DBRS Morningstar Finalizes Provisional Ratings on Progress Residential 2021-SFR9 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-SFR9 Trust (PROG 2021-SFR9 or the Issuer):

-- $174.1 million Class A at AAA (sf)
-- $64.8 million Class B at AA (high) (sf)
-- $27.0 million Class C at A (high) (sf)
-- $31.0 million Class D at A (low) (sf)
-- $47.2 million Class E-1 at BBB (sf)
-- $24.8 million Class E-2 at BBB (low) (sf)
-- $75.0 million Class F at BB (sf)
-- $49.9 million Class G at B (low) (sf)

The AAA (sf) rating on the Class A certificates reflects 67.6% of credit enhancement provided by subordinated notes in the pool. The AA (high) (sf), A (high) (sf), A (low) (sf), BBB (sf), BBB (low) (sf), BB (sf), and B (low) (sf) ratings reflect 55.5%, 50.5%, 44.7%, 35.9%, 31.3%, 17.3%, and 8.0% credit enhancement, respectively.

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

PROG 2021-SFR9’s 1,808 properties are in 12 states, with the largest concentration by BPO value in Florida (20.6%). The largest metropolitan statistical area (MSA) by value is Phoenix (16.3%), followed by Atlanta (14.0%). 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 56.5%. PROG 2021-SFR9 has properties from 22 MSAs, many of which experienced dramatic home price index (HPI) declines in the housing crisis of 2008.

DBRS Morningstar assigned 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 will finalize the provisional ratings on each class based on the level of stresses each class can withstand and whether such stresses are commensurate with the applicable rating level. DBRS Morningstar's analysis includes estimated base-case NCFs by evaluating the gross rent, concession, vacancy, operating expenses, and capex data. The DBRS Morningstar NCF analysis resulted in a minimum debt service coverage ratio of 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 the economic stress assumed under its baseline scenario, please see the following DBRS Morningstar commentary: “Baseline Macroeconomic Scenarios For Rated Sovereigns,” dated September 8, 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.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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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