KBRA Assigns Preliminary Ratings to STAR 2024-SFR4
10 Sep 2024 | New York
KBRA assigns preliminary ratings to four classes of STAR 2024-SFR4 single-family rental pass-through certificates.
STAR 2024-SFR4 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a single $471.6 million floating-rate loan secured by mortgages on 1,693 income-producing single-family units in 1,692 properties. The interest only floating-rate loan has an initial term of two-years and three one-year extension options. The subject transaction will be the second KBRA-rated securitization issued by Starwood.
The underlying single-family rental properties are located in or near 15 Core Based Statistical Areas (CBSAs) across nine states. The top-three CBSAs represent 43.7% of the portfolio and include Phoenix (18.5%), Atlanta (13.4%), and Charlotte (11.9%). The aggregate BPO value of the underlying homes is $636.8 million, yielding an LTV of 74.1%. KBRA adjusted the BPOs, which yielded an aggregate value of $604.9 million, which represents a 5.0% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 78.0%.
KBRA uses a hybrid analysis to evaluate SFR transactions, which incorporates elements of both KBRA’s CMBS and RMBS methodologies, as the underlying real estate contains commercial and residential characteristics. As the properties generate a cash flow stream from tenant rental payments, elements of CMBS methodologies are used to determine the loan’s probability of default (PD). To determine loss given default (LGD), KBRA assumes the underlying properties would be liquidated in the residential property market. In determining LGD, KBRA subjects the real estate properties to home price stress scenarios using elements of RMBS methodologies. This hybrid analysis is described in more in KBRA’s U.S. Single-Family Rental Securitization Methodology.
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