Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to six classes of Progress Residential 2019-SFR4 (Progress 2019-SFR4) single-family rental pass-through certificates.
Progress 2019-SFR4 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $428.5 million loan secured by first priority mortgages on 2,205 income-producing single-family homes. The fixed-rate loan will require interest-only payments and will have a five-year term. Progress 2019-SFR4 will be the 11th KBRA-rated SFR securitization issued by Progress Residential.
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 37.3% of the portfolio and include Orlando (13.0%), Las Vegas (12.6%), and Phoenix (11.7%). The aggregate BPO value of the underlying homes was $473.5 million, yielding an LTV of 90.5%. KBRA adjusted the BPOs, which yielded an aggregate value of $448.4 million. This represents a 5.3% haircut to the nominal BPO value. The resulting LTV based on KBRAs adjusted BPO value was 95.6%.
The loans 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.
KBRA used its U.S. Single-Family Rental Securitization Methodology to evaluate the transaction. The methodology leverages elements of KBRAs 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 loans 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.
1To satisfy the U.S. risk retention requirements, the loan sponsor will retain an eligible horizontal residual interest consisting of the Class H 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.
Related Publications: (available at www.kbra.com)
- Progress Residential 2019-SFR4 Pre-Sale Report
- SFR KBRA Comparative Analytic Tool (SFR KCAT)
- Progress Residential 2019-SFR4 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.
Teena Andrade, Associate
Akshay Maheshwari, Director
Daniel Tegen, Senior Director
Nitin Bhasin, CFA, Senior Managing Director