DBRS Confirms Jefferies Military Housing Trust, Series 2010-XLII

DBRS Limited (DBRS) confirmed the following class of Jefferies Military Housing Trust, Series 2010-XLII, with a Stable trend:

-- Pass-Through Certificates, Series 2010-XLII, HUNTER Project Certificates Series 2010A at B (sf)

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 (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 final maturity in October 2045. Following an initial interest-only (IO) period of five years, the loan began amortizing in November 2015. As of the July 2017 remittance, the loan had an outstanding balance of $89.5 million.

The rating confirmation reflects the stable performance of the transaction, with a trailing 12 months (TTM) average DSCR of 1.89 times (x) for the trust debt at July 2017. Over the past year, the TTM average DSCR has hovered between 1.74x and 1.89x, with cash flows holding relatively steady for the last year. These figures compare well with the 1.29x DSCR analyzed 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 BAH per unit figure was $1,405, comparing well with the weighted-average 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 2017 rent rolls received for those nine properties, the weighted-average occupancy rate was healthy, at 94.5% with a range of 90.0% and 97.3%.

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 methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies.

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

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.