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Investments

Rental securitization earns AAA rating from Kroll, Morningstar & Moody’s

Deal is only third of its kind

For rent sign house

When American Homes 4 Rent (AMH) announced that it would be offering a single-family rental securitization, the details were sparse. Now, a day later, ratings agencies have gotten a look at the deal and released their presale reports.

Kroll Bond Rating Agency, Morningstar and Moody’s Investor Service have each weighed in on the AHR package and given it a sterling AAA rating.

The offering, called American Homes 4 Rent 2014-SFR1, is a $482.7 million single-family rental securitization. The transaction is collateralized by a single loan that is secured by mortgages on 3,871 income-producing single-family homes.

The offering is made up of six classes of mortgage pass-through certificates. Each of the three agencies issued a triple-A rating for $270.40 million of the securitization, which is the largest class of the securitization, by far.

The properties are distributed across five states and 27 metropolitan areas in the United States. According to the presale information, the properties are spread through Florida (30.2%), Texas (23.7%), Georgia (18.5%), Arizona (15.8%) and Nevada (11.8%).

The top five markets in the package are Atlanta (16.01%); Dallas-Fort Worth (12.01%); Las Vegas (11.81%); Tampa (11.28%); and Phoenix (11.25%).

Each agency compared this SFR to previous SFR offerings from Colony American Homes and Invitation Homes.

Kroll’s presale report stated the agency is concerned by the fact that there is not extensive credit performance data on the new asset class of SFR’s because this will only be the third transaction of its kind. But it also noted that the makeup of the properties collateralizing the loans compare “favorably to the two prior SFR transactions” because the homes are newer and much larger than the two previous deals.

Moody’s cited the liquidity of the single-family market as a positive for the deal. “Liquidity and available capital are two key drivers of real estate asset prices,” Moody’s report states. “The recent housing crisis has provided some experience on the liquidation potential for these properties under a scenario with multiple economic and systemic headwinds.”

But Moody’s also noted the limited history of SFR deals as a concern of the deal.

Morningstar’s report said that AHR’s strengths include financial controls and payment processing, training, disaster recovery and business continuity, technology architecture, vendor qualification review and management protocols, tenant relationship management, and delinquent account collections.

Morningstar’s report also mentioned the limited performance history of SFR deals as a concern as well.

The loan backing the AHR securitization will be a non-recourse, first lien, floating rate mortgage loan originated by Goldman Sachs Mortgage Company on the securitization closing date and funded with the proceeds from the sale of the certificates.

The lead managers of the securitization are Goldman Sachs, J.P. Morgan Securities LLC, and Wells Fargo Securities, LLC. The servicer and special servicer is Midland Loan Services. The certificate administrator is Wells Fargo Bank and the property manager is American Homes 4 Rent Management Holdings, LLC.

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