NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to six classes of Invitation Homes 2018-SFR1 (IH 2018-SFR1) single-family rental pass-through certificates.
IH 2018-SFR1 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $916.6 million loan secured by first priority mortgages on 4,300 income-producing single-family homes. The entire subject portfolio consists of rollover properties that were previously securitized in CAH 2014-1 (2,157 homes, 50.5% by BPO) and CAH 2014-2 (2,143 homes, 49.5% by BPO). Both of these deals are expected to pay-off in full in conjunction with the closing of the subject transaction. The floating-rate loan will require interest-only payments and have a fully extended loan term of seven years (two-year initial term with five 12-month extension options). IH 2018-SFR1 will be the first single-borrower SFR securitization issued by Invitation Homes following the merger with Starwood Waypoint Homes. Invitation Homes and its predecessor entities have issued a total of 15 SFR securitizations.
The subject transaction will be the fifth 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. IH is permitted to replace up to 215 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 10.8% of the pool, by value, could be substituted if the assets that were removed from the pool consisted of those with the highest BPO values.
The subject properties are single-family homes located in seven states, with the three largest state exposures representing 71.9% of the aggregate broker price opinion (BPO) value of the portfolio: California (46.4%), Florida (14.1%), and Nevada (11.4%). The aggregate BPO value of the underlying homes was $1.3 billion, yielding an LTV of 70.0%. KBRA adjusted the BPOs, which yielded an aggregate value of $1.2 billion. This represents a 10.6% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 78.3%.
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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