American Residential eyes second SFR securitization

After pricing its first securitization backed by single-family homes last week, American Residential Properties is looking forward to a second. Company CFO Shant Koumriqian told Real Estate Capital the new offering could come as soon as “early next year.” “At this point, that seems very attractive,” he said. “We’re seeing a growing acceptance of this asset class.” American […]

After pricing its first securitization backed by single-family homes last week, American Residential Properties is looking forward to a second.

Company CFO Shant Koumriqian told Real Estate Capital the new offering could come as soon as “early next year.”

Shant Koumriqian
Shant Koumriqian

“At this point, that seems very attractive,” he said. “We’re seeing a growing acceptance of this asset class.”

American Residential, which had spent $1bn on 7,200 homes across 13 states as of June, will also continue to buy more homes, Koumriqian said, citing positive pricing of its first SFR securitization – American Residential Properties 2014-SFR1 – and a growing base of investors viewing the asset class favorably.

The REIT has an additional $38m in cash to deploy and $126m in borrowing capacity, with the potential to expand the line of credit by an additional $250m through an accordion feature.

“Our intent with the proceeds is to continue to acquire assets,” Koumriqian said.

American Residential’s $342.67m securitization, which bundled 2,880 of its 7,200 homes, priced this week at a blended interest rate of LIBOR plus 211 basis points. It marked the seventh securitization of SFR homes to date, growing the asset class into a $3.8bn business, as REC previously reported.

“We think the execution was great, and you’re getting widening interest and additional investors coming into the space,” Koumriqian said.

“We knew August was going to be a challenging time to market. Given what was going on in the world, with turmoil in the Middle East, spreads did widen a little bit. But at the end of the day we’re at Libor plus 211 on a 70 percent LTV loan.”

The SFR business is not without risks, of course. The properties lack long-term rent history, they are often clustered geographically, vacancies could rise, and some managers are inexperienced.

But homeownership rates continue to decline across the US, dipping from a 69.2% peak in the first quarter of 2005 to 64.8% in the second quarter of this year, data from the U.S. Census Bureau shows, and stagnant wages and tight mortgage markets suggest continued demand for SFRs.

“We think it’s a tremendous opportunity,” Koumriqian said. “Through additional improvements in systems, people, processes, technology and vendors, we think there’s room for improvement in the margins that we’re currently getting.”

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