Invitation Homes, the real estate investment trust controlled by private equity firm the Blackstone Group, has found a new source of financing for its portfolio of single-family rental homes: Fannie Mae.
In an amended registration statement for its initial public stock offering, filed Monday, Invitation Homes disclosed that it has secured a commitment for a 10-year mortgage of up to $1 billion from Wells Fargo; this loan will be sold to Fannie Mae, which will securitize it, issuing senior notes with guaranteed interest and principal payments and subordinate notes that are unguaranteed.
Invitation Homes will purchase and retain nonguaranteed notes equal to 5% of the loan, in keeping with the requirements for this program.
Up to now, Invitation Homes has relied primarily on private-label securitization for exit financing. It finances the purchase and renovation of homes with a combination of equity capital, warehouse loans from its sponsor, and borrowings under credit facilities, according to the prospectus.
In November 2013, it was the first Wall Street landlord to securitize loans on a pool of single-family homes through in a transaction that combines characteristics of traditional residential mortgage-backed securities and commercial mortgage-backed securities.
The initial deal is for $479 million, and to date it has completed a total of $5.33 billion of such deals to refinance credit facility balances.
Other owners of large single-family rental portfolios, including American Homes 4 Rent, Colony American Homes and Colony Starwood Homes, Progress Residential and Tricon American Homes, have also tapped the securitization market for exit financing.
Invitation Homes will also use proceeds from its $1.5 billion IPO, as well as from a new, $2.5 billion credit facility with a syndicate of lenders, to refinance part of its rental portfolio, according to the prospectus. These funds will be used to repay the company's existing credit facilities, a mortgage securitized in a 2013 transaction (IG 2013-1), and a portion of a mortgage securitized in a 2014 transaction (IH 2014-1).
Proceeds from the financing obtained from Wells Fargo and Fannie Mae will be used to repay the remaining amounts outstanding the first-half 2014 securitization and approximately $275 million of a mortgage securitized in a second 2014 transaction (IH1 2014-2).
It's not the first time that Fannie Mae has come to the Blackstone Group's aid; last year, the mortgage giant insured a $2.7 billion loan that Wells Fargo provided to Blackstone and Ivanhoe Cambridge for the acquisition of Stuyvesant Town-Peter Cooper Village. That loan was also securitized, with Fannie Mae guaranteeing the senior notes.