Fitch Affirms Freddie Mac 2012-K708 and Freddie Mac Structured Pass-Through Certificates K708

NEW YORK--()--Fitch Ratings has affirmed all six classes of Freddie Mac 2012-K708 multifamily mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates, K-708. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmations of the Freddie Mac 2012-K708 are based on the stable performance of the underlying collateral pool. As of the March 2013 remittance, the pool had no delinquent or specially serviced loans. The pool's aggregate principal balance has been paid down by 0.6% to $1.206 billion from $1.214 billion at issuance. Fifty-four of the remaining 57 loans (94.7% of the pool) reported at least partial year 2013 financials. Based on full year or annualized financial statements, the pool's Top 15 loans overall net operating income (NOI) improved 11% since issuance. However, the improvement reflects using annualized estimates and is not directly comparable to issuance.

The affirmations of the Freddie Mac K-017 certificates are the result of the pass-through nature of the certificates, as they are dependent on the underlying ratings of corresponding classes for FREMF 2012-K708.

RATINGS SENSITIVITY

All classes maintain Stable Outlooks. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's overall portfolio-level metrics. Additional information on rating sensitivity is available in the report 'FREMF 2012-K708 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-708' (July 5, 2012), available at www.fitchratings.com.

One property, Illume Apartments (2.98% of the pool), is currently on the servicer watchlist due to an increase in reported operating expenses for marketing and advertising. As a result, the property these activities and the asking rents are superior to the submarket average. Occupancy reached a high of 92% during the third quarter of 2013, which is a 7% increase from issuance.

The largest loan of the pool (8.15%) is secured by Jefferson Hills, a 1,020-unit mid-rise apartment complex located in Framington, MA. The complex consists of four six-story buildings, a clubhouse, and maintenance building. The complex amenities include a fitness center, swimming pool, and washer/dryer facility on each floor, basketball and volleyball courts, and covered parking. The complex is located 20 miles west of the Boston central business district (CBD) within close proximity of the Massachusetts Turnpike and Route 9. The units in the complex are smaller in square footage than the submarket average. As a result, the average in-place rents tend to be lower than the REIS submarket average rental rates.

The second largest loan (6.64%) is secured by The Encore, a 461-unit garden style apartment complex located in Alexandria, VA. The subject is located eight miles southwest of Washington D.C., and is less than a quarter mile from I-395 which is a direct artery into the capital. The property is of superior quality to the neighboring competing assets resulting in it historically outperforming its competitive set in both occupancy and average rental rate. The subject underwent significant renovations of $45.7 million from 2006 through 2010. The units were furnished with stainless steel appliances, in-unit stackable washer/dryer units, and wood cabinets. The common area amenities were upgraded, comprising a new clubhouse, outdoor pool, fitness center, business library, and movie room.

The third largest loan (4.84%) is secured by a 354-unit apartment complex consisting of six five-story apartment buildings located in Stamford, CT. The subject was built in 1955. The sponsor purchased the property in 1961 and has managed the property since that time. Although the subject is one of the oldest in the submarket, the in-place rents are in line with its competitive set and submarket. The development benefits from its close proximity to the Stamford, CT CBD and the Metro North station that services Manhattan. Another demand generator is that UBS, RBS, and GE all have local offices located within two miles of the complex.

Fitch has affirmed the following classes as indicated:

FREMF 2012-K708 Multifamily Mortgage Pass-Through Certificates

--$89.3 million class A-1 at 'AAAsf'; Outlook Stable;

--$919.3 million class A-2 at 'AAAsf'; Outlook Stable;

--$1.009 billion class X1 at 'AAAsf'; Outlook Stable;

--$1.009 billion class X2-A at 'AAAsf'; Outlook Stable;

--$75.9 million class B at 'Asf'; Outlook Stable;

--$30.3 million class C at 'BBBsf'; Outlook Stable.

Fitch does not rate classes D, interest-only class X2-B, and interest-only class X3.

Freddie Mac Structured Pass-Through Certificates, Series K-708

--$89.3 million class A-1 at 'AAAsf'; Outlook Stable;

--$919.3 million class A-2 at 'AAAsf'; Outlook Stable;

--$1.009 billion class X1 at 'AAAsf'; Outlook Stable.

Fitch does not rate interest-only class X3.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).

A comparison of the transaction's Representations, Warranties, and Enforcement (RW&E) mechanisms to those of typical RW&Es for the asset class is available in the following reports:

--'FREMF 2012-K708 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-708' (July 5, 2012).

--'FREMF 2012-K708 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-708 -- Appendix' (July 5, 2012).

Applicable Criteria and Related Research:

FREMF 2012-K708 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-708

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=681738

FREMF 2012-K708 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K708 - New Issue Appendix

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682854

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=822973

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Contacts

Fitch Ratings
Primary Analyst
Jay Bullie, +1 312-368-2079
Associate Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill, +1 212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Sharing

Contacts

Fitch Ratings
Primary Analyst
Jay Bullie, +1 312-368-2079
Associate Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill, +1 212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com