DBRS Morningstar Finalizes Ratings on Progress Residential 2021-SFR2 Trust

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following Single-Family Rental Pass-Through Certificates (the Certificates) issued by Progress Residential 2021-SFR2 Trust (PROG 2021-SFR2):

-- $354.1 million Class A at AAA (sf)
-- $91.1 million Class B at AAA (sf)
-- $46.9 million Class C at AA (high) (sf)
-- $54.7 million Class D at A (high) (sf)
-- $96.9 million Class E-1 at BBB (high) (sf)
-- $70.8 million Class E-2 at BBB (low) (sf)
-- $106.2 million Class F at BB (low) (sf)
-- $47.9 million Class G at B (low) (sf)

The AAA (sf) rating on the Class A Certificates reflects 64.2% and 55.0% of credit enhancement provided by subordinated notes in the pool. The AA (high) (sf), A (high) (sf), BBB (high) (sf), BBB (low) (sf), BB (low) (sf), and B (low) ratings reflect 50.3%, 44.7%, 34.9%, 27.8%, 17.1%, and 12.2% credit enhancement, respectively.

Other than the classes specified above, DBRS Morningstar does not rate any other classes in this transaction.

PROG 2021-SFR2's 5,421 properties are in 12 states, with the largest concentration by BPO value in Texas (26.4%). The largest MSA by value is Atlanta (16.8%), followed by Memphis (15.7%). The geographic concentration dictates the home-price stresses applied to the portfolio and the resulting market value decline (MVD). The MVD at the AAA (sf) rating level for this deal is 52.2%. PROG 2021-SFR2 has properties from 34 MSAs, most of which did not experience home-price index (HPI) declines as dramatic as those in the recent housing downturn.

DBRS Morningstar finalized the provisional ratings for each class of certificates by performing a quantitative and qualitative collateral, structural, and legal analysis. This analysis uses DBRS Morningstar’s single-family rental subordination model and is based on DBRS Morningstar’s published criteria. (For more details, see www.dbrsmorningstar.com.) DBRS Morningstar developed property-level stresses for the analysis of single-family rental assets. DBRS Morningstar's analysis includes estimated base-case net cash flow (NCF) by evaluating the gross rent, concession, vacancy, operating expenses, and capital expenditure data. The DBRS Morningstar NCF analysis resulted in a minimum debt service coverage ratio higher than 1.0 times.

Furthermore, DBRS Morningstar reviewed the third-party participants in the transaction, including the property manager, servicer, and special servicer. These transaction parties are acceptable to DBRS Morningstar. DBRS Morningstar also conducted a legal review and found no material rating concerns.

For more information regarding rating methodologies and the coronavirus, please see the following DBRS Morningstar press releases and commentary: “DBRS Morningstar Provides Update on Rating Methodologies in Light of Measures to Contain Coronavirus Disease (COVID-19),” dated March 12, 2020; “DBRS Morningstar Global Structured Finance Rating Methodologies and Coronavirus Disease (COVID-19),” dated March 20, 2020; and “Global Macroeconomic Scenarios: March 2021 Update,” published on March 17, 2021.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is the U.S. Single-Family Rental Securitization Ratings Methodology (May 28, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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