DBRS Upgrades Two and Confirms Four Classes of FREMF 2012-K19 Mortgage Trust, Series 2012-K19

DBRS Limited (DBRS) has today upgraded the following classes of the Multifamily Mortgage Pass-Through Certificates Series 2012-K19 issued by FREMF 2012-K19 Mortgage Trust, Series 2012-K19 as follows:

-- Class B to AA (sf) from AA (low) (sf)
-- Class C to A (high) (sf) from A (sf)

In addition, DBRS has also confirmed the rating of the remaining classes 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)

All trends are Stable.

The rating upgrades reflect the increased credit support to the bonds as a result of the strong performance of the transaction and the prepayment of one loan. As of the April 2017 remittance, there has been a collateral reduction of 7.0% since issuance, with 82 of the original 83 loans outstanding, totalling a current trust balance of $1.2 billion. Since issuance, seven loans, representing 8.2% of the pool balance, have been fully defeased. Based on the most recent year-end (YE) reporting for the loans, the pool reported a weighted-average (WA) debt service coverage ratio (DSCR) of 1.83 times (x) and a WA debt yield of 11.2%, which are improvements over the DBRS issuance figures of 1.33x and 8.0%, respectively. The largest 15 loans in the pool represent 42.1% of the transaction balance. Excluding the two defeased loans, performance of the top 15 loans is healthy, with a WA DSCR of 1.66x (compared to the WA DBRS Issuance DSCR of 1.26x) and a WA debt yield of 10.3%. Based on YE2016 or annualized 2016 reporting for these loans, there has been WA net cash flow growth of 32.9% over the DBRS issuance figures. As of April 2017, 44 loans, representing 49.3% of the pool, are reporting YE2016 cash flows, with the bulk of the pool reporting at least a partial-year 2016 figure.

As of the April 2017 remittance, there are seven loans on the servicer’s watchlist, representing 10.9% of the pool balance. Four loans were flagged for non-performance-related reasons limited to deferred maintenance. One loan was flagged due to a fire; however, insurance proceeds have been received and 20% of the repairs have been completed as of February 2017, with repairs to the remaining affected units underway. Of the remaining two loans, one was flagged due to an occupancy decline while the other loan reported a below-threshold YE2016 DSCR, as a result of a decrease in effective gross income and an increase in total operating expenses.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted and specially serviced loan, as well as for the largest 15 loans in the pool, in the DBRS commercial mortgage-backed securities (CMBS) IReports platform. Registration is free. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please register or log at www.ireports.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.

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

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.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.