Progress single family rental ABS surprises market

Last week a single-family rental (SFR) deal led by Goldman Sachs, Deutsche Bank and Morgan Stanley was 10 times oversubscribed on the Kroll Bond Rating Agency (KBRA)-rated AAAs. The lower tranches also were oversold in the $406 million Progress Residential 2020-SFR2 offering, said investors in the deal. Oversubscribed securitizations could become increasingly common with originator tiering and less supply of assets to create new deals as investors compete for fewer opportunities. The Progress transaction is secured by 2,067 first-priority mortgages on "income-producing-single family homes," according to KBRA. The Progress Residential 2020-SFR2 attracted $184.39 million of five-year weighted average life (WAL) AAAs sold at swaps+170 basis points (bps), from priced talk of 190-200 bps. Tighter spreads were seen across the capital stack. The underlying single-family rental properties are located in or near 15 core-based statistical areas (CBSAs) across nine states. The top three CBSAs represent 42.3% of the portfolio and include Phoenix (17.9%), Las Vegas (12.6%), and Orlando (11.8%). The aggregate BPO value of the underlying homes was $463.9 million, yielding an LTV of 87.5%. KBRA adjusted the BPOs, which yielded an aggregate value of $417.2 million. This represents a 10.1% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 97.3%, according to KBRA. "We bought the deal largely because we understand there is a lack of housing supply in the U.S. and rentals will remain strong," according to a credit investor. With soaring job loss, more families will be pushed out of the home buying market and into single-family rentals. The last Progress Residential deal wasn't much bigger at $513 million via Barclays on March 4. This is the second SFR to price since early March. CoreVest American Finance priced at $234 million in mid-May via Wells Fargo.

Progress single family rental ABS surprises market

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