A securitisation, a private placement, completed by Systima Capital Management for a portfolio of almost 1,300 subsidised flats, underscores the potential for utilising the Commercial Mortgage-Backed Securities (CMBS) market in affordable housing transactions. Systima closed the $153 million tax-exempt affordable housing bond transaction through the Public Finance Authority. This transaction was secured by a pool of loans on seven properties spanning five states, including California, Georgia, Florida, Colorado and Texas.
The bonds, which received a Moody's rating of Aa1 and an S&P rating of AA+, were in high demand from institutional investors and were fully subscribed within 15 minutes of pricing. This demonstrates the market's continued interest in secure, tax-exempt investment products, particularly in an environment of volatile market reactions to inflation and interest rates. The high demand for these specific bonds highlights the attractiveness of investing in the affordable housing sector, especially when supported by robust financial structures such as CMBS.
Morgan Stanley acted as the lead underwriter for this transaction. The deal is the largest tax-exempt, privately placed CMBS transaction rated by Moody's in the last 20 years. The underlying loans were originated in accordance with Federal Housing Administration (FHA) lending guidelines, funded by private lenders, and insured by the FHA under the FHA Section 223(f) Programme.
Systima Capital Management acted as the primary sponsor of the transaction. For bondholders, FHA backing provides an additional layer of security, which, combined with the stable nature of the affordable housing market, results in an attractive investment opportunity. The transaction therefore includes multiple layers of risk hedging and professional management, which together contributed to its high market acceptance.
According to sources within Systima Capital Management, this transaction demonstrates the maturation of the housing market in the public finance sector. It was noted that similar deals could become more frequent in the 2020s as the capital market for affordable housing financing continues to evolve. This indicates a growing trend towards using innovative financing instruments to address the need for affordable housing.
- —Financing volume: $153 million
- —Number of housing units: approximately 1,300
- —Rating: Moody's Aa1, S&P AA+
- —Geographical distribution: California, Georgia, Florida, Colorado, Texas
