KBRA Assigns Ratings to Progress Residential 2024-SFR3
30 May 2024 | New York
KBRA assigns ratings to seven classes of Progress Residential 2024-SFR3 (Progress 2024-SFR3) single-family rental pass-through certificates.
Progress 2024-SFR3 is a single-borrower, single-family rental (SFR) securitization that will be collateralized by a $710.3 million loan secured by first priority mortgages on 2,199 income-producing single-family homes. The fixed-rate loan requires interest payments only over its five-year term. The subject transaction will be the 29th 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 31.1% of the portfolio and include Charlotte (11.3%), Phoenix (11.2%), and Nashville (8.6%). The aggregate BPO value of the underlying homes is $811.8 million, yielding an LTV of 87.5%. KBRA adjusted the BPOs, which yielded an aggregate value of $771.2 million, which represents a 5.0% haircut to the nominal BPO value. The resulting LTV based on KBRA’s adjusted BPO value was 92.1%.
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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