NEW YORK–(BUSINESS WIRE)–#creditratingagency–KBRA assigns preliminary ratings to eight classes of Progress Residential 2025-SFR3 (Progress 2025-SFR3) single family rental (SFR) pass-through certificates.
Progress 2025-SFR3 is the first ever single-borrower, SFR securitization consisting entirely of Build-to-Rent (BTR) communities. The transaction will be collateralized by a $778.5 million five-year fixed-rate interest-only loan secured by mortgages on 2,020 income-producing single-family homes. All of the homes are located in 21 newly built, amenity-light BTR communities that were purchased by the sponsor between June 2023 and May 2024 from the original builder. The properties serving as collateral comprise 100% of the homes in 20 communities and 51% of the homes in the remaining community, with each home on an individual tax parcel. The subject transaction will be the 31st KBRA-rated SFR securitization issued by Progress Residential.
The communities are located in 18 Core Based Statistical Areas (CBSAs) across 10 states. The top three CBSAs represent 34.0% of the portfolio and include Lakeland-Winter Haven (13.1%), Sacramento (10.8%), and Atlanta (10.2%). The single largest community accounts for 10.8% of the collateral portfolio and the top three communities account for 30.0% of the portfolio. The aggregate BPO value of the underlying homes is $782.4 million, yielding an LTV of 99.5%. KBRA adjusted the BPOs, which yielded an aggregate value of $751.1 million, which represents a 4.0% haircut to the nominal BPO value. The resulting LTV based on KBRAās adjusted BPO value was 103.6%.
KBRA uses a hybrid analysis to evaluate SFR transactions, which incorporates elements of both KBRAās CMBS and RMBS methodologies, as the underlying real estate contains commercial and residential characteristics. As the properties generate a cash flow stream from tenant rental payments, elements of CMBS methodologies are used to determine the loanās probability of default (PD). To determine loss given default (LGD), KBRA assumes the underlying properties would be liquidated in the residential property market. In determining LGD, KBRA subjects the real estate properties to home price stress scenarios using elements of RMBS methodologies. This hybrid analysis is described in more in KBRAās U.S. Single-Family Rental Securitization Methodology.
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Methodologies
- CMBS/RMBS: U.S. Single-Family Rental Securitization Methodology
- Structured Finance: Global Structured Finance Counterparty Methodology
- ESG Global Rating Methodology
Disclosures
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
About KBRA
Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwanās Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.
Doc ID: 1008837
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