Fitch Affirms Freddie Mac 2012-K709 and Freddie Mac Structured Pass-Through Certificates K709

CHICAGO--()--Fitch Ratings has affirmed all six classes of Freddie Mac 2012-K709 multifamily mortgage pass-through certificates and the three classes of Freddie Mac structured pass-through certificates, K-709. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmations of the Freddie Mac 2012-K709 are based on the stable performance of the underlying collateral pool. As of the March 2014 remittance, the pool had no delinquent or specially serviced loans and no loans are on the servicer watchlist. The pool's aggregate principal balance has been paid down by 1.1% to $1.228 billion from $1.241 billion at issuance. Fifty of the 54 loans (92.6% of the pool) reported at least partial year 2013 financials. Based on full year or annualized financial statements, the pool's overall net operating income (NOI) improved 10% since issuance. However, the improvement reflects using annualized estimates and is not directly comparable to issuance.

The affirmations of the Freddie Mac K709 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-K709.

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-K709 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K709' (June 7, 2012), available at www.fitchratings.com.

The largest loan of the pool (11.0%) is secured by Atlantic Point Apartments, a 795-unit townhome-style apartment community located in Bellport, NY. The complex incorporates a number of common area amenities which include a clubhouse, business center, tennis courts, basketball court, and media room. The subject experienced an increase in vacancy during the first half of 2013 reaching 6% at the end of the second quarter. The increase in vacancy was more than offset by the increase of rental rates as the properties reported NOI increased 3% over 2012 servicer reported information.

The second largest loan (5.51%) is secured by The Bennington, a 348-unit high rise apartment complex located in Alexandria, VA. The subject is located four 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 subject underwent significant renovations from 2008 through 2010 for the apartment units and the common areas are scheduled for minor renovations in the future. The units feature hardwood floor entries, in unit washer/dryer units, spacious layouts, and large kitchens. The common area amenities feature a complimentary coffee bar, outdoor pool, convenience store, parking garage, and fitness center. The property has an occupancy rate of 94%, in line with the market average of 95%. NOI for the subject has been stable with minimal volatility since issuance. This trend should continue as new development is restricted in the submarket and economic growth should drive moderate yearly rental rate increases for the next 12 to 24 months.

The third largest loan (4.2%) is secured by a 460-unit garden-style apartment complex located in Vista, CA, approximately 40 miles north of San Diego. The subject was built in 1988 and renovated in 2008. The sponsor purchased the property in 2008 and the complex is managed by an affiliate that has oversight responsibilities for more than 5,742 units in the local market. The subject has a military concentration of 15%, primarily personnel assigned to Camp Pendleton training base located nine miles to the north. The community amenities consist of outdoor swimming pools, spas, barbecue areas, fitness center, and common area laundry rooms. The subject is expected to perform strongly over the next few years as the submarket continues to experience muted multifamily development. The complex is considered a high-quality asset which is the primary factor in the subject being able to command 8% -10% more on a per unit basis than its competitive set.

Fitch has affirmed the following classes as indicated:

FREMF 2012-K709 Multifamily Mortgage Pass-Through Certificates

--$90.9 million class A-1 at 'AAAsf'; Outlook Stable;

--$932.3 million class A-2 at 'AAAsf'; Outlook Stable;

--$1.032 billion class X1 at 'AAAsf'; Outlook Stable;

--$1.032 billion class X2-A at 'AAAsf'; Outlook Stable;

--$80.7 million class B at 'A-sf'; Outlook Stable;

--$31 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-709

--$90.9 million class A-1 at 'AAAsf'; Outlook Stable;

--$932.3 million class A-2 at 'AAAsf'; Outlook Stable;

--$1.032 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-K709 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-709 and Freddie Mac Structured Pass-Through Certificates, Series K709' (Dec. 17, 2012).

--'FREMF 2012-K708 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-709 -- Appendix' (Dec. 17, 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

Global Structured Finance Rating Criteria

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

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

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=827142

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Contacts

Fitch Ratings
Primary Analyst
Jay Bullie
Associate Director
+1-312-368-2079
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

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Contacts

Fitch Ratings
Primary Analyst
Jay Bullie
Associate Director
+1-312-368-2079
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com