Morningstar DBRS Assigns Provisional Credit Ratings to Progress Residential 2024-SFR4 Trust

DBRS, Inc. (Morningstar DBRS) assigned the following provisional credit ratings to the Single-Family Rental Pass-Through Certificates (the Certificates) to be issued by Progress Residential 2024-SFR4 Trust (PROG 2024-SFR4 or the Issuer):

-- $318.7 million Class A at AAA (sf)
-- $58.7 million Class B at AA (low) (sf)
-- $46.0 million Class C at A (low) (sf)
-- $64.8 million Class D at BBB (sf)
-- $31.1 million Class E1 at BBB (sf)
-- $20.3 million Class E2 at BBB (low) (sf)
-- $51.8 million Class F1 at BB (sf)
-- $26.1 million Class F2 at BB (low) (sf)

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

The AAA (sf) credit rating on the Class A certificates reflects 52.82% of credit enhancement provided by subordinate certificates. The AA (low) (sf), A (low) (sf), BBB (sf), BBB (low) (sf), BB (sf), and BB (low) (sf) credit ratings reflect 44.13%, 37.32%, 23.11%, 20.11%, 12.44%, and 8.58% of credit enhancement, respectively.

The Certificates are supported by the income streams and values from 2,070 rental properties. The properties are distributed across 10 states and 18 metropolitan statistical areas (MSAs) in the U.S. Morningstar DBRS maps an MSA based on the ZIP code provided in the data tape, which may result in different MSA stratifications than those provided in offering documents. As measured by broker price opinion (BPO) value, 57.00% of the portfolio is concentrated in three states: Florida (26.22%), Arizona (18.08%), and North Carolina (12.69%). The average BPO value is $349,855. The average age of the properties is roughly 20 years as of the cut-off date. The majority of the properties have three or more bedrooms. The certificates represent a beneficial ownership in an approximately five-year, fixed-rate, interest-only loan with an initial aggregate principal balance of approximately $675.3 million.

Morningstar DBRS assigned the provisional credit ratings for each class of certificates by performing a quantitative and qualitative collateral, structural, and legal analysis. This analysis uses Morningstar DBRS' single-family rental (SFR) subordination analytical tool and is based on Morningstar DBRS' published criteria. (For more details, see https://dbrs.morningstar.com). Morningstar DBRS developed property-level stresses for the analysis of SFR assets. Morningstar DBRS assigned the provisional credit ratings to each class based on the levels of stresses each class can withstand and whether such stresses are commensurate with the applicable credit rating level. Morningstar DBRS' analysis includes estimated base-case net cash flows (NCFs) derived by evaluating the gross rent, concession, vacancy, operating expenses, and capital expenditure data. The Morningstar DBRS NCF analysis resulted in a minimum debt service coverage ratio higher than 1.0 times. (For more details, see Morningstar DBRS' presale report.)

Furthermore, Morningstar DBRS reviewed the third-party participants in the transaction including servicer, and special servicer. Morningstar DBRS did not conduct an operational risk review of Progress' platform for this transaction. (For more details, see the Property Manager and Servicer Summary section of the related presale report.) Morningstar DBRS also conducted a legal review and found no material credit rating concerns. (For details, see the Scope of Analysis section of the presale report.)

Morningstar DBRS' credit ratings on the Certificates address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations for each of the rated certificates are the related Interest Distribution Amounts and the related Principal Distribution Amounts.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030 (January 23, 2024).

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

The principal methodology applicable to the credit ratings is Rating and Monitoring U.S. Single-Family Rental Securitizations (November 23, 2022), https://dbrs.morningstar.com/research/405662.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

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

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

A provisional credit rating is not a final credit rating with respect to the above-mentioned Certificates and may change or be different than the final credit rating assigned or may be discontinued. The assignment of final credit ratings on the above-mentioned Certificates is subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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@morningstar.com.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623
-- Legal Criteria for U.S. Structured Finance (April 15, 2024), https://dbrs.morningstar.com/research/431205
-- Operational Risk Assessment for U.S. RMBS Originators (August 31, 2023), https://dbrs.morningstar.com/research/420106
-- Operational Risk Assessment for U.S. RMBS Servicers (August 31, 2023), https://dbrs.morningstar.com/research/420107
-- Representations and Warranties Criteria for U.S. RMBS Transactions (May 16, 2023), https://dbrs.morningstar.com/research/414076

For more information on this credit or on this industry, visit https://dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.