KBRA Assigns Preliminary Ratings to Progress Residential 2025-SFR3
9 Jun 2025 | New York
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 KBRA’s adjusted BPO value was 103.6%.
KBRA uses a hybrid analysis to evaluate SFR transactions, which incorporates elements of both KBRA’s 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 loan’s 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 KBRA’s U.S. Single-Family Rental Securitization Methodology.
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