Class A-1 at
Class A-2 at
Class X1 at
Class X2-A at
All trends are Stable.
The Class X1 and X2-A balances are notional.
With regard to the Coronavirus Disease (COVID-19) pandemic, the magnitude and extent of performance stress posed to global structured finance transactions remains highly uncertain. This considers the fiscal and monetary policy measures and statutory law changes that have already been implemented or will be implemented to soften the impact of the crisis on global economies. Some regions, jurisdictions, and asset classes are, however, feeling more immediate effects. DBRS Morningstar continues to monitor the ongoing coronavirus pandemic and its impact on both the commercial real estate sector and the global fixed income markets. Accordingly, DBRS Morningstar may apply additional short-term stresses to its rating analysis; for example, by front-loading default expectations and/or assessing the liquidity position of a structured finance transaction with more stressful operational risk and/or cash flow timing considerations.
The collateral consists of 64 fixed-rate loans secured by 64 properties, including 39 garden-style multifamily properties, 11 manufactured housing communities, five high-rise or mid-rise multifamily properties, and nine nontraditional multifamily properties that are independent living, age restricted, student housing, or have a military concentration. Additionally, the pool contains two groups of cross-collateralized loans. As a result, DBRS Morningstar combined the crossed loans and lowered the deal loan count to 60. The transaction is a sequential-pay pass-through structure and losses are allocated first to the lowest-priority certificates. DBRS Morningstar analyzed the conduit pool to determine the provisional ratings, reflecting the long-term probability of loan default within the term and its liquidity at maturity.
Classes A-1, A-2, A-M, X1, XAM, and X3 of the FREMF 2021-K128 transaction have been conveyed into a trust by
The pool has a weighted-average (WA) expected loss of 2.17%, which compares favorably with recent FREMF transactions rated by DBRS Morningstar. The pool has a WA DBRS Morningstar Issuance LTV of 70.0%, which is more than 2.0% lower than recent comparable transactions. The average haircut was -5.2% across the DBRS Morningstar sample of loans. The average compares favorably with recent transactions and is probability of default (POD) positive. 96.7% of the loans were assigned a DBRS Morningstar sponsor strength of Strong and credit positive. Sponsors generally represent large, financially capable individuals or companies led by experienced professionals with minimal prior credit issues. In many cases, sponsors are repeat borrowers of FREMF and have a proven credit record with no performance issues. DBRS Morningstar identified three assets that exhibited superior quality and had Above Average property quality scores. These three loans, Empire, Berkeley And
82.3% of the loans have a debt service reserve (DSR) that can be used if the property experiences performance declines attributable to the coronavirus pandemic. Reserves were generally sized from six to nine months of debt service and borrowers may request disbursement from the reserve in the amount of a shortfall upon submission of rental collection, current rent schedule, and a current trailing-12-month operating statement. The reserves will be released at least 90 days following the lifting of all governmental actions related to the coronavirus affecting the property.
Multifamily properties may encounter weaker performance and softer market conditions if the pandemic leads to further financial fallout. Apartment tenants could be affected by higher unemployment, lifting of eviction moratoriums, and a reduction in unemployment benefits.
In response to the ongoing coronavirus pandemic,
The pool is split between multifamily properties, which encompass 96.0% of the pool, and manufactured housing properties, encompassing 4.0% of the pool. Nine properties in the pool, representing 10.2% of the total pool balance, have disclosed a military or student tenant concentration ranging from 1.0% to 90.0%. One property in the pool, representing 0.5% of the total pool balance, offers independent living units, but DBRS Morningstar treated this property as multifamily. Compared with other property types, multifamily assets generally benefit from staggered lease rollover and lower expense ratios. While revenue is quick to decline in a downturn because of the short-term nature of the leases, it is also quick to respond when the market improves. Forty-eight loans, representing 69.0% of the pool, exhibited a recent occupancy rate above 95.0%, and another 12 loans, representing 15.3% of the pool, exhibited an occupancy rate between 90.0% and 94.9%. Only two loans, representing approximately 1.0% of the pool, exhibited an occupancy less than 90.0%. Additionally, four properties had relatively high percentages of military personnel or students. DBRS Morningstar modeled these with a student housing property type, which has a small POD penalty compared with the multifamily property type.
