Cerberus Scores $616M CMBS Loan on FirstKey Homes Single-Family Rental Portfolio

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Single-family rentals (SFRs) continue to ride high in the commercial mortgage-backed securities (CMBS) space as large institutional investors keep making waves in the housing market. 

Morgan Stanley just recently originated a $616.1 million, five-year, fixed-rate CMBS loan to finance a portfolio of 2,106 single-family rental properties that were acquired by FirstKey Homes in the summer, according to analysis from Kroll Bond Rating Agency (KBRA), which analyzed the deal. 

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Morgan Stanley declined to comment on the transaction.

Cerberus Capital Management — the sponsor in the deal — is the parent organization of FirstKey Homes, a housing investment and property management company that was created in 2015 and has become one of the largest owners and operators of SFR homes in the U.S.; the company has a portfolio of over 34,000 homes, more than 31,000 of which are tied up in CMBS securitizations, according to KBRA, which cited data from Sept. 30.

FirstKey assembled the houses in this portfolio over a series of purchases that happened between June 2021 and August 2021, with nearly two thirds of the portfolio purchased in July and August, per data from KBRA.

More than a third of the portfolio is located in the Atlanta, Charlotte and Phoenix metropolitan areas, KBRA indicated. The portfolio, in full, is spread out across 39 core markets and 13 states. North Carolina, Florida and Georgia are the three states that host the highest concentrations of homes from this portfolio — totaling more than 51 percent of the bundle.

Most of the rental homes in this deal have three or more bedrooms and two or more bathrooms, and the homes average about 1,969 square feet, per KBRA. 

The houses are larger in size and also a bit newer than many homes that have been included in previous CMBS securitizations. The average age of the properties is 20 years, while comparable CMBS deals have homes that average 24 years old, per KBRA. 

KBRA wrote that it “views larger, newer properties as being more marketable than older, smaller homes in the event of a default and subsequent liquidation.” 

As of Nov. 4, 151 homes in this collection were vacant and had not been leased out, and 31 properties were empty but had leases in place, with a median start date of Nov. 11. KBRA wrote that the vacancy rate for this portfolio — more than 4 percent — should move lower and normalize “upon some seasoning, if this portfolio performs similar to the other four FirstKey transactions.” The other four FirstKey Homes CMBS deals KBRA is referring to have an average vacancy rate of 2.1 percent.

A representative for Cerberus did not respond to requests for comment prior to publication. A representative for FirstKey Homes could not be reached. 

Mack Burke can be reached at mburke@commercialobserver.com.