Colony Capital LLC’s Colony American Homes Inc. completed the fifth-ever sale of bonds backed by U.S. rental homes, with a $558.5 million offering in the new market.
The company sold $291.2 million of top-rated floating-rate notes to yield 95 basis points, or 0.95 percentage point, more than a benchmark rate, said a person with knowledge of the deal, who asked not to be named because they’re not authorized to speak publicly. That was 5 basis points less than the previously tightest spread for AAA notes in such transactions, which was garnered last month in sales by both Blackstone Group LP’s Invitation Homes and American Homes 4 Rent. (AMH)
Colony’s securities carried loss protection known as credit enhancement of 47.9 percent, compared with 44 percent for the comparable part of the American Homes transaction and 52 percent for the similar portion of the Blackstone deal, the person said. The lowest ranking slice of the Colony deal priced at a spread of 335 basis points, compared with 325 basis points in the American Homes deal and 375 in the Blackstone deal, which was the largest at $993 million.
Blackstone last year became the first among the hedge funds, private-equity firms and real-estate investment trusts that expanded in the rental business amid the U.S. foreclosure crisis to tap the securitization market. Issuance now totals about $3 billion. Scottsdale, Arizona-based Colony American Homes issued $513.6 million of rental-home bonds in April in the second such deal.