Reaffirming investor confidence in a new and relatively unproven Wall Street strategy, two of the nation’s largest owners of single-family rental homes issued new securitizations this month: American Homes 4 Rent launched its first such offering; while Blackstone Group’s Invitation Homes’ came out with its second offering.
Both show the strategy of buying up distressed homes in bulk following onset of the Great Recession is now paying off handsomely.
Agoura Hills, California-based American Homes 4 Rent priced an offering that represents beneficial ownership interests in a loan secured by single-family homes sold to an affiliate of the company and expects gross proceeds of $481 million from the offering, with a duration-weighted blended interest rate of LIBOR plus 154 basis points.
The transaction collateral is a non-recourse first-lien mortgage loan with a cut-off date principal balance of $482.7 million originated by Goldman Sachs Bank USA, according to presale analysis by Kroll Bond Ratings.
The underlying collateral is comprised primarily of 3,871 one- to four-unit residential properties in 24 markets in five states: Florida (30.2%), Texas (23.7%), Georgia (18.5%), Arizona (15.8%) and Nevada (11.8%). The average property value of the homes in the portfolio is approximately $178,141 and ranging from $60,000 to $505,000.
According to Kroll analysis, the broker price opinion values of the homes in the portfolio have experienced significant home price inflation to date since their initial acquisition. Without incorporating closing costs or rehabilitation costs, the values represent an average appreciation of 45% based solely on the original purchase price.
On average, approximately $16,377 per home was spent on rehabilitating the portfolio properties. The 'dollar for dollar' credit for rehabilitation costs is equal to 13.4% of the purchase price and the average increase in the value over the post-refurbishment cost is 21.3%.
Blackstone's Invitation Homes also received a warm welcome from investors for its single-family rental securitization collateralized by a $1 billion loan secured by mortgages on income-producing single-family homes with a total value of $1.34 million.
The loan backing the securitization is a non-recourse, first lien, floating rate mortgage loan originated by German American Capital Corp. The underlying collateral consists of 6,537 single-family residential properties in or near 28 markets across 10 states. The top three states represent 70% of the portfolio balance and include Florida (32.0%), California (26.8%), and Arizona (10.8%), while the top three MSAs represent 30%, and include Phoenix, (10.8%), Sacramento, (10%) and Atlanta, GA (9.2%).
Invitation Homes has acquired all of the properties, which are 94.9% rented, with an average monthly rental payment of approximately $1,420. According to Kroll analysis, based on the most recent broker price opinions, the average property value of the homes in the portfolio is $205,191 ranging from $55,000 to $630,000. Based solely on the purchase price, the values represent an average appreciation of 43% since purchase.
On average, approximately $20,246 per home was spent on rehabilitating the portfolio properties. The 'dollar-for-dollar' credit for rehabilitation costs is equal to 15.7% of the purchase price and the average increase in the value over the post-refurbishment cost is 23.2%.