Kroll Bond Rating Agency Assigns Final Ratings to FREMF 2012-K23 and Freddie Mac Structured Pass-Through Certificates

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) assigned its final ratings to seven classes of FREMF 2012-K23 mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates (SPCs), Series K23, a $1.37 billion CMBS multi-borrower transaction. Concurrently, we have withdrawn our preliminary ratings on the certificates, which were assigned on December 4, 2012 (see our ratings listed below).

The transaction is collateralized by 76 fixed rate multifamily commercial mortgage loans that are secured by a single property across 26 states. The two largest concentrations are in California (18.3%) and Florida (12.5%). The majority of the properties are garden-style apartment projects (59 properties) which range in size from 15 to 1,098 units.

KBRA’s analysis of the transaction incorporated our multi-borrower rating process that begins with our analysts' evaluation of underlying collateral properties' financial and operating performance, which determine KBRA’s estimate of sustainable net cash flow (KNCF) and KBRA value. The analysis included 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). The resulting KNCF for the collateral properties was 2.1% below issuer net cash flow on a weighted average basis. KBRA capitalization rates were applied to each asset’s KCNF to derive individual property values that, on an aggregate basis, were 36.6% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction was 8.5%.

The model deploys rent and occupancy stresses, probability of default regressions, and loss given default calculations to determine losses for each collateral loan that were used by KBRA to assign our credit ratings for this transaction.

Final Ratings Assigned: FREMF 2012-K23
Class	Rating	Balance
A-1	AAA (sf)	$202,136,000
A-2	AAA (sf)	$944,939,000
X1*	AAA (sf)	$1,147,075,000
X2-A*	AAA (sf)	$1,147,075,000
X3*	AAA (sf)	$222,566,927
B	A (sf)	$85,602,000
C	BBB+ (sf)	$34,241,000
* Notional Amount

Final Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K-23
Class	Rating	Balance
A-1	AAA (sf)	$202,136,000
A-2	AAA (sf)	$944,939,000
X1*	AAA (sf)	$1,147,075,000
* Notional Amount

Related publications (available at www.krollbondratings.com):

CMBS Presale Report: FREMF 2012-K20 CMBS: U.S. CMBS Multi-Borrower Rating Methodology CMBS Property Evaluation Guidelines

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.