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32 SFR IN 2017: WHAT FIZZLED, WHAT SIZZLED By Tim Reilly As we near the end of 2017, it's worth looking back at what has become a very eventful year for the single-family rental (SFR) market. We began the year with certain expectations of what would provide positive momentum for the industry, but the market had other ideas and surprises in mind. Some components of the market met headwinds, while others provided unexpected momentum going forward. Fix and Flip: Heralded as the "next big thing" for the emerging SFR asset class, fix and flip didn't fully materialize as a driver of securitiza- tions. Although market conditions remain ripe, aggregation of sufficient fix-and-flip assets to generate securitizations proved elusive. Going forward, however, the number of new entrants needing liquidity will grow, laying the ground- work and potential need and demand for further evolution of a "fix-and-flip securitization." Multiborrower Securitizations: Deals didn't materialize as market participants had antici- pated. Indeed, the excitement surrounding two key sponsors, who came to market in 2015 with two of the first multiborrower securitizations, hasn't generated the vibrant market that was expected. One explanation may be the difficulty of effectively finding economies of scale for their operating platforms as both firms have exited the multiborrower lending space. e complexity of dealing with multiple borrowers with varying lending requirements and borrower needs make it more difficult to aggregate borrowers into a like-kind securitization pool. With no immedi- ate takeout program offered by the GSEs for this "tweener" product (i.e., not commercial and not residential), regional banks and credit unions continued to lend in accordance with existing GSE guidelines. As the GSEs have entered the SFR market, the evolution of the multiborrower SFR securitization may come to fruition as the GSE involvement may act as an attractive SFR secondary market vehicle for many more banks and lending institutions. On the flip side, the market was energized by several factors: GSE Engagement: e single-borrower SFR space saw continued positive activity, under- scoring the staying power of this asset class. e showstopper was Invitation Homes, Wells Fargo, and Fannie Mae kicking off the year with a $1 billion securitization. is significantly boosted the legitimacy and the prospect of alter- native financing channels for an asset class that previously relied on private-label market partici- pants. Many anticipate additional future GSE activity based upon market reception to this deal, without discounting the positive impact that the private institutions have played in growing the SFR single-borrower space. Mergers and Consolidations: e market experienced a number of mergers and consolida- tions—providing much-needed economies of scale. It underscores that we are reaching a level of maturation with institutions developing their backroom operations so as to be able to manage tens of thousands of properties spread through- out various metropolitan statistical areas. Key transactions this year include the Tricon acquisi- tion of Silver Bay, Colony acquiring properties from GI Partners, and the proposed merger of equals Invitation Homes and Colony Starwood. New Market Participants: is year saw many new midsize and larger street lenders enter the SFR space. is is particularly exciting for the market as it underscores the strength, confidence, and positive momentum for future securitizations. ese additional debt facilities created newer private money and institutional investors who funded market participants who did not exist prior to the beginning of 2017. In retrospect, 2017 may end up being the tipping point for the continued expansion of the SFR market. We're looking forward to being part of it. Tim Reilly is President of Green River Capital, a wholly owned subsidiary of Clayton Holdings LLC. Clayton Holdings is a wholly owned subsid- iary of Radian Group Inc. (N YSE: RDN). SPONSORED CONTENT "In retrospect, 2017 may end up being the tipping point for the continued expansion of the SFR market."

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