Genesis Capital Closes Its Second Rated Residential Transitional Loan Securitization

Genesis Capital, a leading non-bank lender specializing in single- and multi-family properties, has successfully closed its second rated residential transitional loan (RTL) securitization. This significant achievement further validates the viability and attractiveness of RTL securitizations in the market, following the first rated deal completed by Toorak Capital Partners in February 2021.

RTL securitizations have gained traction among residential real estate investors seeking bridge loan capital for purchasing and preparing properties for profitable resales. The introduction of Morningstar DBRS's ratings methodology for RTLs in 2021 enabled issuers to access less expensive financing and investors to participate in attractive investment opportunities in today's uncertain interest-rate environment.

The first rated RTL securitization, completed by Toorak Capital Partners, was upsized to $240 million from $192 million in pre-marketing, demonstrating the strong investor appetite for these deals. Genesis Capital followed suit with a $500 million rated RTL securitization in April 2021, and New York Mortgage Trust came forward with a $250 million deal in May.

The rated deals provide issuers with less expensive financing and investors with an attractive investment opportunity in today's uncertain interest-rate environment. The yield on the rated deal was materially lower than that of unrated deals, further enhancing their appeal to investors.

The RTL securitization market has grown significantly since the first large deal in 2018, approaching $10 billion in estimated volume in 2022. The short supply of new housing stock has contributed to the popularity of RTLs, as real estate investors seek to purchase and prepare properties for profitable resales.

The rated deals have also influenced the volume and frequency of RTL securitizations in the market, with more issuers considering this option to access less expensive financing. The structured features of rated RTL deals, such as revolving components and rate step-ups, have made them more attractive to investors seeking predictable, short-term investments.

In conclusion, Genesis Capital's second rated RTL securitization further cements the viability and appeal of these deals in the market. The introduction of Morningstar DBRS's ratings methodology, the short supply of new housing stock, and the less expensive financing and attractive investment opportunities have all contributed to the growth and popularity of RTL securitizations. As the market continues to evolve, investors can expect more deals and further innovation in this sector.