DBRS Morningstar Assigns Provisional Ratings to Tricon Residential 2021-SFR1 Trust

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the following Single-Family Rental Pass-Through Certificates (the Certificates) to be issued by Tricon Residential 2021-SFR1 Trust (TCN 2021-SFR1 or the Issuer):

-- $315.6 million Class A at AAA (sf)
-- $78.4 million Class B at AA (high) (sf)
-- $42.2 million Class C at AA (low) (sf)
-- $52.3 million Class D at A (low) (sf)
-- $26.1 million Class E-1 at BBB (high) (sf)
-- $48.3 million Class E-2 at BBB (low) (sf)
-- $80.4 million Class F at BB (sf)
-- $40.2 million Class G at B (high) (sf)

The AAA (sf) rating on the Class A certificates reflects 57.0% of credit enhancement provided by subordinated notes in the pool. The AA (low) (sf), A (low) (sf), BBB (high) (sf), BBB (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf) ratings reflect 46.3%, 40.5%, 33.4%, 29.8%, 23.3%, 12.3%, and 6.8% of credit enhancement, respectively.

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

TCN 2021-SFR 1’s 3,395 properties are in seven states, with the largest concentration by BPO value in North Carolina (25.0%). The largest MSA by value is Atlanta (19.2%), followed by Charlotte (18.9%). The geographic concentration dictates the home-price stresses applied to the portfolio and the resulting market value decline (MVD). The MVD at the AAA (sf) rating level for this deal is 45.4%. TCN 2021-SFR1 has properties from 27 MSAs, many of which did not experience dramatic home price index (HPI) declines in the housing crisis of 2008.

DBRS Morningstar assigned 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 will finalize the provisional ratings on 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 NCFs by evaluating the gross rent, concession, vacancy, operating expenses, and capex 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 the economic stress assumed under its baseline scenario, please see the following DBRS Morningstar commentary: “Baseline Macroeconomic Scenarios For Rated Sovereigns,” dated September 8, 2021.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

DBRS Morningstar notes that this press release was amended on November 2, 2021, to correct the ratings of Classes B, C, D, E-1, F, and G in the text of the press release. The ratings were correctly displayed in the rating table.

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

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

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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.

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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