DBRS Confirms Ratings on FREMF 2012-K19 Mortgage Trust, Series 2012-K19

DBRS Inc. (DBRS) has today confirmed all five classes of the Multifamily Mortgage Pass-Through Certificates Series 2012-K19 issued by 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 ratings confirmation reflects the stable performance of the pool since issuance, with 82 of the original 83 loans remaining in the pool as of the April 2016 remittance. The pool has experienced collateral reduction of 5.3% as a result of the payout of one loan and scheduled amortization. There are four defeased loans, representing 4.4% of the transaction balance. Most loans are reporting year-end (YE) cash flows as of YE2014 (30 loans, representing 37.5% of the pool reported at YE2015), with the bulk of the pool reporting at least a partial-year 2015 figure. Based on the respective YE figures for the underlying loans, the overall performance of the pool is strong, with a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.70 times (x) and 10.4%, respectively, compared to the issuance DSCR and debt yield of 1.40x and 8.2%, respectively. The largest 15 loans in the pool represent 40.3% of the transaction balance. Performance for those loans is healthy, with a WA DSCR of 1.57x (compared to the WA DBRS UW DSCR of 1.25x), WA debt yield of 9.7%, and WA increase in NCF since issuance of +28.2%, based on the YE2015 or annualized 2015 NCF figures, as available for each.

As of the April 2016 remittance report, there are no loans in special servicing and three loans, representing 4.5% of the pool, on the servicer’s watchlist. All three loans on the servicer’s watchlist are reporting healthy cash flow metrics and are being monitored for non-performance-related issues. The largest loan on the watchlist, Prospectus ID #4, Bronx Park East (2.7% of the pool), is being monitored for expired fire extinguisher tags, and the other two loans, Prospectus ID #21, Greentree Apartments (1.5% of the pool), and Prospectus ID #80, Summerhill Apartments (0.3% of the pool), are being monitored for recent fires at each property that damaged between ten and 16 units. Both of those loans are reporting strong cash flows as of the most recent reporting periods and the servicer reports insurance proceeds will be used for repairs over the near term at both properties.

Although overall performance of the pool is strong, there are additional risks present in a relatively high concentration of loans (16.9% of the pool balance) secured by properties in tertiary or rural locations. Additionally, the pool has a concentration of interest-only (IO) structures, with one loan (0.8% of the pool balance) IO for the entire loan term, and 38 loans (58.3% of the pool balance) with partial IO periods. The pool also has exposure to student housing, which has historically been more volatile than other multifamily properties. There are four loans (6.7% of the pool balance) secured by student housing properties, including two in the Top 15, Prospectus ID #6, Reveille Ranch in Bryan, Texas (2.3% of the pool) and Prospectus ID #10, Aspen Heights in San Marcos, Texas (2.2% of the pool). Both of those properties are performing well, with a YE2015 DSCR of 1.65x and 1.40x, respectively. The Aspen Heights property experienced a slight drop in cash flows in 2013 due to increased competition in the submarket, but cash flows have rebounded steadily over the past few years and the YE2015 NCF figure represents growth of +11.3% over the YE2014 NCF figure and growth of +6.3% over the DBRS UW NCF figure.

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

The applicable methodologies are North American CMBS Rating Methodology (March 2016) and CMBS North American Surveillance (December 2015), which can be found on our website under Methodologies.

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

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