority mortgages on 2,621 income-producing single-family homes. Of these properties, 1,103 homes (44.6% by BPO) were previously securitized in TAH 2015-SFR1 and 517 properties (19.4%) were previously securitized in SBY 2014-1. Both the aforementioned transactions were paid-off in full in October 2017 and May 2017, respectively. The fixed-rate loan will require interest-only payments and have a six-year loan term. TAH 2017-SFR2 will be the fourth rated securitization issued by Tricon American Homes.
The subject transaction is the fourth 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. TAH is allowed to replace up to 131 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 10.2% 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 located in or near 18 Core Based Statistical Areas (CBSAs) across nine states. The top-three CBSA exposures represent 45.2% of the aggregate broker price opinion (BPO) value of the portfolio, which include Atlanta (22.5%), Phoenix (11.5%), and Charlotte (11.2%). The aggregate BPO value of the underlying homes was $522.7 million, yielding an LTV of 75.4%. KBRA adjusted the BPOs, which yielded an aggregate value of $444.8 million. This represents a 14.9% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 88.6%.
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.
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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