DBRS Confirms All Classes of FREMF 2012-K22 Mortgage Trust, Series 2012-K22

DBRS Limited (DBRS) confirmed the ratings on the Multifamily Mortgage Pass-Through Certificates, Series 2012-K22 issued by FREMF 2012-K22 Mortgage Trust, Series 2012-K22 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 at AA (sf)
-- Class C at A (high) (sf)

All trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction. The transaction closed in December 2012, with 81 loans secured by 81 properties and was last reviewed in September 2017, when two classes were upgraded and the remaining classes were confirmed with Stable trends. As of the August 2018 remittance, 80 of the original 81 loans remain in the pool with a current outstanding trust balance of $1,291 million, representing a collateral reduction of 8.4% due to loan repayment and scheduled amortization. Based on the most recent year-end (YE) figures, the pool benefits from a healthy weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.65 times (x) and 9.9%, respectively, with 64 loans (87.8% of the pool balance) reporting YE2017 financials. The top 15 loans reported a WA DSCR and WA debt yield of 1.78x and 10.8%, respectively, at YE2017, representing a 31.2% improvement over the DBRS issuance net cash flow figures. All loans within the pool are amortizing and 13 loans (9.6% of the current pool balance) are fully defeased.

As of the August 2018 remittance, there are two loans, representing 2.3% of the pool balance, on the servicer’s watchlist. One loan (Peppermill Place Apartments – Prospectus ID#29) is being monitored for a non-performance related issue due to fire damage for which repairs were scheduled to be complete by October 2018, while the other loan (Vista Ridge Apartments – Prospectus ID#36) is being monitored for a low DSCR. Vista Ridge Apartments is being monitored for a low DSCR, driven by expense increases related to repairs and maintenance costs and professional and administrative fees. Apart of efforts to redevelop the area, the borrower has been evicting tenants, improving the units and re-leasing at higher rents. The increased expenses are expected to be non-recurring, with cash flows stabilizing once the repairs are complete.

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 applicable reference obligation 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 loans in the transaction:

-- Peppermill Place Apartments (Prospectus ID #29, 1.2% of pool)
-- Vista Ridge Apartments (Prospectus ID #36, 1.1% of pool)

For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrs.com. The platform includes loan level-data for the entire commercial mortgage-backed securities (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.

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.