The REO-to-rental securitization deal that Blackstone (BX) subsidiary Invitation Homes brought to market is just the tip of the iceberg, with KBW analysts forecasting a nearly trillion dollar market when calculating the lingering possibilities that exist for single-family rental securitization deals.
KBW analysts put out a report saying that when assuming a 70% LTV on the properties in such deals, a capture rate of 35% – and the addition of $40 billion in annual production over the course of six years – the REO-to-Rental securitization marketplace is nearing $920 billion in potential opportunities.
This also includes an estimation of an average priced home in the $200,000-range, bringing the total value for the single-family rental sector to $2.8 trillion.
The Blackstone deal has inspired much discussion about the scope, interest and potential size of this market. It's new, but the larger the first deal and the more interest generated, the more likely other market players will express potential interest.
Moody’s Investors Service (MCO) analyzed the Invitation Homes 2013-SFR1 REO-to-Rental deal this week, awarding $278.7 million in triple-A ratings for the largest tranche of the deal. In all, $479.1 million in MBS is classified into four classes of certificates backed by one floating rate loan secured by mortgages on single-family rental properties.
Kroll, Moody’s and Morningstar all took shots rating the deal – a boon for future securitizations in this space, KBW claims.
"Importantly, we believe the participation of several ratings agencies will add institutional credibility to the sector. Additionally, we believe the size of the deal is a positive as this is larger than we believe some industry participants had expected," KBW analysts wrote. "This might suggest potentially strong demand. Finally, we believe a successful deal could pave the way for future offerings with improved execution and help address some long-term questions about the sector’s capitalization."
Blackstone Group, the parent of Invitation, apparently spent two years building a portfolio of single-family rental homes using its Invitation Homes subsidiary.
The good news about the Blackstone deal is it’s larger than the market expected, KBW points out.
"This might suggest potentially strong demand. Finally, we believe a successful deal could pave the way for future offerings with improved execution and help address some long-term questions about the sector’s capitalization," KBW analysts concluded.