American Homes 4 Rent has repaid the $342 million loan that serves as collateral for its first securitization of single-family rental properties, ARP 2014-SFR1.
It's only the second time a deal in this relatively new asset class has been repaid. In July, Progress Residential refinanced its first securitization, rolling much of the collateral into a new deal.
All of these transactions are backed by a single mortgage on a portfolio of rental homes. The loans have initial terms of two or three years, and can be extended for up to five years. To date, all other maturing loans have been extended, and some are concerned that a large number will come due at the same time, when they are fully extended, making it difficult to refinance all of them. This could prove especially difficult if housing prices were to fall, as most of the loans pay only interest, and no principal, and so do not amortize.
Unlike Progress, AH4R is not refinancing its deal, at least not right away. Instead, it is expected to hold the properties on its balance sheet, according to Kroll Bond Rating Agency, which rated the deal. The original sponsor of the deal, American Residential Properties, was merged into AH4R earlier this year, and the combined firm operates as AH4R. In a report published this week, KBRA said that AH4R will manage the properties "as part of its ongoing corporate strategy."
Once investors in the securitization receive full proceeds from repayment of the loan, KBRA will withdraw its rating on the deal.
ARP 2014-SFR1 was collateralized by an interest-only loan with an initial maturity date of Sept. 9. Although the loan had an initial term of two years with three 12-month extension options, the borrower elected not to exercise the first extension option. Throughout the life of the transaction, the loan maintained a current payment status, according to KBRA.
KBRA noted that Progress refinanced its deal ahead of the loan's maturity, and as a result was required to pay a spread maintenance premium.