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

DBRS Limited (DBRS) confirmed all ratings on the 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 to AA (sf)

All trends are Stable.

These rating confirmations, along with the upgrade to the Class B certificates at the last review of this transaction by DBRS in August 2017, reflect the overall strong performance of the transaction since issuance. The collateral consists of 74 fixed-rate loans secured by 78 multifamily properties. As of the February 2018 remittance, there has been a collateral reduction of 8.5% since issuance, with 74 of the original loans remaining in the pool and a current trust balance of $1,108 million. Thirteen loans, representing 12.4% of the pool, are fully defeased.

Excluding defeasance, 59 loans (85.1% of the pool) have reported Q3 2017 net cash flow (NCF) figures or YE2017 figures, while 60 loans (85.5% of the pool) reported YE2016 NCF figures. Based on the 2017 NCF reporting, the transaction had a weighted-average (WA) debt service coverage ratio (DSCR) of 1.58 times (x), compared to the WA DBRS Term DSCR of 1.39x at issuance. The WA in-place debt yield as based on the YE2016 NCF figures is 11.4%, compared to the WA DBRS Debt Yield of 8.5% at issuance. The 14 largest non-defeased loans reported a WA YE2016 DSCR of 1.62x, compared to 1.70x at YE2015, and the WA DBRS Term DSCR of 1.34x at issuance. As of the most recent reporting available for each loan, the WA DSCR for the top 14 non-defeased loans is 1.79x, representing a WA NCF growth of 2.9% year over year and WA NCF growth of 72.4% over the DBRS Term NCF figure derived at issuance.

Two small loans, combing for 0.8% of the pool, are on the servicer’s watchlist and uncharacteristic of a FREMF transaction, one loan, Red Mile Village Student Apartments (Prospectus ID #26, 1.5% of the current pool balance), is in special servicing. That loan is secured by a student housing property located in Lexington, Kentucky, within half a mile of the University of Kentucky campus. The loan was previously monitored on the servicer’s watchlist for deferred maintenance and occupancy-driven cash flow declines before transferring to the special servicer in August 2017 for payment default. The August 2017 appraisal obtained by the Special Servicer valued the property at $17.9 million, down from $24.8 million at issuance, but relatively in line with the trust’s exposure of approximately $18.0 million as of the February 2018 remittance.

Classes X1 and X2-A 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.

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the specially serviced loan in the transaction.
For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes issuer and servicer data for the entire CMBS universe, as well as deal and loan-level commentary for all DBRS rated transactions.

Notes:
All figures are in U.S. dollars unless otherwise noted.

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.