Banks set to roadshow Blackstone home-rental bond

Thu Oct 24, 2013 1:36pm EDT

NEW YORK, Oct 24 (IFR) - Deutsche Bank, Credit Suisse and JP Morgan will begin marketing the first-ever bond backed by US home-rental cashflows, a US$500 million trade for private-equity giant Blackstone, next Wednesday.

The banks will meet with investors in New York on October 30, and then visit Boston and Los Angeles the following two days.

Deutsche bank is the lead structurer, while Credit Suisse and JP Morgan will be acting as joint leads for the transaction.

The deal, titled Invitation Homes 2013-SFR1, will receive ratings from Kroll, Morningstar, and Moody's. At least one of those ratings will be Triple A.

The deal will be secured by individual mortgage liens on each underlying property rather than an equity pledge in the property-owning special purpose vehicle (SPV), allowing for the creation of a so-called real estate mortgage investment conduit (Remic) structure, according to sources close to the deal.

Remics, which are also used in CMBS, allow for the pooling of a diverse set of loans from different originators and offer flexibility in assembling a security.

Rating agencies had preferred that mortgages were in place as legal instruments in any potential REO-to-rental securitization structure so that bondholders do not get shut out of payments in case competing liens were placed on any particular property.

Agencies cautioned that in the absence of a recorded mortgage, bondholders could be on the hook if an issuer/sponsor puts an SPV owning the homes into bankruptcy.

Therefore, despite the recording fees and administrative costs involved with filing individual mortgages on each property, the mortgage structure seemed the best route for the first single-family rental securitization deal, sources said.

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