American Homes 4 Rent prepping home-rental bond
NEW YORK, Nov 8 (IFR) - California-based American Homes 4 Rent announced on Friday that it will be issuing its inaugural single-family rental (SFR) securitization within the next 90 days.
The announcement follows in the footsteps of the successful US$479m rental-income ABS from Blackstone subsidiary Invitation Homes, its largest competitor in the REO-to-rental space, which met overwhelming demand this week from bond investors.
American Homes is likely to structure the deal similar to this week's Blackstone deal, which received Triple A ratings from Kroll, Morningstar, and Moody's, sources said. It's not yet clear though if the American Homes trade would also receive the agencies' top rating.
"We are very excited to finalize the details to take advantage of this new capital opportunity," said David Singelyn, CEO of American Homes 4 Rent, in a statement. "We look forward to leveraging our superior proprietary business model to reduce our cost of capital over the long term."
American Homes has bought up more than 21,000 foreclosed homes for the purpose of renting out; Blackstone has bought up more than 40,000. Blackstone's rental-income ABS was backed by rental streams on only 3,207 of those properties, signaling that the private equity giant intends to become a programmatic issuer next year.
"The Blackstone deal firmly established that capital markets are ready for this new asset class," said an RMBS investor. "It is massively better execution than bank-finance alternatives. It shows that the securitization markets are open for rental-finance strategies, and that there is significant capital for this sector."
This week Deutsche Bank (structuring lead), Citigroup and JP Morgan, the lead underwriters, were able to get a pricing inside of Libor plus 200bp on essentially a rental cashflow-backed floating-rate loan to Invitation Homes with a loan-to-value (LTV) of 75%.
By comparison, if a bank separately gave a roughly US$100m loan with an LTV of 65%, it would charge approximately Libor plus 350bp, securitization experts said.
"This is a positive signal that increases capital creation and capital flowing into this part of the housing market," the investor said.
Blackstone's home-rental ABS was trading tighter in the secondary market on Wednesday, just one day after pricing its Triple A slice 35bp tighter than initial whispers in the primary market.
All six tranches of the US$479m Invitation Homes 2013-SFR1 transaction were trading above par today in the secondary, according to investors.
(Reporting By Adam Tempkin; Edited by Shankar Ramakrishnan)