FirstKey Lending has priced its $241m single-family rental securitization, one of two multi-borrower deals to recently emerge from the asset class.
The senior tranche of FirstKey Lending 2015-SFR1’s class A-1 notes pays 115 basis points over the interpolated swap curve, for a yield of 2.4%. Moody’s Investors Service, Morningstar and Kroll Bond Ratings Agency previously awarded the top tranche their ‘AAA’ ratings.
By comparison, the class A-1, ‘AAA’-rated notes on the other multi-borrower securitization, B2R Finance 2015-1, pay 2.5%.
The FirstKey senior notes benefit from higher credit support of 37.75%, compared to 33.7% subordination on the B2R Finance deal, which may have been been necessary to secure a ‘AAA’ rating due to a more concentrated loan pool, Asset Securitization Report noted. The FirstKey Lending deal is collateralized by just 16 loans secured by mortgages on 3,628 homes, while the B2R deal involves 144 loans secured by 3,160 properties.
When Fitch Ratings rated the B2R deal — after claiming previous single-borrower deals were too risky to rate — the agency noted that multi-borrower deals carry longer historical loan performance data, making future performance more predictable.
The FirstKey transaction is also less levered than previous single-borrower SFR deals, with a loan-to-value ratio of 63.1% compared to an average 72.7% for previous transactions. Lower leverage implies greater borrower equity, lower likelihood of default, and lower overall loss severity following an event of default.