Enter Wall Street with StreetInsider Premium. Request your one-week free trial here.
NEW YORK – (BUSINESS WIRE) – Kroll Bond Rating Agency (KBRA) is issuing preliminary ratings for eight classes of Progress Residential 2021-SFR10 (Progress 2021-SFR10) pass-through certificates for single-family homes.
Progress 2021-SFR10 is a single-family home loan securitization (SFR) supported by a loan of 823.5 million. The fixed rate loan requires principal and interest payments and has a term of seven years. The subject of the transaction is the 18th KBRA-rated securitization issued by Progress Residential.
The underlying single-family homes are located in or near 39 Core Based Statistical Areas (CBSAs) in 16 states. The top 3 CBSAs represent 38.4% of the portfolio and include Atlanta (21.2%), Memphis (8.7%) and Charlotte (8.5%). The aggregate BPO value of the underlying houses is $ 827.6 million, which translates into a 99.5% LTV, the highest LTV among any KBRA-rated SFR securitisations issued to date. KBRA adjusted the BPOs for a total of $ 786.2 million. This corresponds to a haircut of 5.0% on the nominal BPO value. The resulting LTV based on the adjusted BPO of KBRA was 104.7%.
Progress 2021-SFR10 includes a voluntary substitution function that enables the issuer to replace up to a maximum of 5.0% of the underlying residential properties in the underlying portfolio according to the number on the reporting date; provided that this maximum amount can be increased by up to 35.0% of the underlying apartments by the number of properties if a rating agency confirmation (RAC) is received from KBRA of such an increase.
The sponsor has the right to release real estate without paying the loan balance in advance or paying the trust any income maintenance or an additional release premium. Exercising the Excessive Collateral Release (ECR) function is subject to certain conditions being met, including, but not limited to: obtaining updated BPOs for 100% of the collateral properties; the loan-to-value ratio (LTV) (excluding credit component I) must not exceed 89.5% for the first ECR and 87.5% for each additional ECR based on the updated BPOs; the LTV for each credit component must not exceed the LTV on the closing date of the securitization; and certain performance tests must be passed. The use of the function is also subject to the KBRA RAC.
KBRA used its US single family home securitization method to evaluate the transaction. Due to the fact that the collateral underlying an SFR transaction has both commercial and personal characteristics, the method utilizes elements of KBRA’s criteria for commercial mortgage-backed securities and residential mortgage-backed securities. Since the properties generate a cash flow from rent payments from tenants, CMBS methods were used to determine the probability of default of the loan. To determine the loss on default, KBRA assumed that the underlying secured property would be liquidated in the residential property market.
Click here to view the report. To access reviews and relevant documents, click here.
Learn more about key credit considerations, sensitivity research that takes into account what factors may affect those credit ratings and how they could lead to an upgrade or downgrade, and ESG factors (if they are a material factor in changing creditworthiness or the rating outlook). ) can be found in the full assessment report above.
A description of all the materially significant sources used in establishing the credit rating and information about the methodology (s) (including any material models and sensitivity analyzes of the relevant key assumptions for the rating, if any) that were used in determining the credit rating , are available on the information disclosure form (s) located here.
Information on the meaning of the individual assessment categories can be found here.
Further information on this rating measure can be found in the information disclosure forms mentioned above. For more information on KBRA policies, methods, rating scales and indications, please visit www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered as an NRSRO with the Securities and Exchange Commission. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered with the UK Financial Conduct Authority as a CRA under the temporary registration system. In addition, KBRA has been named by the Ontario Securities Commission as the designated rating organization for issuers of asset-backed securities for the submission of a short prospectus or shelf prospectus. KBRA is also recognized as a credit rating provider by the National Association of Insurance Commissioners.
Richard Marrano, Associate Director (Lead Analyst)
+1 (646) 731-1266
Anshul Manglani, deputy director
+1 (646) 731-2366
Akshay Maheshwari, Senior Director
+1 (646) 731-2394
Fred Perreten, Senior Director
+1 (646) 731-2454
Nitin Bhasin, CFA, Senior Managing Director (Chairman of the Evaluation Committee)
+1 (646) 731-2334
Contact to business development
Michele Patterson, General Manager
+1 (646) 731-2397
Source: Kroll Bond Rating Agency