DBRS Confirms All Classes of HFX Funding 2017-1

DBRS Limited (DBRS) confirmed all classes of the Notes issued by HFX Funding 2017-1, as listed below:

-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)

All trends are Stable.

The transaction currently consists of 11 performing loans, secured by traditional commercial real estate properties with a combined principal balance of $170.9 million, which has been funded since the transaction closed in October 2017. For this review, DBRS constructed a worst-case pool based on concentration limits and eligibility requirements for each rating confirmation event, as defined in the Indenture, up to the maximum transaction balance of $300.0 million. The trust is expected to reach its fully funded balance by February 2020 as outlined in the funding period extension agreement.

DBRS is required to analyze newly funded loans when the pool reaches 25%, 50% and 85% funding to ensure the underlying collateral meets the Target Enhancements set forth by the loan documents. In May 2019, the 50% threshold was met as four additional loans, with a collective principal balance of $45.1 million, were funded to the trust. As of the August 2019 remittance, an additional loan of $20.0 million secured by 365 Passaic Street, was funded to the trust, bringing the total trust balance to $170.9 million. The transaction pays sequentially after the trust reaches its fully funded balance. All loans are secured by cash flowing assets with five- to seven-year terms. Seven loans, representing 38.0% of the maximum trust balance, reported trailing 12-month March 2019 financials and based on that reporting, the loans had a weighted-average (WA) DSCR of 1.73 times (x) and a WA debt yield of 9.6%, compared with the DBRS Term DSCR of 1.43x and debt yield of 8.0%.

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

DBRS provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:

-- Khoshbin’s Landing (7.4% of the max pool balance)
-- Kenmore Apartments (5.8% of the max pool balance)
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 most outstanding CMBS transactions (including non-DBRS rated), as well as loan-level and transaction-level commentary for most DBRS-rated and -monitored transactions.

DBRS notes that the above press release was amended on April 1, 2020, to add a sensitivity analysis note. The amendment was minor and would not impact the understanding of the reader

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

The principal methodology is 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.

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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