KBRA Assigns Preliminary Ratings to Progress Residential 2019-SFR1

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Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to six classes of Progress Residential 2019-SFR1 (Progress 2019-SFR1) single-family rental pass-through certificates.

Progress 2019-SFR1 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $450.7 million loan secured by first priority mortgages on 2,391 income-producing single-family homes. The fixed-rate loan will require interest-only payments and have a five-year term. Progress 2019-SFR1 will be the tenth KBRA-rated SFR securitization issued by Progress.

The loan’s cash management structure features a “Low DSC Period” concept. If a Low DSC Period has occurred with respect to loan component E, F or G and there are insufficient available amounts to pay full or partial interest on Loan Component F and/or loan component G then the due interest on these components will be deferred and added to the respective principal balance. While such deferrals are occurring, any excess cash flow will be held in a reserve account until the cash flows improve and the DSC threshold is met for two consecutive quarters or the borrower prepays the loan in an amount causing the DSC threshold to be met.

The underlying single-family rental properties are located in or near 17 Core Based Statistical Areas (CBSAs) across nine states. The top-three CBSAs represent 32.1% of the portfolio and include Phoenix (11.1%), Orlando (10.8%), and Nashville (10.2%). The aggregate BPO value of the underlying homes was $496.2 million, yielding an LTV of 90.8%. KBRA adjusted the BPOs, which yielded an aggregate value of $469.0 million. This represents a 5.5% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 96.1%.

KBRA used its Single-Family Rental Securitization Methodology to evaluate the transaction. The methodology leverages elements of KBRA’s commercial mortgage-backed securities and residential mortgage-backed securities criteria due to the fact that the collateral underlying an SFR transaction has both commercial and residential characteristics. As the properties generate a cash flow stream from tenant rental payments, CMBS methodologies were used to determine the loan’s probability of default. To determine loss given default, KBRA assumed the underlying collateral properties would be liquidated in the residential property market.

For further details on KBRA’s analysis, please see our pre-sale report, entitled Progress Residential 2019-SFR1, which is published at www.kbra.com.

The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of final ratings that differ from the preliminary ratings.

                   
Class     Rating     Balance (USD)     Rating Action
A     AAA (sf)     $174,916,000     Preliminary
B     AA+ (sf)     $35,975,000     Preliminary
C     AA- (sf)     $27,291,000     Preliminary
D     A (sf)     $21,089,000     Preliminary
E     BBB- (sf)     $88,078,000     Preliminary
F     BB- (sf)     $32,254,000     Preliminary
G     NR     $34,735,000     N/A
H     NR     $36,400,000     N/A
           

To access ratings, reports and disclosures, click here.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

More news and information about Kroll Bond Rating Agency

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Business Wire: 20:47 GMT Monday 11th February 2019

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