Vacancies drop in Invitation Homes rental securitization

Reverses previous month’s surge

Considering the nature of renters, those who would come and go from residencies, this level of volatility should be somewhat expected.

Earlier this month, a report from Morningstar showed a surge in the vacancy rate of the rental homes that make up a $1 billion rental securitization from Invitation Homes.

According to the 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, representing an increase of nearly 33%.

But the vacancy rates reversed in June and dropped below May’s levels, although not completely returning back down to April’s lower level.

As of June 30, the cash-flow vacancy decreased to 6.4%, down from a revised 6.8% as of May 31, 2014, according to a new report from Morningstar. By property count, month-end vacancy declined to 6.8% as of June 30, 2014, also down from a restated 7.1% as of May 31, 2014. The delinquency rate was flat at 0.5% as of June 30, 2014.

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.

“With initial lease expirations peaking in May and June 2014 (23.3% of all properties in the pool had leases expiring through May 2014 and 34.3% through June 2014), Morningstar expects the month-end vacancy rate to stabilize and to potentially decline,” Morningstar said in its update.

Morningstar also provided an update on the performance of Invitation Homes first REO-to-rental securitization, which hit the market in late 2013.

The $479.1 million securitization is backed by the mortgages on 3,207 single-family rental properties.

According to Morningstar, the vacancy rate of the underlying properties increased slightly in June. The cash-flow vacancy was 2.6%, compared with a revised 2.3% in May. By property count, month-end vacancy increased to 3.8%, compared with a restated 3.4% at the end of May, while the delinquency rate was 0.6%.

“As Morningstar previously reported, initial lease expirations were anticipated to peak between January 2014 and March 2014,” Morningstar said in a report. “As the number of expiring leases declines through the remainder of the year and vacant properties become occupied, Morningstar continues to expect the month-end vacancy rate to stabilize and to potentially decline further.”

Morningstar does caution that it measures vacancy rates based on month-end vacancies. “Because a large proportion of lease expirations may occur in the last five days of any calendar month, month-end measures of vacancy may be higher than vacancies reported based on average days of occupancy in a given month,” Morningstar said in its report.

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