DBRS Confirms Ratings on FREMF 2017-K61 Mortgage Trust, Series 2017-K61

DBRS Limited (DBRS) confirmed the ratings on the Multifamily Mortgage Pass-Through Certificates, Series 2017-K61 issued by FREMF 2017-K61 Mortgage Trust, Series 2017-K61 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 XAM at AA (low) (sf)
-- Class A-M at A (high) (sf)
-- Class B at BBB (high) (sf)
-- Class X2-B at BBB (sf)
-- Class C at BBB (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall performance of the transaction, which has remained in line with DBRS’s expectations since issuance. The collateral consists of 69 fixed-rate loans secured by 69 multifamily properties. As of the December 2017 remittance, there has been a collateral reduction of 0.2% since issuance as a result of scheduled amortization. All loans remain in the pool. The DBRS weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield at issuance were 1.39 times (x) and 7.5%, respectively. The largest 15 loans in the pool collectively represent 52.3% of the transaction balance, and based on partial-year 2017 financials, these loans are reporting annualized WA net cash flow (NCF) growth of 6.0% over the DBRS NCF figures, with a WA DSCR and debt yield of 1.44x and 8.7%, respectively.

There are eight loans on the servicer’s watchlist, representing 10.3% of the current pool balance, as of the December 2017 remittance. All loans are current and have been flagged for various reasons, including declines in financial performance, casualty events or deferred maintenance. The largest loan on the watchlist, Alta Cobb Hill (Prospectus ID#7), represents 3.3% of the current pool balance and was added to the watchlist because of hail damage sustained in March 2017. According to the servicer, insurance proceeds have been advanced to the borrower and property performance has remained stable, as the September 2017 occupancy rate was reported at 94.7%, remaining in line with issuance levels. In addition, the loan is reporting a Q3 2017 annualized DSCR of 1.35x compared with the DBRS Term DSCR of 1.19x. DBRS is awaiting an update from the servicer regarding the nature and status of the repairs to the property.

Classes X1, X2-A, XAM and X2-B are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated reference tranche adjusted upward by one notch if senior in the waterfall.

All ratings will be subject to ongoing surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

DBRS has provided updated loan-level commentary and analysis for the pivotal watchlisted loans in the transaction in the DBRS Viewpoint 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 Viewpoint at www.viewpoint.dbrs.com.

Notes:
The principal methodology is CMBS North American Surveillance, which can be found on dbrs.com under Methodologies. For a list of the Structured Finance related methodologies that may be used during the rating process, please see the DBRS Global Structured Finance Related Methodologies document on www.dbrs.com. Please note that not every related methodology listed under a principal Structured Finance asset class methodology may be used to rate or monitor an individual structured finance or debt obligation.

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 under Related Documents or by contacting us at info@dbrs.com.

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 for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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