Single-family rentals secure $1.2 billion FirstKey transaction

Single-family rental (SFR) properties are serving as collateral for a $1.2 billion securitization from the FirstKey Homes 2022-SFR1 trust.

It is the largest deal since the program priced its $2 billion transaction through the FKH 2021-SFR1 in July 2021. The current transaction is secured by a single, first-lien mortgage that Morgan Stanley Capital Holdings had originated, and which is secured by a collateral pool of 3,292 homes, according to a pre-sale report from Kroll Bond Rating Agency.

The fixed-rate, five-year loan will require interest-only payments, and Midland Loan services is the servicer on the transaction. The collateral homes are located in or near 40 Core Based Statistical Areas (CBSAs) across 14 states, while the top-three CBSAs represent 32.0% of the portfolio and include Phoenix (12.0%), Atlanta (11.1%) and Charlotte, N.C. (8.9%). Florida, Texas and North Carolina represent the top three states in the collateral, KBRA said.

Morgan Stanley leads the list of placement agents on the transaction, which includes BofA Securities, Wells Fargo Securities, Goldman Sachs & Co., and Citigroup Global Markets. The notes will be issued through a senior-subordinate capital structure, the rating agency said.

FKH 2021-SFR1 deal is the latest in a recent cluster of single-family rental home securitizations, including the STAR 2022-SFR3, plus the forthcoming Progress Residential 2022-SFR3, tapping the markets for more than $2 billion. Similar to typical SFR transactions, FKH 2021-SFR1 can release individual properties subject to certain prepayment premiums that range from 5% to 20%, according to the rating agency.

KBRA expects to assign ratings ranging from ‘AAA’ on the $428 million class A certificates to ‘B’ on the $57.1 million F1 notes.

On average, the properties have a broker price opinion (BPO) of $354,514, and the top three states have a BPO of 53%. On a weighted average (WA) basis, the collateral has an original lease term of 13.4 months, with a remaining term of 10.8 months, and monthly rent of $2,098. The pool has an occupancy rate of 78.8%, and loan-to-BPO value of 99.5%.

Some of the aspects of the underlying properties are similar to previous FKH transactions, such as the number of states represented hovering around the mid-teens, and southeastern states—such as North Carolina—representing the top three states, and around 40 CBSAs represented in the deal.

FKH 2022-SFR1 does have a couple of key differences, however. On average, the rental homes are 18 years old on average, slightly younger than previous deals, and the average square footage of 2,061 is larger.