Velocity Commercial Capital (VCC) has issued a $312m hybrid securitization backed by two separate groups of loans: one residential and another commercial.
The VCC 2015-1 securitization is backed by one subpool consisting of 706 residential loans, 74.4% of which are single-family rental homes and the rest secured by two- to four-family rental properties; and a second pool of 237 commercial loans, mostly secured by multifamily, mixed-use and industrial properties.
Previous SFR securitizations have typically been collateralized by a single loan backed by thousands of rental homes, with no commercial component. May’s Colony American Homes (CAH) 2015-1 deal, for example, was collatoralized by a $673.8m loan secured by 3,879 homes.
Kroll Bond Rating Agency (KBRA) has assigned a preliminary AAA rating to the VCC transaction’s senior notes. Nomura Securities International, Citigroup, Barclays and Guggenheim Securities are the initial purchasers.
The loan pool on VCC 2015-1 also differs from previous SFR deals in that it carries a much lower loan-to-value, at just 60.5%. Leverage on SFR securitizations has otherwise continued to creep up as the industry warms up to the asset class and issuers consider structuring deals with an added risk retention tranche, as was the case with CAH 2015-1, which had a 77.6% LTV.
Assets underlying RMBS and CMBS are also generally of higher quality and offer more stable credit performance, KBRA noted in a presale report. The VCC loans do however have an average balance of $331,739, which have historically exhibited higher delinquency rates relative to the CMBS asset class alone.
The VCC 2015-1 loans are fully amortizing over periods of up to 30 years and pay an adjustable interest rate; and 903 (95.1%) are fixed for the first three years of the loan term.
VCC is best known for lending on distressed commercial and residential properties, having completed $300m of originations in 2014 and projecting $500m for 2015. As of May 2015, it had originated 3,084 small-balance commercial real estate loans and acquired another 233 with total principal balances of $1.2bn.