Vacancies drop again in Invitation Homes rental securitizations

Continues downward trend

The vacancy rate in the properties that make up Invitation Homes’ two REO-to-rental securitizations continued to decrease in July, according to a new report from Morningstar.

In Invitation Homes’ $1 billion single-family rental securitization, which launched earlier this year, the cash flow vacancy rate of the underlying properties fell to 5.4% as of July 31, down from June’s revised figure of 6.2%.

That 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 data, the month-end vacancy rate, by property count, declined to 6.3% in July, down from the revised June figure of 6.6%.

Both figures are down sharply from May’s totals.

June’s figures saw the cash-flow vacancy decrease to 6.4%, down from a revised 6.8% as of May 31. By property count, month-end vacancy in June declined to 6.8%, also down from a restated 7.1% as of May 31.

And the vacancy rate is expected to continue its decline.

“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 continue to stabilize and to potentially decline further,” Morningstar said in its report.

Morningstar said that the net cash flow based on rents continues to be sufficient enough to cover the bond obligations.

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’s report, the cash flow vacancy for Invitation Homes 2013-SFR1 declined in July to 1.6%, compared with a revised 2.4% in June. By property count, month-end vacancy improved to 3.1%, compared with a restated 3.7% at the end of June.

Morningstar also said that the net cash flow based on total rent collected remains sufficient to cover the bond obligations of this securitization as well.

“As Morningstar previously reported, initial lease expirations were anticipated to peak between January 2014 and March 2014,” Morningstar noted. “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 cautioned 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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