DBRS Confirms All Classes of FREMF 2012-K17 Mortgage Trust, Series 2012-K17

DBRS, Inc. (DBRS) has today confirmed all classes of FREMF 2012-K17 Mortgage Trust, Series 2012-K17 as follows:

-- Classes A-1 at AAA (sf)
-- Classes A-2 at AAA (sf)
-- Classes X1 at AAA (sf)
-- Classes X2-A at AAA (sf)
-- Class B at A (sf)

The trends on all classes are Stable.

The pool consists of 72 fixed-rate loans secured by 76 multifamily properties. Since issuance, the pool has experienced approximately 2.9% of collateral reduction as a result of amortization. As of the January 2015 remittance, the weighted-average debt service coverage ratio (DSCR) and weighted-average Debt Yield are 1.70 times (x) and 10.3%, respectively. In comparison, the weighted-average DSCR and Debt Yield at issuance were 1.40x and 8.4%, respectively. In the last 12 months, one loan, representing 0.5% of the current pool balance, has fully defeased.

There is one loan currently on the servicer’s watchlist. Stillwater Flats (Prospectus ID#49, 0.7% of the current pool balance) is secured by a student housing complex built in 2009 and located within walking distance of the Oklahoma State University campus. The loan was added to the watchlist after the DSCR dropped below the 1.10x threshold as a result of lower effective gross income and higher operating expenses. The YE2013 DSCR was reported to be 1.01x, down from 1.37x at YE2012. Based on the annualized Q3 2014 DSCR of 0.83x, the YE2014 net cash flow is expected to reflect further decline. According to the YE2013 operating statement analysis report, the expense ratio for FY2013 was reported to be 54.0%, and the annualized expense ratio as of September 2014 was reported to be 61.0 %, representing a 16.4% increase in operating expenses since issuance. According to the September 2014 rent roll, the property was 97.0% occupied, up from an occupancy of 85.0% as of YE2013. A site inspection dated June 2014 indicated that the installation of a new fitness center and computer lab had recently been completed, which may have contributed to the elevated expense ratio. In addition to being situated in proximity to Oklahoma State University, the property is also within walking distance of a Wal-mart Supercenter and multiple bus routes.

Woodbridge Station Apartments (Prospectus ID#3, 4.9% of the current pool balance) was previously being monitored after a July 2012 fire completely destroyed 24 units in two buildings at the property. The collateral consists of a 600-unit garden apartment community located approximately 20 miles southwest of Washington D.C. According to a servicer site inspection dated August 2014, all repairs have been completed. The property was 97.0% occupied as of September 2014, up from a June 2013 occupancy of 89.8%, which suggests that there is no residual effect from the fire. The YE2013 and annualized Q3 2014 DSCRs were reported to be 1.40x and 1.54x, respectively.

The Top 15 loans have experienced healthy cash flow growth overall, with a weighted-average cash flow change of 21.5% over the DBRS underwritten cash flows. For Top 15 loans reporting Q3 2014 financials, the weighted-average DSCR is 1.76x as of the January 2015 remittance.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the remaining loans in the pool. The February 2015 Monthly Surveillance Report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com.

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

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.