DBRS Morningstar Finalizes Provisional Ratings on STAR 2021-SFR2 Trust

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the following Single-Family Rental Pass-Through Certificates (the Certificates) issued by STAR 2021-SFR2 Trust (STAR 2021-SFR2):

-- $70.9 million Class A at AAA (sf)
-- $18.9 million Class B at AAA (sf)
-- $40.5 million Class C at AA (high) (sf)
-- $20.9 million Class D at A (sf)
-- $24.3 million Class E at BBB (low) (sf)
-- $24.3 million Class F at BB (low) (sf)
-- $16.2 million Class G at B (low) (sf)

The AAA (sf) ratings on the Class A and B Certificates reflect 72.4% and 65.0% of credit enhancement, respectively, provided by the subordinated notes in the pool. The AA (high) (sf), A (sf), BBB (low) (sf), BB (low) (sf), and B (low) (sf) ratings reflect 49.2%, 41.1%, 31.6%, 22.1%, and 15.8% of credit enhancement, respectively.

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

STAR 2021-SFR2 Borrower, L.P., the Borrower, has 1,211 properties in five states, with the largest concentration by cut-off date broker price opinion value or appraiser reconciled broker price opinion value in Georgia (59.6%). The largest metropolitan statistical area (MSA) by value is Atlanta (59.6%), followed by Phoenix (11.3%). The geographic concentration dictates the home-price stresses applied to the portfolio and the resulting market value decline (MVD). The Atlanta concentration was mitigated by DBRS Morningstar’s qualitative adjustments and the distribution of the properties across 66 ZIP codes within Georgia. The MVD at the AAA (sf) rating level for this deal is 52.6%. STAR 2021-SFR2 has properties from 11 MSAs, most of which did not experience home-price index declines as dramatic as those in the recent housing downturn.

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 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.

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.

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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