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Investments

Vacancies surge in Invitation Homes $1 billion rental securitization

Up nearly 33% in May

The vacancy rate for the homes in Invitation Homes’ $1 billion rental securitization is rising. According to the latest data from Morningstar, the properties’ cash-flow vacancy rate rose from 5.4% in April to 7% in May, an increase of nearly 30%.

By property count, the month-end vacancy rate as of May 31 was 7.3%, up from 5.5% as of April 30. That’s an increase of nearly 33%.

The securitization is backed by a single floating rate loan secured by mortgages on 6,473 single-family rental properties. Initial reports listed the total number of properties in the securitization as 6,537.

According to Morningstar’s report, there were 475 vacant properties as of May 31, up from 353 in April and up from 348 as of the property cutoff date of April 22.

There are also 29 delinquent properties as of May 31, which is 0.4% of the total properties. In previous months, there were no delinquent properties in the securitization.

In its presale report, Morningstar said that it expected high renewal rates for the properties.

“The overall estimated renewal rate was 75.2% in April 2014,” Morningstar wrote in its performance update. “Morningstar had an expected renewal rate of 60.0% at issuance. As the number of lease expirations declines and vacant properties are occupied following the peak months of lease expiration in May 2014 and June 2014, Morningstar expects the vacancy rate to stabilize and to potentially decline.”

In its presale ratings, Kroll Bond Rating Agency factored in an expected vacancy rate of 10% and still awarded AAA ratings to the largest tranche of the deal, $483 million.

Despite the increase in vacancies and delinquencies, Morningstar’s opinion is that the net cash flow based on the total rent collected is sufficient to cover the bond obligations. 

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