NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to four classes of FREMF 2012-KF01 mortgage pass-through certificates and two classes of Freddie Mac structured pass-through certificates (SPCs), a $1.37 billion CMBS multi-borrower transaction (see our ratings listed below).
The transaction is collateralized by 80 floating rate multifamily mortgage loans and is Freddie Mac’s Capital Markets Execution (CME) program’s inaugural floating rate transaction. The underlying properties are located in 21 states, with the two largest concentrations in Texas (25.7%) and California (17.9%), and over half of the pool (60.1%) is located in primary markets. The majority of the collateral is garden-style projects (83.1%) ranging from 47 to 972 units. Student housing (5.5%) and independent/assisted living projects (5.5%) are the only other property type exposures representing more than 5.0% of the pool balance.
KBRA’s analysis of the transaction incorporated our U.S.CMBS multi-borrower rating process that begins with our analysts' evaluation of the underlying collateral properties' financial and operating performance, which are used to determine KBRA’s estimate of sustainable net cash flow (KNCF) and KBRA value. The analysis incorporates a detailed evaluation of the underlying collateral properties’ financial and operating performance using our CMBS Property Evaluation Guidelines to determine Kroll Net Cash Flow (KNCF), which is a key input used in our credit modeling process. KBRA’s weighted average KNCF for the portfolio is 2.8% less than the issuer’s NCF. KBRA capitalization rates were applied to each asset’s KNCF to derive individual property values that, on an aggregate basis, were 33.9% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.3%. The KBRA credit model deploys rent and occupancy stresses, probability of default regressions, and loss-given default calculations to determine losses for each collateral loan, which are then used to assign our credit ratings.
The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of final ratings that differ from the preliminary ratings.
Preliminary Ratings Assigned: FREMF 2012-KF01
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Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series KF01
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Rule 17g-7 Disclosure
All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description regarding the representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled FREMF 2012-KF01 17g-7 Disclosure Report.
Related publications (available at www.krollbondratings.com):
About Kroll Bond Rating Agency
Kroll Bond Rating Agency, Inc. (www.krollbondratings.com) is registered with the SEC as a nationally recognized statistical rating organization (NRSRO). Kroll Bond Rating Agency was established in 2010 to restore trust in credit ratings by establishing new standards for assessing risk and by offering accurate, clear, and transparent ratings.