KBRA Releases Single-Borrower SFR Comprehensive Surveillance Report

NEW YORK–()–Kroll Bond Rating Agency (KBRA) releases a Comprehensive Surveillance Report for the KBRA-rated universe of 19 outstanding single-borrower, single-family rental (SFR) securitizations. In connection with this report, 86 ratings have been affirmed and 21 ratings have been upgraded. Of the 21 upgraded ratings, 17 are on securities issued in connection with four transactions issued by American Homes 4 Rent, which were primarily driven by continued increases in cash flow and deleveraging owing to home price appreciation of the underlying portfolios and amortization of each respective loan. The remaining four ratings upgrades are related to Progress 2015-SFR3, which were mainly driven by deleveraging through home price appreciation of the underlying assets.

The ratings were issued in connection with 19 single-borrower transactions, each of which is collateralized by a single loan. The underlying loans, which have an aggregate balance of $11.7 billion, are secured by 75,423 SFR properties.

The report provides various key credit metrics that were analyzed and compared to both issuance and ongoing performance data for the individual transactions. While the report provides an individual tear sheet for each deal, KBRA has also presented rolled-up information for each of the issuing shelf, which provides useful insights into the overall performance of each sponsor’s securitized portfolio. Finally, the publication also provides key takeaways from our analysis, some of which are as follows:

  • Property portfolio values have appreciated by 15.4%, on average, since issuance of the respective transactions as implied by July 2019 CoreLogic HPI data.
  • Portfolio net operating incomes (NOI) are, on average, 9.1% higher than the issuer’s underwritten NOI, and higher than 5.9% compared to our last review in September 2018. The servicer NOI for the current review was 33.4% higher, on average, compared to KBRA assumed NOI at issuance.
    • Contractual rental rates (rent per property) have increased by an average of 9.4% across all of the outstanding deals since issuance.
    • The current vacancy rate across all the portfolios is 4.4%, on average, which is equivalent to the average vacancy as of our last review in September 2018, but lower than the average of 6.1% as of the November 2017 review. Tenant delinquency rates have averaged 0.5%, which is in-line with 0.6% in our previous review.
    • Tenant Retention Rates have averaged 72.5% across all of the transactions, which is higher than the 70.0% at the time of the last comprehensive surveillance report.
    • Servicer reported operating expenses are, on average, 21.1% higher than each issuer’s underwritten figures at issuance. In comparison, operating expenses as of the last review in September 2018 were, on average, 17.3% higher than the issuer’s underwritten figures at securitization.
  • LTVs across all transactions have continued to decline since the issuance average of 73.2% to a current Implied LTV of 62.1%. This average Implied LTV as of the last review in September 2018 was slightly higher, at 63.9%.
  • Average NOI debt service coverage (DSC) and NOI debt yield (DY) for all of the deals are 1.98x and 8.0%, respectively.

For further details, please see a copy of the report, entitled Single-Borrower SFR: Comprehensive Surveillance Report, published at www.kbra.com.

To access ratings, reports and disclosures, click here.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

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