DBRS Confirms Jefferies Military Housing Trust, Series 2010-XLII

DBRS, Inc. (DBRS) has today confirmed the rating on the Pass-Through Certificates, Series 2010-XLII, HUNTER Project Certificates Series 2010A issued by Jefferies Military Housing Trust, Series 2010-XLII at B (sf) with a Stable trend.

This transaction consists of one $90 million loan collateralized by the residual cash flow interests from 12 U.S. military housing projects located on 11 bases in ten states (the original collateral). The sponsor, Hunt Companies, Inc. (Hunt), also pledged collateral in distribution rights and/or development fees for an additional 15 projects as collateral for the loan after DBRS’s initial review of the transaction. The loan was originated in 2010 with scheduled maturity in October 2030 and a final maturity in October 2045. Following an initial interest-only period of five years, the loan began amortizing in November 2015. As of the July 2016 remittance, the loan had an outstanding balance of $89.8 million.

The rating confirmation reflects the stable performance of the transaction with a trailing 12-month (T-12) average debt service coverage ratio (DSCR) of 1.79 times (x) for the trust debt at July 2016. Over the past year, the T-12 average DSCR has hovered between 1.70x and 1.82x with cash flows holding relatively steady for the last year. These figures compare well with the DSCR of 1.29x sized by DBRS at issuance based on the cash flow assumptions in a base-case scenario that included a 1.0% annual growth rate for expenses and basic allowance for housing (BAH) income over the life of the loan. DBRS received updated BAH figures for nine of the 12 projects in the original collateral set. For those nine projects, the weighted-average (WA) BAH per unit figure was $1,426, comparing well with the WA BAH of $1,241 for those nine projects at issuance and implying annual growth well above that in the DBRS base-case scenario. As of the July 2016 rent rolls received for those nine properties, the WA occupancy rate was healthy at 95.4% with a range of 91.3% to 97.4%.

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

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

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.