KBRA assigns preliminary ratings to eight classes of Progress Residential 2022-SFR1 (Progress 2022-SFR1) single-family rental pass-through certificates.

Progress 2022-SFR1 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $733.6 million loan secured by first priority mortgages on 2,390 income-producing single-family homes. The fixed-rate loan requires interest payments only over its seven-year term. The subject transaction, which is being issued to refinance all of the properties included in the Progress 2019-SFR1 transaction, will be the 20^th KBRA-rated securitization issued by Progress Residential.

The underlying single-family rental properties are located in or near 18 Core Based Statistical Areas (CBSAs) across nine states. The top-three CBSAs represent 33.8% of the portfolio and include Phoenix (13.0%), Atlanta (10.7%), and Orlando (10.2%). The aggregate BPO value of the underlying homes is $737.3 million, yielding an LTV of 99.5%, which is equal to the highest LTV among the KBRA-rated SFR securitizations, but in line with Progress’ other recent transactions. KBRA adjusted the BPOs, which yielded an aggregate value of $700.5 million, which represents a 5.0% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 104.7%.

Similar to recent transactions issued by Progress, the subject transaction includes provisions for collateral release without corresponding loan paydown (the ECR feature), property releases with premiums, and property substitution, all of which are subject to various conditions.

KBRA utilized its U.S. Single-Family Rental Securitization Methodology to evaluate the transaction. The methodology leverages elements of KBRA’s commercial mortgage-backed securities and residential mortgage-backed securities criteria due to the fact that the collateral underlying an SFR transaction has both commercial and residential characteristics. As the properties generate a cash flow stream from tenant rental payments, CMBS methodologies were used to determine the loan’s probability of default. To determine loss given default, KBRA assumed the underlying collateral properties would be liquidated in the residential property market.

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Related Publications

• SFR KBRA Comparative Analytic Tool (SFR KCAT)
• U.S. Single-Family Rental Securitization Methodology
• 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) is a full-service credit rating agency 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 pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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