DBRS Confirms All Classes of FREMF 2012-K18 Mortgage Trust, Series 2012-K18

DBRS Limited (DBRS) has today confirmed all classes of Multifamily Mortgage Pass-Through Certificates Series 2012-K18 issued by FREMF 2012-K18 Mortgage Trust, Series 2012-K18 as follows:

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

The trend for Class B has been changed to Positive. Trends for remaining classes are Stable.

The rating confirmations and trend change reflect the overall strong performance of the pool’s underlying collateral since issuance. The collateral consists of 74 fixed-rate loans secured by 78 multifamily properties. As of the January 2017 remittance, the transaction has experienced collateral reduction of 6.5% since issuance as a result of scheduled loan amortization and the prepayment of one loan since issuance (Prospectus ID#53, Aegis of Bothell), with an aggregate outstanding principal balance of $1.13 billion. According to most recent reporting for each loan (YE2015 or annualized quarterly 2016 financial reporting), the transaction has a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.81 times (x) and 10.3%, respectively. In comparison, the WA DBRS DSCR and the WA DBRS debt yield at issuance were 1.39x and 8.5%, respectively. The largest 15 loans in the pool have experienced a WA positive cash flow growth since issuance of 35.6% over the DBRS issuance figures. The transaction also benefits from defeasance collateral as seven loans, representing 8.5% of the current pool balance, are fully defeased.

There are currently two loans on the servicer’s watchlist, representing 2.2% of the pool balance. Red Mile Village Student Apartments (Prospectus ID#26; 1.70% of the pool balance) has been flagged for a below threshold DSCR while the second loan was flagged for deferred maintenance items.

DBRS has provided updated loan-level commentary and analysis for the Red Mile Village Student Apartments loan, as well as for the largest 15 loans in the pool, in the DBRS CMBS IReports platform. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please log into DBRS CMBS IReports at www.ireports.dbrs.com.

The rating assigned to Class B differs from the higher rating implied by the Large Pool Multi-borrower Parameters. DBRS considers this difference to be a material deviation from the methodology and, in this case, the rating reflects the sustainability of loan performance trends not demonstrated. The improvement in performance of the underlying collateral to date is reflected with the aforementioned trend change to Class B.

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 principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.

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