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Vacancy rates among single-family rental securitizations are trending higher, according to data reported by Morningstar Credit Ratings in its July 2015 Single-Family Research: Performance Summary Covering All Morningstar Rated Securitizations released Wednesday.
Morningstar had anticipated higher-trending vacancy rates in June based on a higher number of lease expirations in recent months; the company cited as an example a correspondence between a slight increase in five Invitation Homes transactions and higher levels of lease expirations during the summer months. The retention rate for month-to-month leases dropped in 15 of 17 transactions in June, and there was also a slight drop in the retention rate of scheduled lease expirations. Notable declines in retention rates for scheduled lease expirations from May to June occurred in two Colony American Homes Transactions, CAH 2014-1 (which dropped from 81.7 percent to 68.2 percent) and CAH 2014-2 (which dropped from 81.2 percent to 69.9 percent).
Even with the higher-trending vacancy rates, monthly retention rates stayed within Morningstar's expectations, in the mid-70s to low-80s range. Still, the report said, "Vacancy rates generally remain low, though they may continue to migrate higher as more leases expire. Cash flows remain sufficient to cover bond obligations, and in general the asset class performance is in line with recent history."
The transaction with the highest concentration of month-to-month (MTM) leases in June was the recently-closed TAH (Tricon American Homes) 2015-SFR1 with 17.2 percent. Other deals with higher-than-average shares of MTM leases were ARP 2014-SFR1 (11 percent) and SBY (Silver Bay Realty) 2014-1 (8.1 percent), both of which increased slightly from May. Morningstar reported that single-family rental securitizations typically report MTM concentrations below 5 percent.
According to Morningstar, though delinquency rates generally remained low, the rate on the ARP 2014-SFR1 (American Residential Properties) securitization climbed from 2.5 percent in May up to 3 percent in June and it retained the highest delinquency rate among all transactions.
Click here to see the complete Single-Family Rental Research: Performance Summary Covering All Morningstar-Rated Securitizations for July 2015.
