Morningstar and Kroll Bond Rating Agency (KBRA) have issued preliminary ratings on Progress Residential 2015-SFR2, a $438.7m securitization of 3,317 single-family rental (SFR) homes.
The rating agencies awarded a ‘AAA’ rating to the $229.9m top tranche of the securitization. It is the third SFR deal under borrower Progress Residential, which entered the market in September, and the 19th single-borrower SFR securitization.
The collateral for the transaction is a $438.7m five-year, fixed rate, interest-only (IO) and non-recourse mortgage loan originated by loan seller German American Capital Corporation (a US subsidiary of Deutsche Bank) and secured by the borrower’s fee simple interest in the 3,317 homes.
Seven classes of certificates will be issued, six entitled to monthly interest and principal distributions and one residual class.
The deal is exposed to similar risks as previous deals, including limited performance and operating history, refinance risk and backing from an IO loan, considered to carry higher maturity default than an amortizing loan.
Rating agencies have also sparred over the merits of single-borrower SFR deals, which Fitch Ratings has suggested are riskier than more recent multi-borrower deals.
Progress 2015-SFR2 however has a loan-to-value (LTV) ratio of 72.5%, falling in line with the 72.8% average for prior securitizations, which ranged from 65% to 78.9%. And the underlying homes exhibit “above average geographic diversity” compared to previous securitizations, KBRA noted.
The homes are located in or near 21 Core Based Statistical Areas (CBSAs) across nine states. The top three states represent 63% of the portfolio and include Florida (36.2%), Georgia (14%), and North Carolina (12.8%).