Invitation Homes Prepares for $891.9 Million Sale

Two thousand, six hundred single-family homes financed with one loan yield $891.9 million in mortgage-backed securities from the Invitation Homes 2024-SFR1 transaction.

Invitation Homes Operating Partnership and SFR Javelin Venture are the loan sponsor and securitization sponsor, respectively, according to analysts at Moody’s Ratings. Invitation Homes is the guarantor under the limited guarantee, while SFR Javelin will retain the Class G piece to meet risk retention requirements. The deal will see bonds issued through seven tranches of Class A, B, C, D, E, F and G certificates. The collateralized loan is a five-year fixed-rate loan, the ratings agency said.

Deutsche Bank Securities, BofA Securities, Goldman Sachs and Morgan Stanley are the lead and co-lead managers of the deal, which is expected to close on September 5. Yields in the Asset Securitization Report range from 4.9% on the AAA notes to 7.6% on the BB notes.

DBRS Morningstar also rated the notes and said the properties are spread across eight states and 29 metropolitan areas in the U.S., something Moody’s said shows potential credit strength. The average assigned loan amount is $317,328, Moody’s said.

The bonds benefit from credit support ranging from 44.8% on the Class A bonds to 7.5% on the Class F bonds.

Moody’s also considers Invitation Homes Operating Partnership to be a strong sponsor.

However, one of the credit challenges is the lack of servicing of the loans, and the loans are highly concentrated in states and MSAs. According to the broker price opinion, 20% of the loans are in the Phoenix-Mesa-Scottsdale area, followed by 16% in the Charlotte-Concord-Gastonia area.

Another credit concern is a multi-tier debt service coverage ratio (DSCR) test and a payment-in-kind feature for the class E and F tranches. The payment-in-kind certificates could earn partial interest even after the multi-tier test is initiated, Moody’s said. But the rating agency was concerned about what would happen in a scenario where the available money in the cash collateral account could be lower.

Moody’s assigns ratings Aaa, Aa1, A3 and Baa3 to the A, B, C and D tranches. DBRS assigns AAA, AA and A to the class A, B and C notes; BBB to the D and E notes; and BBB to the class F notes.