NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings and Rating Outlooks to B2R Mortgage Trust 2015-2 Mortgage Pass-Through Certificates:
--$191,871,000 class A 'AAAsf'; Outlook Stable;
--$191,871,000a class X-A 'AAAsf'; Outlook Stable;
--$31,226,000a class X-B 'AA-sf'; Outlook Stable;
--$31,226,000 class B 'AA-sf'; Outlook Stable;
--$17,682,000 class C 'A-sf'; Outlook Stable;
--$22,573,000 class D 'BBB-sf'; Outlook Stable.
(a) Notional amount and interest-only.
Since Fitch published its expected ratings on Nov. 3, 2015, the interest-only class X-C, which Fitch did not expect to rate, was removed from the capital structure by the issuer. As such, Fitch withdrew its rating on this class. In addition, the interest-only class X-B previously referenced both the class B and class C certificates and was issued an expected rating of 'A-sf'. The interest-only class X-B now references only the class B certificates, resulting in a rating of 'AA-sf'. The classes above reflect the final ratings and deal structure.
Fitch did not rate the following certificates: the $13,544,000 class E, the $14,296,000 class F, the $3,762,000 class G, or the $6,019,388 class H certificates.
The certificates represent the beneficial ownership in the trust, primary assets of which are 211 loans secured by 4,272 mortgaged properties consisting of 3,459 single-family residential properties, 345 2-4 unit properties, 175 condominium properties, 271 townhomes, and 22 multifamily properties, and having an aggregate principal balance of approximately $301.0 million as of the cutoff date. The loans were contributed to the trust by B2R Finance L.P.
Fitch reviewed a comprehensive sample of the transaction's collateral, including cash flow analysis and asset summary reviews of 57.8% of the pool. Details of our analysis are highlighted in the presale report.
KEY RATING DRIVERS
New Asset Class: B2R 2015-2 represents the fourth multi-borrower single family rental (SFR) transaction in the U.S. and the second sponsored by B2R Finance, L.P. Although a number of single borrower SFR transactions have been issued since late 2013, Fitch highlights significant differences to those transactions in this report. Similar to single borrower SFR, sector and property level operating history are limited; however, historical investor loan performance provides a reasonable proxy for expected through-the-cycle performance.
Fitch Leverage: The pool's Fitch DSCR and LTV of 1.03x and 116.5%, respectively, are similar to 1.02x and 114.9%, respectively, for the other recent Fitch-rated multi-borrower SFR transaction, B2R 2015-1. This represents higher leverage relative to 1.09x and 115.6%, respectively, for the average 2015 year-to-date Freddie Mac 10-year K-Series transactions. However, the higher DSCR and LTV metrics reflect more conservative weighted-average Fitch stressed constant and capitalization rate assumptions of 10.53% and 9.66%, compared to average constants and capitalization rates of 9.32% and 8.32%, respectively, for 2015 year-to-date Freddie Mac transactions. Fitch net cash flow debt yield for this transaction of 8.75%, relative to B2R 2015-1 of 8.78%, compares favorably to the average Fitch debt yield of 7.41% for 2015 year-to-date Freddie Mac transactions.
Loan and Borrower Diversity: The pool consists of 211 loans secured by 4,272 properties; on average, loans are cross-collateralized by 20 properties. The 10 largest loans represent 48.8% of the pool, which represents average loan diversity compared to recent CMBS transactions and higher pool concentration relative to B2R 2015-1 at 37.1%.
For this transaction, Fitch's net cash flow (NCF) was 12.7% below the issuer's NCF. Unanticipated further declines in property-level NCF could result in higher defaults and loss severity on defaulted loans, and could result in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to B2R 2015-2 certificates and found that the transaction displays an average sensitivity to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the 'AAAsf' certificates to 'AAsf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the 'AAAsf' certificates to 'Asf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 16.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from Ernst & Young LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the 211 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary (RAC).
Additional information is available at www.fitchratings.com.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 28 May 2015)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
B2R Mortgage Trust 2015-2 -- Appendix
Dodd-Frank Rating Information Disclosure Form
ABS Due Diligence Form 15E 1