ESG CONSIDERATIONS
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.
Classes X1 and X2-A are interest-only (IO) certificates that reference a single rated tranche or multiple rated tranches. The IO rating mirrors the lowest-rated applicable reference obligation tranche adjusted upward by one notch if senior in the waterfall.
All ratings are subject to surveillance, which could result in ratings being upgraded, downgraded, placed under review, confirmed, or discontinued by DBRS Morningstar.
For supporting data and more information on this transaction, please log into www.viewpoint.dbrsmorningstar.com. DBRS Morningstar provides analysis and in-depth commentary in the DBRS Viewpoint platform.
DBRS Morningstar provides updated analysis and in-depth commentary in the DBRS Viewpoint platform for the following loans in the transaction:
Prospectus ID#1 - Acadia by
Prospectus ID#2 - CalSTRS Portfolio (6.8% of the pool)
Prospectus ID#3 - Empire (6.2% of the pool)
Prospectus ID#4 - The Reserve At Warner Center (6.1% of the pool)
Prospectus ID#5 - Starwood Portfolio (6.0% of the pool)
Prospectus ID#6 - The Perry (5.6% of the pool)
Prospectus ID#7 -
Prospectus ID#8 - Arborview At Riverside And Liriope (3.8% of the pool)
Prospectus ID#9 - Icon 9700 (3.7% of the pool)
Prospectus ID#10 -
Prospectus ID#11-
Prospectus ID#12- Arioso City Lofts (2.8% of the pool)
Prospectus ID#13-
Prospectus ID#14 - Arlington At
Prospectus ID#15 -
Prospectus ID#16 - Eastdale Residential I (1.9% of the pool)
Prospectus ID#17 -
Prospectus ID#18 - ReNew 78 West (1.9% of the pool)
Prospectus ID#19 - Set Point Garden (1.6% of the pool)
Prospectus ID#21 - San Paloma (1.5% of the pool)
Prospectus ID#22 -
Prospectus ID#33 -
Prospectus ID#34 -
For complimentary access to this content, please register for the DBRS Viewpoint platform at www.viewpoint.dbrsmorningstar.com. The platform includes issuer and servicer data for most outstanding CMBS transactions (including non-DBRS Morningstar rated), as well as loan-level and transaction-level commentary for most DBRS Morningstar-rated and -monitored transactions.
Notes:
All figures are in
With regard to due diligence services, DBRS Morningstar was provided with the Form ABS Due Diligence-15E (Form-15E), which contains a description of the information that a third party reviewed in conducting the due diligence services and a summary of the findings and conclusions. While due diligence services outlined in Form-15E do not constitute part of DBRS Morningstar's methodology, DBRS Morningstar used the data file outlined in the independent accountant's report in its analysis to determine the ratings referenced herein.
The principal methodology is the North American CMBS Multi-Borrower Rating Methodology (
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.
For more information regarding the structured finance rating approach and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/359905.
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.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
Tel. +1 312 696-6293
Ratings
Date Issued Debt Rated Action Rating Trend Attributes
i
US = Lead Analyst based in USA
CA = Lead Analyst based in
EU = Lead Analyst based in EU
E = EU endorsed
U =
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-participating
19-Apr-21 Multifamily Mortgage Pass-Through Certificates, Series 2021-K128, Class A-1 Provis.-NewAAA (sf) Stb US
19-Apr-21 Multifamily Mortgage Pass-Through Certificates, Series 2021-K128, Class A-2 Provis.-NewAAA (sf) Stb US
19-Apr-21 Multifamily Mortgage Pass-Through Certificates, Series 2021-K128, Class X1 Provis.-NewAAA (sf) Stb US
19-Apr-21 Multifamily Mortgage Pass-Through Certificates, Series 2021-K128, Class X2-A Provis.-NewAAA (sf) Stb US
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