DBRS Upgrades Two Classes of FREMF 2012-K22 Mortgage Trust, Series 2012-K22

DBRS Limited (DBRS) upgraded the ratings on the following classes of Multifamily Mortgage Pass-Through Certificates, Series 2012-K22 issued by FREMF 2012-K22 Mortgage Trust, Series 2012-K22:

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

DBRS Limited (DBRS) has also confirmed the ratings on the following classes:

-- 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 overall strong performance of the transaction, which has experienced stable cash flow growth since issuance. At issuance, the collateral consisted of 81 loans secured by 81 multifamily properties. As of the September 2017 remittance, 80 loans remain in the pool with an outstanding trust balance of $1,317 million. Sixty loans, representing 89.5% of the pool balance, reported YE2016 cash flow figures. Based on the reporting, the pool benefits from a healthy in-place weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.80 times (x) and 10.8%, respectively, which compares favorably with the WA DSCR and WA debt yield of 1.60x and 9.1% at issuance. The top 15 loans reported a WA YE2016 DSCR and WA debt yield of 1.81x and 10.4%, respectively, reflective of a 31.6% improvement over the DBRS issuance net cash flow figures. At issuance, 42 loans, representing 69.2% of the current pool balance, were structured with partial interest-only periods at issuance. As of the September 2017 remittance, all loans within the pool are now amortizing and ten loans (7.0% of the current pool balance) are fully defeased.

As of the September 2017 remittance, there are four loans, representing 3.9% of the current pool balance, on the servicer’s watchlist. One loan is being monitored for non-performance-related items limited to deferred maintenance, while the remaining loans are being monitored for suppressed cash flows but have reported stable occupancy rates ranging between 88.0% and 98.0%. The largest watchlisted loan is being monitored for a low DSCR due to elevated expenses; however, this loan was recently assumed and the higher reported expenses are attributable to the implementation of rebranding and marketing campaigns.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans in the transaction, as well as the Top 15 loans, in the DBRS 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 into DBRS CMBS IReports 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.

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.

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