KBRA Assigns Preliminary Ratings to Progress Residential 2020-SFR1
NEW YORK--(BUSINESS WIRE)--Mar 2, 2020--
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to seven classes of Progress Residential 2020-SFR1 (Progress 2020-SFR1) single-family rental pass-through certificates.
Progress 2020-SFR1 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $513.0 million loan secured by first priority mortgages on 2,317 income-producing single-family homes. The fixed-rate loan will require interest-only payments and will have a five-year term. The subject will be the 12 th KBRA-rated SFR securitization issued by Progress Residential.
The underlying single-family rental properties are located in or near 18 Core Based Statistical Areas (CBSAs) across nine states. The top-three CBSAs represent 30.0% of the portfolio and include Charlotte (10.8%), Phoenix (10.7%), and Dallas (8.5%). The aggregate BPO value of the underlying homes was $540.0 million, yielding an LTV of 95.0%. KBRA adjusted the BPOs, which yielded an aggregate value of $494.7 million. This represents an 8.4% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 103.7%.
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, G, or H and there are insufficient available amounts to pay full or partial interest on loan component F, and/or loan component G, and/or loan component H then the interest due after paying lesser of 4.5% and the respective pass through rate 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.
KBRA used its U.S. 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.
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.
1 To satisfy the U.S. risk retention requirements, the loan sponsor will retain an “eligible horizontal residual interest” consisting of the Class I certificates, representing at least 5.0% of the fair value of all non-residual interests issued by the issuer on the closing date.
To access ratings, reports and disclosures, click here.
- Progress Residential 2020-SFR1 Pre-Sale Report
- SFR KBRA Comparative Analytic Tool (SFR KCAT)
- Progress Residential 2020-SFR1 Representations & Warranties Disclosure
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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. KBRA is also 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.
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Johnson Ji, Senior Analyst
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Anshul Manglani, Associate
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Akshay Maheshwari, Director
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Daniel Tegen, Senior Director
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Michele Patterson, Managing Director
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KEYWORD: NEW YORK UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: PROFESSIONAL SERVICES FINANCE
SOURCE: Kroll Bond Rating Agency
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PUB: 03/02/2020 12:08 PM/DISC: 03/02/2020 12:08 PM