DBRS Assigns Final Rating to JMHT 2010-XLII

DBRS has today assigned a final rating to the following class of Jefferies Military Housing Trust, Series 2010-XLII. The trend is Stable.

HUNTER Project Certificates Series 2010A at B (sf)

The collateral for the transaction consists of the residual cash flow interests from 12 U.S. military housing projects located at 11 bases, along with the property management and asset management fees from eight of the 12 projects. Following the initial review by DBRS, the sponsor pledged developer fees, developer overhead fees and residual interests from 15 additional military housing projects as collateral for the transaction. Nine of these projects remain in the construction phase, with targeted completion dates scheduled between December 2010 and September 2014. Given this status and the limited time for review, DBRS did not conduct analysis, or give credit to, any of these added military housing projects. The scope of the review conducted by DBRS is based on the transaction’s original collateral, outlined in the Loan Details and Structural Features section of the report.

The loan is sponsored by Hunt Companies of El Paso, Texas, who is a leader in the military privatization market, having developed over 31,000 units for the Department of Defense under the Military Housing Privatization Initiative. In addition to the $90 million loan, which is being contributed to the trust, there is also a total of $839 million in senior-securitized loans and $344 million of government-direct loans outstanding that are also secured by the leasehold interests in the 12 original projects. The senior-securitized loans and the government-direct loans are senior in priority to the transaction’s $90 million underlying loan.

The loan benefits from sponsors and property management that have significant experience with the specialized nature of the collateral and a stable source of revenue provided by the Basic Allowance for Housing (BAH) from servicmember occupants. While the loan’s collateral is deeply subordinated within each of the subject property’s payment priority waterfalls, DBRS assumed annual growth rates in BAH that are a fraction of the portfolio’s actual BAH growth rate historically. In addition, the transaction’s structure features cash traps both at the loan level and at the Grantor Trust level, which are designed to benefit the Series 2010A certificate. The Series 2010B certificate is fully subordinated to the Series 2010A note, and in the event that the loan’s DSCR is less than 1.0x, funds otherwise payable to the Series 2010B certificate will be trapped for the benefit of the Series 2010A certificate.

Notes:
All figures are in U.S. dollars unless otherwise noted.

All classes are privately placed pursuant to Rule 144A.

The applicable methodology is CMBS Rating Methodology, which can be found on our website under Methodologies.