DBRS Finalizes Provisional Ratings on FREMF 2019-K93 Mortgage Trust, Series 2019-K93

DBRS, Inc. (DBRS) finalized provisional ratings on the following classes of Multifamily Mortgage Pass-Through Certificates, Series 2019-K93 issued by FREMF 2019-K93 Mortgage Trust, Series 2019-K93:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class X1 at AAA (sf)
-- Class X2-A at AAA (sf)
-- Class XAM at AA (high) (sf)
-- Class A-M at AA (sf)
-- Class X2-B at A (low) (sf)
-- Class B at A (low) (sf)
-- Class C at BBB (high) (sf)

All trends are Stable.

The Class X1, X2-A, X2-B and XAM balances are notional.

The collateral consists of 59 fixed-rate loans secured by 59 multifamily and manufactured housing community (MHC) properties and one independent/assisted-living property. Two loans are cross-collateralized and cross-defaulted; DBRS incorporates these loans as a single portfolio, resulting in a modified loan count of 58, and the loan number referenced within the related presale report reflects this total. All loans within the transaction are structured with ten-year loan terms with the exception of one loan, Rancho San Joaquin Apartments, which is structured with a 10.5-year loan term. Loans with more than a ten-year term are typically part of Freddie Mac’s pre-stabilization lending program. The transaction is a sequential-pay pass-through structure. The conduit pool was analyzed to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity. When the cut-off loan balances were measured against the DBRS Stabilized Net Cash Flow and their respective actual constants, 18 loans, representing 19.5% of the trust balance, had a DBRS Term Debt Service Coverage Ratio (DSCR) below 1.15 times (x), a threshold indicative of a higher likelihood of mid-term default.

The deal has favorable credit metrics as evidenced by an Issuance weighted-average (WA) loan-to-value (LTV) ratio and Balloon WA LTV of 66.1% and 61.5%, respectively. Only eight loans, comprising 14.4% of the trust balance, have Issuance LTVs of 75.0% or higher. In addition, the WA DBRS Term DSCR is reasonable at 1.41x. Additionally, loans in the transaction benefit from experienced and financially strong borrowers compared with typical commercial mortgage-backed security multifamily loans. Many of the borrowers are repeat clients of Freddie Mac. Two loans, representing 14.2% of the pool, exhibit Above Average property quality and five loans, representing 12.6% of the pool, exhibit Average (+) property quality. Five of these loans are in the top 15.

Thirteen loans, representing 14.0% of the pool, are secured by properties located in markets ranked one or two, which are considered more rural or tertiary in nature, including two of the top 15 loans (Ridge at Clear Creek and Residence at Midland). Furthermore, only three loans, representing 5.0% of the pool, are secured by properties located in markets ranked six, which are typically lighter urban in nature. Only four loans, representing 5.7% of the pool, are secured by properties located in markets ranked seven while just two loans, comprising 0.6% of the pool, are secured by properties in markets ranked eight. Markets ranked seven and eight are generally denser urban in nature and benefit from greater liquidity, even during times of economic stress.

Thirteen loans, representing 38.4% of the pool and including six of the top 15 loans in the pool, are structured with full-term interest-only (IO) payments. An additional 38 loans, comprising 53.5% of the pool, have remaining partial-IO periods ranging from 24 months to 72 months.

Lastly, the pool is concentrated by property type as multifamily properties represent 81.5% of the collateral. Seven loans, representing 18.5% of the pool, are secured by non-traditional property types (i.e., MHC, student housing, cooperatives, age-restricted housing and assisted living). Two of the top ten loans, Del Tura Country Club (9.8% of the trust balance) and Ridge at Clear Creek (3.1% of the trust balance), are securitized by MHC and student-housing properties, respectively.

Classes X1, X2-A, X2-B and XAM are 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 are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed or discontinued by DBRS.

For supporting data and more information on this transaction, please log into www.viewpoint.dbrs.com.

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

With regard to due diligence services, DBRS was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS’s methodology, DBRS used the data file outlined in the independent accountant’s report in its analysis to determine the ratings referenced herein.

The principal methodology is North American CMBS Multi-borrower Rating Methodology, which can be found on www.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, which can be found on www.dbrs.com in the Commentary tab under Regulatory Affairs. 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 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. Please note a sensitivity analysis is not performed for CMBS bonds rated CCC or lower. The DBRS long-term rating scale definition indicates that ratings of CCC or lower are assigned when the bond is highly likely to default or default is imminent, thereby prevailing over a sensitivity analysis.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

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

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