DBRS Confirms All Classes of FREMF 2015-K51 Mortgage Trust, Series 2015-K51

DBRS Limited (DBRS) confirmed the ratings on the following classes of Multifamily Mortgage Pass-Through Certificates issued by FREMF 2015-K51 Mortgage Trust, Series 2015-K51:

-- 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 A (low) (sf)
-- Class X2-B at BBB (high) (sf)
-- Class C at BBB (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 originally consisted of 99 fixed-rate loans secured by 99 multifamily properties, and as of the October 2018 remittance, all loans remain in the pool with a collateral reduction of 1.1% since issuance as a result of scheduled amortization. In addition, two loans, representing 1.1% of the pool, are fully defeased. The DBRS weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield at issuance were 1.43 times (x) and 8.0%, respectively. Approximately 79.6% of the pool reported 2018 partial-year financials, and 95.8% of loans reported YE2017 financials. The pool is well diversified by loan size, as the largest 15 loans in the pool collectively represent 36.3% of the pool balance, with 14 of the 15 loans reporting YE2017 financials. Based on YE2017 financials, the 14 loans reported a WA net cash flow growth of 10.4% over the DBRS issuance figures, with a WA DSCR and debt yield of 1.73x and 8.8%, respectively.

There are 12 loans on the servicer’s watchlist, representing 14.7% of the current pool balance, as of the October 2018 remittance. All loans are current and have been flagged for various reasons, including declines in financial performance, affiliation or sponsorship of properties by Morgan Communities, casualty events or deferred maintenance. Three loans were placed on the watchlist for deferred maintenance; however, one loan was mistakenly flagged by the master servicer and is expected to be removed from the watchlist in the near term. One loan, Villages at Meyerland (Prospectus ID#4), sustained damage from Hurricane Harvey, and 118 down units are currently under repair. Five of the watchlisted loans — Fox Creek Estates, Henrietta Highlands, East Ridge Manor Apartments, Parkway Manor Apartments and Pittsford Garden Apartments — are affiliated with Morgan Communities. Morgan Communities and some of its affiliates are currently under investigation for fraud charges by the Federal Bureau of Investigation, and DBRS will continue to monitor this situation.

Classes X1, X2-A 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 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:

-- Prospectus ID #4 – Villages at Meyerland
-- Prospectus ID #33 – Villas at Desert Pointe
-- Prospectus ID #70 – Villas of Castle Hills

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 commercial mortgage-backed securities universe, as well as deal and loan-level commentary for all DBRS-rated transactions.

Notes:
The principal methodology is North American CMBS Surveillance Methodology, which can be found on dbrs.com under Methodologies & Criteria. 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.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

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