DBRS Upgrades One Class and Confirms One Class of Series RR 2012-1 Trust, Series 2012-1

DBRS Limited (DBRS) upgraded the rating on the following class of the Pass-Through Certificates, Series RR 2012-1 issued by Series RR 2012-1 Trust, Series 2012-1:

-- Pass-Through Certificates, Series RR 2012-1, Class 1-A (Class 1-A Certificates) to AAA (sf) from AA (sf)

In addition, DBRS has confirmed the rating of the remaining class as follows:

-- Pass-Through Certificates, Series RR 2012-1, Class 2-A (Class 2-A Certificates) at BBB (sf)

DBRS changed the trend on the Class 2-A Certificates to Positive from Stable. The trend for the Class 1-A Certificates is Stable.

The transaction is a resecuritization collateralized by the beneficial interests in six commercial mortgage-backed security (CMBS) pass-through certificates from six Federal Home Loan Mortgage Corporation deals issued from 2010 to 2012: FREMF 2010-K8 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series 2010-K8; FREMF 2011-K701 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates Series 2011-K701; FREMF 2011-K704 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series 2011-K704; FREMF 2011-K15 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series 2011-K15; FREMF 2012-K17 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series 2012-K17; and FREMF 2012-K19 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series 2012-K19.

The ratings are dependent on the performance of the underlying transactions. As at April 2018, there are five underlying transactions remaining that contribute to the resecuritization of real estate mortgage investment conduit (Re-REMIC) structure as the FREMF 2011-K701 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates Series 2011-K701 transaction was terminated following the repayment of its outstanding balance as at December 2017. Three of the remaining underlying CMBS transactions contribute the most junior certificate to the rated Class 1-A and unrated Class 1-B Re-REMIC structure and two underlying CMBS transactions contribute the most junior certificate to the rated Class 2-A and unrated Class 2-B Re-REMIC structure. Although DBRS does not publicly rate the FREMF 2011-K704 Mortgage Trust, Multifamily Mortgage Pass-Through Certificates, Series 2011-K704 transaction, a detailed level of analysis was performed using the CRE Finance Council Investor Reporting Package files from the latest remittance period.

The rating upgrade for the Class 1-A certificates and the Positive trend assignment for the Class 2-A certificates reflect the increased credit support to the underlying transactions and the generally strong performance of the collateral properties in each deal. As at the April 2018 remittance for the FREMF 2011-K704 transaction (not rated by DBRS), the pool has experienced a collateral reduction of 30.1% since issuance and benefits from defeasance collateral totalling 80.4% of the current pool balance with all of the remaining loans scheduled to mature by October 2018.

Excluding defeasance collateral, the weighted-average (WA) debt service coverage ratios (DSCRs) for these underlying transactions range from 1.76 times (x) to 2.23x. The WA debt yields range from 11.8% to 14.7%. Additionally, WA net cash flow growth since issuance is significant, ranging from 32.3% to 95.6%.

DBRS analyzed the underlying certificates based on the performance of the underlying loans and the transaction structure and applied various stresses, including cash flow haircuts, to all loans in each pool. This stressed cash flow was then used to determine the DBRS probability of default based on the DSCR and the loss given default based on the debt yield for each loan.

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

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.

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