Amherst markets first SFR MBS transaction of 2019
American Residential, a two-year-old firm formed to acquire, renovate, lease and manage single-family rental housing, is sponsoring its first SFR securitization of 2019.
AMSR 2019-SFR1 Trust is a $442.9 million transaction backed by a single-loan secured by 2,525 SFR properties in 13 states, according to presale reports from Moody’s Investors Service and DBRS Morningstar.
The Class A notes totaling $129.4 million in the deal have preliminary triple-A ratings from Moody’s and DBRS Morningstar.
The ratings agencies, however, diverged on the ratings on lower notes. While DBRS Morningstar also assigned an AAA to the $43.1 million Class B tranche, Moody’s pegged the notes at a notch below the Class A notes at Aa2. The Class C notes that Moody’s rated A2 (the equivalent of a high A rating) were granted an AA+ rating by DBRS Morningstar. The Class D notes totaling $19.8 million are rated Baa2 (BBB equivalent) by Moody’s but AA by DBRS Morningstar.
DBRS Morningstar also assigned an early BBB- rating to the $93.2 million in Class E notes, a BB to the $39.6 million in Class F notes, and a B+ to the Class G notes totaling $16.3 million. Moody’s is not rating those three classes of notes. The $35 million in each of Class H and Class I tranches are not rated by either agency.
The Class F, G, H and I notes have payment-in-kind features that permit interest payments to be deferred, potentially increasing the outstanding balance of the certificates if the deal’s minimum debt-service coverage ratio threshold is breached.
Total leverage of 95% in the transaction, which Moody’s said is the highest among all the large-loan SFR transactions it has rated to date. “As a result of the higher total leverage, the borrower has less equity in the properties and less incentive to maintain or create value, and in stress scenarios may choose to divert resources to other properties with lower leverage. We made a negative adjustment to our recoveries to account for this increased risk.”
The average monthly rent of homes in the pool is $1,439, with 94.9% of the properties occupied. All of the properties were acquired by Amherst this year.
Moody’s has rated the value of the properties at $371.8 million.
Most of the properties are Southeast regional houses, with Tennessee (21.35% of total cost), Georgia (20.58%) and Florida (11.79%) making up the top three states in the pool that includes 34 metropolitan statistical areas.
Amherst is allowed to substitute up to 5% of the pool over the life of the transactions.
Goldman Sachs is the accommodation loan lender, and is joined as lead manager on the deal by Amherst Pierpoint and Nomura Securities.
Amherst Residential was formed in April 2017, and is majority owned by Amherst Holdings.