Morningstar DBRS Finalizes Its Provisional Credit Ratings on Tricon Residential 2024-SFR4 Trust

DBRS, Inc. (Morningstar DBRS) finalized its provisional credit ratings on the Single-Family Rental Pass-Through Certificates (the Certificates) issued by Tricon Residential 2024-SFR4 Trust (TCN 2024-SFR4):

-- $420.8 million Class A at AAA (sf)
-- $68.2 million Class B at AA (low) (sf)
-- $70.5 million Class C at A (low) (sf)
-- $70.6 million Class D at BBB (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 38.1% of credit enhancement provided by subordinate certificates. The AA (low) (sf), A (low) (sf), and BBB (sf) credit ratings reflect 28.1%, 17.7%, and 7.4% of credit enhancement, respectively.

The TCN 2024-SFR4 certificates are supported by the income streams and values from 2,607 rental properties. The properties are distributed across 10 states and 31 metropolitan statistical areas (MSAs) in the United States. 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, 67.7% of the portfolio is concentrated in three states: Georgia (29.8%), Arizona (19.5%), and Florida (18.5%). The average BPO value of a rental home in the pool is $348,969. The average age of the properties is roughly 29 years as of the cut-off date. The vast majority of the properties, 2,570 by count, 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 $680 million.

Morningstar DBRS finalized its provisional credit ratings to each class of certificates by performing a quantitative and qualitative collateral, structural, and legal analysis. This analysis uses Morningstar DBRS' single-family rental 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 single-family rental assets. Morningstar DBRS finalized its provisional credit ratings to each class based on the level 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) by evaluating the gross rent, concession, vacancy, operating expenses, and capital expenditure (capex) data. The Morningstar DBRS NCF analysis resulted in a minimum debt service coverage ratio (DSCR) of higher than 1.0 times (x). (For more details, see the Morningstar DBRS' Analysis section of the related report.)

Furthermore, Morningstar DBRS reviewed the third-party participants in the transaction, including the property manager, servicer, and special servicer. These transaction parties are acceptable to Morningstar DBRS. (For more details, see the Property Manager and Servicer Summary section of the related 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 related 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, or 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 Factors in Credit Ratings (August 13, 2024) at https://dbrs.morningstar.com/research/437781.

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 (September 30, 2024), https://dbrs.morningstar.com/research/440087.

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.

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.
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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.

-- Rating and Monitoring U.S. Single-Family Rental Securitizations (September 30, 2024), https://dbrs.morningstar.com/research/440087
-- 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 (October 28, 2024),
https://dbrs.morningstar.com/research/441840
-- Operational Risk Assessment for U.S. RMBS Originators and Servicers (September 30, 2024), https://dbrs.morningstar.com/research/440086
-- Third-Party Due-Diligence and Representations & Warranties Criteria for U.S. RMBS Transactions (September 30, 2024), https://dbrs.morningstar.com/research/440091

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