Rental securitization mania: Colony Homes jumps in

[don]

with the usual suspects . . .

remember the Ownership Society . . .

Colony American Homes to launch rental securitization

Firm hires advisers to help structure the transaction

Kerri Ann Panchuk
November 25, 2013

Securitization deals backed by rental income continue to attract market interest as more families turn to rentals over homeownership amid tighter lending standards.

Even firms not engaged in the space are rolling out initiatives, with single-family property manager, Colony American Homes (CAH), disclosing plans Monday to create a securitization deal backed by rental income.

The company will use single-family homes within its own property portfolios to support the transactions.
It’s a new venture for the single-family rental firm and arrives just as CAH announces plans to expand an existing credit facility to $1.2 billion from $500 million.

The extra proceeds from the credit line will be directed toward single-family acquisitions, with a group of banks led by JPMorgan (JPM) and Credit Suisse (CS) funding the deal.

Colony’s securitization plans follow the recent REO-to-rental securitization deal that Blackstone (BX) subsidiary, Invitation Homes, brought to market in the past month.

Not long after the deal’s announcement, KBW analysts forecasted a nearly trillion-dollar market when calculating the lingering possibilities that exist for single-family rental securitization deals.

KBW analysts put out a report, saying that when assuming a 70% LTV on the properties in such deals, a capture rate of 35% – and the addition of $40 billion in annual production over the course of six years – the REO-to-rental securitization marketplace is nearing $920 billion in potential opportunities.

This also includes an estimation of an average priced home in the $200,000-range, bringing the total value for the single-family rental sector to $2.8 trillion.

CAH owns and manages more than 15,000 homes for rent in seven states, including Arizona, California, Colorado, Florida, Georgia, Nevada and Texas.

http://www.housingwire.com/articles/...securitization

[ProdigyofZen]

Re: Rental securitization mania: Colony Homes jumps in

with the usual suspects . . .

remember the Ownership Society . . .

Colony American Homes to launch rental securitization

Firm hires advisers to help structure the transaction

Kerri Ann Panchuk
November 25, 2013

Securitization deals backed by rental income continue to attract market interest as more families turn to rentals over homeownership amid tighter lending standards.

Even firms not engaged in the space are rolling out initiatives, with single-family property manager, Colony American Homes (CAH), disclosing plans Monday to create a securitization deal backed by rental income.

The company will use single-family homes within its own property portfolios to support the transactions.
It’s a new venture for the single-family rental firm and arrives just as CAH announces plans to expand an existing credit facility to $1.2 billion from $500 million.

The extra proceeds from the credit line will be directed toward single-family acquisitions, with a group of banks led by JPMorgan (JPM) and Credit Suisse (CS) funding the deal.

Colony’s securitization plans follow the recent REO-to-rental securitization deal that Blackstone (BX) subsidiary, Invitation Homes, brought to market in the past month.

Not long after the deal’s announcement, KBW analysts forecasted a nearly trillion-dollar market when calculating the lingering possibilities that exist for single-family rental securitization deals.

KBW analysts put out a report, saying that when assuming a 70% LTV on the properties in such deals, a capture rate of 35% – and the addition of $40 billion in annual production over the course of six years – the REO-to-rental securitization marketplace is nearing $920 billion in potential opportunities.

This also includes an estimation of an average priced home in the $200,000-range, bringing the total value for the single-family rental sector to $2.8 trillion.

CAH owns and manages more than 15,000 homes for rent in seven states, including Arizona, California, Colorado, Florida, Georgia, Nevada and Texas.

http://www.housingwire.com/articles/...securitization

This will actually succeed because everyone needs a place to live and not having that huge debt on the consumers balance sheet is a positive for the consumer.

I do not however believe that their yields will stay high and I see a scenario where they will have to lower rents down to the ability of the renter to pay to keep the homes occupied. This due to rising unemployment and lower wages for the foreseeable future.

[don]

Re: Rental securitization mania: Colony Homes jumps in

I do not however believe that their yields will stay high and I see a scenario where they will have to lower rents down to the ability of the renter to pay to keep the homes occupied. This due to rising unemployment and lower wages for the foreseeable future.

The sweet spot is not in the yields from rents, the sweet spot is using the rental cache as the basis for new MBS with a rental twist. These will most likely be fobbed off on the usual suspects. Sound familiar?

[ProdigyofZen]

Re: Rental securitization mania: Colony Homes jumps in

The sweet spot is not in the yields from rents, the sweet spot is using the rental cache as the basis for new MBS with a rental twist. These will most likely be fobbed off on the usual suspects. Sound familiar?

Yes, I understood. I was writing from the perspective of the "investors" actually owning the MBS backed by rentals.

It is obvious that the banks and companies selling the rental backed MBS will make a good profit.

[Fox]

Re: Rental securitization mania: Colony Homes jumps in

Sound familiar?

