DBRS Confirms Ratings of FREMF 2012-K19 Mortgage Trust

DBRS Limited (DBRS) has today confirmed the ratings of FREMF 2012-K19 Mortgage Trust, Series 2012-K19, as follows:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (sf)
-- Class X1 at AAA (sf)
-- Class X2-A at AAA (sf)

All trends are Stable.

The rating confirmations reflect the continued stable performance of the transaction since issuance. The collateral consists of 83 fixed-rate loans secured by 83 multifamily properties. As of the April 2015 remittance report, the pool has a balance of approximately $1.24 billion, representing a collateral reduction of approximately 2.7% since issuance in August 2012. Overall, the loans in the pool have reported stable performance, as according to YE2014 reporting, the pool had a weighted-average debt service coverage ratio (DSCR) and weighted-average debt yield of 1.6 times (x) and 9.7%, respectively. Performance of the Top 15 loans is slightly weaker, as the loans are reporting a YE2014 weighted-average DSCR and weighted-average debt yield of 1.5x and 7.5%, respectively. However there are 12 loans in the top 15 and 89.5% of the pool are located in urban and suburban locations, benefiting from strong diverse economies.

As of the April 2015 remittance report, there are no loans on the servicer’s watchlist and no delinquent or specially serviced loans. The Briarcliff City Apartments loan (Prospectus ID#7, 2.3% of the pool balance) is fully defeased.

The Reveille Ranch loan (Prospectus ID#6, 2.3% of the pool balance) is secured by a 971-bed student housing property in Bryan, Texas. The property draws from Texas A&M University and Blinn College, which combined have an annual enrollment of over 62,800 students as of the fall 2014 semester. This loan was formerly on the servicer’s watchlist due to reporting a YE2013 DSCR of 1.08x. To improve property performance, the borrower focused on attracting international students, which improved occupancy from 77.0% at YE2013 to 91.9% at YE2014 As a result, the YE2014 DSCR improved to 1.39x and the loan has since been removed from the servicer’s watchlist. According to the December 2014 rent roll, the average rent per bed has increased to $535, from $525 as of the YE2013 rent roll. New supply in the near vicinity does not directly compete with the subject as they are considered luxury student complexes and charge a premium on rent.

The DBRS analysis included an in-depth review of the top 15 loans, which represent 41.4% of the current pool balance. Within the top 15 loans, three loans are secured by student-housing properties, which are considered non-traditional multifamily property types. Loans secured by student-housing properties historically are more volatile, as occupancy drops in the summer months and the construction of new developments can provide additional supply to a given market. These factors have been considered in DBRS’s analysis and DBRS will continue to monitor and disclose any material changes.

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 largest loans in the pool and loans on the servicer’s watchlist. The April 2015 Monthly CMBS 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 related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology are North American CMBS Rating Methodology (March 2015) 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.