The first securitization of single-family rental properties appears to be at risk of a maturity default.
The $479 million Invitation Homes 2013-SFR1 is backed by a floating-rate loan secured by the rental payments of about 3,200 single-family homes in five states. This loan is within 90 days of its initial term, when it ends Dec. 9, and the sponsor has yet to submit the required written notice of its intention to extend, according to Kroll Bond Rating Agency. The loan can be extended for one year up to three times, for a total term of five years.
As a result, Kroll has placed the deal on "watch developing" until it receives information from the servicer as to whether the bond will be extended.
In order to exercise the extension option Invitation Homes must deliver a written notice to the servicer no later than Nov. 9, which is 30 days prior to the current maturity date. If the sponsor opts not to extend the bond, all unpaid principal and interest due in respect of the loan must be paid at maturity.
Invitation Homes has been a regular issuer of single-family rental bonds since it completing the inaugural deal for the asset class two years ago. The sponsor has seven deals outstanding for total volume of $5.17 billion; collectively, these deals are backed by 31,429 properties. In total, 24 single-family rental securitizations have come to market, including three deals backed by loans to multiple borrowers, putting total issuance volume amounting to $13.1 billion.
On the single-borrower side, the majority of single-family rental bonds are structured like Invitation Homes' first deal, with floating-rate, two-year loans with extension options that extend the term to five years, but some of the more recent deals are backed by fixed-rate loans with terms of five to 10 years.
Kroll has flagged the risk of such a concentrated debt maturity profile in various presale reports. The large number of loans coming due could result in increased financial stress for sponsors.
To date, however, all securitizations backed by single-family rentals have performed in line with ratings agencies' expectations. Kroll noted in its report on the IH 2013-SFR1 deal that no performance factors contributed to the loan being watch listed and that it is currently performing.