DBRS Morningstar Finalizes Provisional Ratings on Tricon American Homes 2020-SFR2 Trust

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following Single-Family Rental Pass-Through Certificates (the Certificates) issued by Tricon American Homes 2020-SFR2 Trust (TAH 2020-SFR2):

-- $230.1 million Class A at AAA (sf)
-- $80.5 million Class B at AA (sf)
-- $32.9 million Class C at A (sf)
-- $39.4 million Class D at BBB (high) (sf)
-- $44.4 million Class E-1 at BBB (sf)
-- $13.1 million Class E-2 at BBB (low) (sf)

The AAA (sf) rating on Class A reflects 51.76% of credit enhancement, provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (high) (sf), BBB (sf), and BBB (low) (sf) ratings reflect 34.87%, 27.98%, 19.71%, 10.41%, and 7.65% of credit enhancement, respectively.

Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.

The TAH 2020-SFR2 Certificates are supported by the income streams and values from 3,319 rental properties. The properties are distributed across nine states and 25 metropolitan statistical areas (MSAs) in the United States. DBRS Morningstar maps an MSA based on the ZIP code provided in the data tape, which may result in different MSA stratifications than those provided in offering documents. As measured by broker price opinion value, 58.9% of the portfolio is concentrated in three states: Texas (33.6%), California (12.9%), and North Carolina (12.4%). The average value is $198,094. The average age of the properties is roughly 34 years. The majority of the properties have three or more bedrooms. The Certificates represent a beneficial ownership in an approximately five-year, fixed-rate, interest-only loan with an initial aggregate principal balance of approximately $477 million.

The sponsor intends to satisfy its risk-retention obligations under the U.S. Risk Retention Rules by Class F, which is 7.7% of the initial total issuance balance, either directly or through a majority-owned affiliate.

DBRS Morningstar finalized the provisional ratings for each class of Certificates by performing a quantitative and qualitative collateral, structural, and legal analysis. This analysis uses DBRS Morningstar’s single-family rental subordination model and is based on DBRS Morningstar’s published criteria. (For more details, see www.dbrsmorningstar.com.) DBRS Morningstar developed property-level stresses for the analysis of single-family rental assets. DBRS Morningstar assigned the ratings to each class based on the level of stresses each class can withstand and whether such stresses are commensurate with the applicable rating level. DBRS Morningstar's analysis includes estimated base-case net cash flows (NCFs) by evaluating the gross rent, concession, vacancy, operating expenses, and capital expenditure data. The DBRS Morningstar NCF analysis resulted in a minimum debt service coverage ratio of higher than 1.0 times.

Furthermore, DBRS Morningstar reviewed the third-party participants in the transaction, including the property manager, servicer, and special servicer. These transaction parties are acceptable to DBRS Morningstar. DBRS Morningstar also conducted a legal review and found no material rating concerns.

For more information regarding rating methodologies and the Coronavirus Disease (COVID-19), please see the following DBRS Morningstar publications: “DBRS Morningstar Provides Update on Rating Methodologies in Light of Measures to Contain Coronavirus Disease (COVID-19),” dated March 12, 2020; “DBRS Morningstar Global Structured Finance Rating Methodologies and Coronavirus Disease (COVID-19),” dated March 20, 2020; and “Global Macroeconomic Scenarios: September Update,” dated September 10, 2020.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at https://www.dbrsmorningstar.com/research/357792.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is U.S. Single-Family Rental Securitization Ratings Methodology (May 28, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrsmorningstar.com.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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