Yup, this is more "yield" chasing that created the housing bubble.

The other side of this is that it only makes sense if home values rise. Well considering cash only and big institutional investors are the ones raising prices, this smacks of all the "Greater foolism" that started 10 years ago. Also add the fact that there is NO money in renting single family homes, it means we are dealing with some very great fools indeed.

So the question is not that they are doing this; dogs will bark after all; But who have they lined up for the bag holders this time?

[thriftyandboringinohio]

Re: Rental securitization mania: Colony Homes jumps in

... But who have they lined up for the bag holders this time?

Same as last time.
The mutual fund managers and pension fund managers will buy the rotten securities because the seller promises a high yield with little risk.
The rotten securities will come to rest in the pension accounts of lunch box Larry, Aunt Millie, and Joe six pack.
When the rotten securities inevitably under perform and default, the fund managers will protest that they should have been more honestly informed by the sellers, there was no way to see this coming.

Wall street makes huge fortunes selling them; fund managers make personal fortunes buying them; average people get reduced pensions by holding them.

It worked last time.

[Fox]

Re: Rental securitization mania: Colony Homes jumps in

It worked last time.

Well the funny thing is, is that it's not working. XD

This idea was so brain dead from day one that apparently it's already over and they are all looking to bail. That's why securitization is coming on the scene. They are desperate for bag holders.

I don't like Mendalman becuase I find his articles wordy and he's not as witty as he thinks he is, but this article is well worth the read for those interested in this latest fiasco.
The Rush for Rentals by Investors Turns Into a Run for the Exit
And be sure to read the comment at the end from someone that's "been there, done that"; for those of you that are not part of the "been there, done that" landlord crowd.

The naivety of this scheme would embarrass Marie Antoinette. The scary part I found in this article is the REIT part. My mother asked for my opinion on REITs a month ago or so. A cursory scan made me dismiss it as just another twist on a tax shelter; like the "income trust" frenzy we had up here that the government shut down. However I see now it's a Wall Street sucker play.

I think I'm going to rip a strip off my mother for even asking me about this. She should know better than to let this get through her "your kidding me" filter. She is also a "Been there, done that" landlord who also recently said she would never do it again (I was her property manager when she moved out of town btw). Lesson to be learned here everyone. Wall Street is desperate for greater fools, and the last thing you want is for your 77 year old mother to be one of them.

Stay Sharp!

[don]

Re: Rental securitization mania: Colony Homes jumps in

That's why securitization is coming on the scene.

Not among the big boys. I believe that was always the business plan.

That said, your point is well taken.

Desperation among the hedgies for high yield leads to mal-investment ventures.

[Forrest]

Re: Rental securitization mania: Colony Homes jumps in

This will actually succeed because everyone needs a place to live and not having that huge debt on the consumers balance sheet is a positive for the consumer.

I do not however believe that their yields will stay high and I see a scenario where they will have to lower rents down to the ability of the renter to pay to keep the homes occupied. This due to rising unemployment and lower wages for the foreseeable future.

+1

[Forrest]

Re: Rental securitization mania: Colony Homes jumps in

Yes, I understood. I was writing from the perspective of the "investors" actually owning the MBS backed by rentals.

It is obvious that the banks and companies selling the rental backed MBS will make a good profit.

The question then is...where are those selling the Rental MBS putting their money?

[charliebrown]

Re: Rental securitization mania: Colony Homes jumps in

yes, if rental was such a good deal colony would spin off some company own the houses and collect all the rent. Anyone with a strong balance sheet can borrow lots of money with little interest. I think they are trying to find the greater fool to dump these houses on just like the MBS of 2006.

I have noticed the REIT market weakening. Is it just a shift from REITs to bonds, since the ratio of bond yields to REIT income has tightened up? Or is there something in the REIT market that is being discovered

[Fox]

Re: Rental securitization mania: Colony Homes jumps in

Or is there something in the REIT market that is being discovered

My feeling is that the increase in interest rates since this spring removed what little and fictitious profit there was in this scheme. Also the slow down in price appreciation, which was amost exclusively created by the REITs, has revealed another flaw in it all.

So yes, something has been discovered; it's a bad freak'n idea for all the very obvious reasons it was always a bad freak'n idea. Pretty much it comes down to one of the truism of being a landlord: everyone thinks its easy money until they do it.

Home appreciation and sales have been a big support pillar of the "recovery". With this soon to be gone, I think its safe to say we will see the next leg down soon; possibly in the spring when the expected sales pick up doesn't materialize.

I wouldn't want to be in Yellen's shoes. However I've read a few impressive things about her. I think she has some surprises in store for all of us, optimist and pessimists alike.

Here's hoping anyways

[don]

Re: Rental securitization mania: Colony Homes jumps in

Following the heroin binge of the massive mortgage scam, what's left is the weak beer rentals drunk . . . .