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

DBRS Limited (DBRS) upgraded the following classes of the Multifamily Mortgage Pass-Through Certificates Series 2012-K19 issued by FREMF 2012-K19 Mortgage Trust, Series 2012-K19:
-- Class B to AA (high) (sf) from AA (sf)
-- Class C to AA (sf) from A (high) (sf)

In addition, DBRS confirmed the ratings 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 overall strong performance of the underlying collateral since issuance and the high defeasance concentration, with 19 loans, representing 21.4% of the pool fully defeased. The transaction’s last annual review was in April 2017, when all classes were confirmed with Stable trends. At issuance, the transaction was made up of 83 loans secured by 83 multifamily properties. As of the April 2018 remittance, there has been collateral reduction of 8.8% as a result of scheduled loan amortization and the prepayment of one loan. Based on the most recent year-end financials, the transaction had a weighted-average (WA) debt service coverage ratio (DSCR) and debt yield of 1.80 times (x) and 11.6%, respectively, compared to the WA DBRS Term DSCR and WA DBRS Debt Yield figures derived at issuance of 1.40x and 8.2%, respectively. Based on the most recent year-end financials, the Top 15 loans (excluding defeasance) reported a WA DSCR of 1.69x, compared to the WA DBRS Term DSCR of 1.25x, representing a 31.5% net cash flow growth over the DBRS figures derived at issuance.

As of the April 2018 remittance, there are eight loans on the servicer’s watchlist, representing 9.2% of the pool balance. Seven of those loans, representing 6.9% of the pool balance, were flagged for deferred maintenance. The only loan on the watchlist for performance issues, Reveille Ranch (Prospectus ID #6; 2.3% of the pool) was flagged for declining cash flow performance and low occupancy. For additional information on that loan, please see the DBRS Viewpoint platform, for which information is provided below.

Classes X1 amd 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.

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

As part of this review, DBRS has provided updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loan in the transaction:

• Prospectus ID#6 – Reveille Ranch

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.

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