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Two Years In, Overall Performance of SFR Securitizations Remains Strong

for-rent-threeThe vacancy and delinquency rates generally remain low and stable across 22 single-family rental (SFR) securitizations through the end of October, Morningstar Credit Ratings’ November 2015 Performance Summary Covering All Morningstar-Related Securitizations released Monday.

The low delinquency rates and vacancy rates suggest that the overall performance of SFR securitizations is strong two years after the first transaction, IH 2013-SFR1 (Invitation Homes), in the asset class closed, according to Morningstar.

Through the end of October, only two of the 22 transactions in Morningstar’s summary had a vacancy rate above 7 percent and only eight out of the 22 had a delinquency rate higher than 1 percent. In addition, the retention rates across the securitizations remained stable and within Morningstar’s expectations during October.

“The percentage of month-to-month tenants remains in line with recent history, but Morningstar notes that 16.7 percent of properties in TAH 2015-SFR1 (Tricon American Homes) are occupied by MTM (month-to-month) tenants,” the report stated. “The TAH transaction has historically had the highest percentage among all deals, but this is an increase.”

For most transactions covered in the summary, vacancy rates remained under 6 percent in October. The highest vacancy rate for the month went to AH4R 2015-SFR1 (American Homes for Rent) with 8.3 percent, the same as it was in September. However, 60 percent of the 4,661 properties in that transaction had leases expire over the past five months; and properties that have more leases expiring in a given month will generally have a higher vacancy rate. One example of that is the PRD 2015-SFR2 (Progressive Residential), which experienced a vacancy rate increase for the fourth consecutive month in October. This transaction saw 20.1 percent of leases expire in September and October combined, which resulted in an increase in vacancy rate from 3.3 percent in August up to 4.6 percent in September and 6.3 percent in October.

The vacancy rate for the ARP 2014-SFR1 (American Residential Properties) deal has also been on the rise, albeit at a slower rate than that of PRD 2015-SFR2. For ARP 2014-SFR1, the vacancy rate has jumped from 6.3 percent in August to 6.9 percent in September to 7.2 percent in October, the second-highest vacancy rate for the month among the 22 transactions behind only AH4R 2015-SFR1.
The transaction with the lowest vacancy rate among the 22 securitizations in October was IH 2013-SFR1, which in October 2013 became the very first SFR securitization closed. In October, the vacancy rate for that deal was 3.1 percent.

Morningstar’s monthly summary has been developed to give SFR market participants detailed property level information for each securitization, given the limited amount of historical data available for the relatively new asset class. Click here to see the complete summary.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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