NEW YORK--(EON: Enhanced Online News)--Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to six classes of Invitation Homes 2018-SFR2 (IH 2018-SFR2) single-family rental pass-through certificates.
IH 2018-SFR2 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $1.1 billion loan secured by first priority mortgages on 5,614 income-producing single-family homes. The entire subject portfolio consists of rollover properties that were previously securitized in IH 2015-SFR1 (2,610 homes, 45.3% by BPO) and IH 2015-SFR2 (3,004 homes, 54.7% by BPO). Both of these deals are expected to be fully repaid in conjunction with the closing of the subject transaction. The floating-rate loan will require interest-only payments and have a fully extended loan term of seven years (two-year initial term with five 12-month extension options). IH 2018-SFR2 will be the second single-borrower SFR securitization issued by Invitation Homes following the merger with Starwood Waypoint Homes. Including the current deal, Invitation Homes and its predecessor entities will have issued a total of 17 SFR securitizations.
The subject transaction is the seventh KBRA-rated SFR securitization to include a voluntary substitution feature that permits the issuer to replace any property or sub-portfolio of properties with a substitute property or portfolio of properties up to a maximum of 5.0% of the homes in the underlying portfolio, by count, as of the closing date. IH is allowed to replace up to 281 properties over the remaining duration of the deal with occupied detached single-family homes. As the substitution threshold is by count, it is conceivable that up to 9.7% of the pool, by BPO value, could be substituted if the assets that were removed from the pool were comprised of those with the highest BPO values.
The underlying single-family rental properties are located in or near 33 Core Based Statistical Areas (CBSAs) across eight states. The top-three CBSAs represent 42.3% of the portfolio and include Miami (16.1%), Seattle (13.6%), and Atlanta (12.6%). The aggregate BPO value of the underlying homes was $1.5 billion, yielding an LTV of 70.0%. KBRA adjusted the BPOs, which yielded an aggregate value of $1.4 billion. This represents a 10.3% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 78.0%.
KBRA used its Single-Family Rental Securitization Methodology to evaluate the transaction. The methodology leverages elements of KBRA’s commercial mortgage-backed securities and residential mortgage-backed securities criteria due to the fact that the collateral underlying an SFR transaction has both commercial and residential characteristics. As the properties generate a cash flow stream from tenant rental payments, CMBS methodologies were used to determine the loan’s probability of default. To determine loss given default, KBRA assumed the underlying collateral properties would be liquidated in the residential property market.
For further details on KBRA’s analysis, please see our pre-sale report, entitled Invitation Homes 2018-SFR2, which is published at www.kbra.com.
The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of final ratings that differ from the preliminary ratings.
| Class | Rating | Balance (USD) | Rating Action | |||||||||
| A | AAA (sf) | $464,424,000 | Preliminary | |||||||||
| B | AA+ (sf) | $135,929,000 | Preliminary | |||||||||
| C | AA- (sf) | $98,171,000 | Preliminary | |||||||||
| D | A+ (sf) | $60,413,000 | Preliminary | |||||||||
| E | BBB- (sf) | $173,687,000 | Preliminary | |||||||||
| F | BB- (sf) | $124,601,000 | Preliminary |
Representations & Warranties Disclosure
All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report available here.
Related Publications: (available at www.kbra.com)
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KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.
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