DBRS Confirms Rating of Jefferies Military Housing Trust, Series 2010-XLII

DBRS Limited (DBRS) confirmed the following class of Jefferies Military Housing Trust, Series 2010-XLII:

-- Pass-Through Certificates, Series 2010-XLII, HUNTER Project Certificates Series 2010A at B (sf)

The trend is Stable.

This transaction consists of one loan collateralized by the residual cash flow interests from 12 U.S. military housing projects located on 11 bases in ten states (the Original Collateral). The sponsor, Hunt Companies, also pledged collateral in distribution rights and/or development fees for an additional 15 projects as collateral for the loan after DBRS’s initial review of the transaction. The loan was originated in 2010, with scheduled maturity in October 2030 and final maturity in October 2045. Following an initial interest-only period of five years, the loan began amortizing in November 2015. As of the July 2019 remittance, the loan had an outstanding balance of $88.8 million.

The rating confirmation reflects the stable performance of the transaction, which reported a trailing 12 months (T-12) ending July 2019 average debt service coverage ratio (DSCR) of 1.83 times (x) for the senior debt. Over the past year, the T-12 average DSCR has hovered between 1.17x and 2.41x, with cash flows holding relatively steady for the last year. These reported DSCR figures consider revenues from the additional pledged collateral, which DBRS did not give credit to at issuance. The DBRS Term DSCR of 1.29x is reflective of the Original Collateral, based on the cash flow assumptions in a base-case scenario that included a 1.0% annual growth rate for expenses and Basic Allowance for Housing (BAH) income over the life of the loan. DBRS received updated BAH figures for nine of the 12 projects in the Original Collateral set. For those nine projects, the weighted-average BAH per unit was $1,473, comparing well with the weighted-average of $1,241 for those nine projects at issuance and implying annual growth well above the 1.0% in the DBRS base-case scenario. As of the July 2019 rent rolls received for those nine properties, the weighted-average occupancy rate was healthy at 92.0%, ranging between 85.2% and 97.2%.

All ratings are subject to 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 the North American CMBS Surveillance 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 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. 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.

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