NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to seven classes of FREMF 2014-K40 mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates (SPCs), Series K40, a $1.57 billion CMBS multi-borrower transaction (see our ratings listed below).
The transaction is collateralized by 105 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $1.5 million to $81.5 million for the largest loan, which is secured by the fee simple interest in Lake Carlton Arms (5.2%), a 1,912-unit garden-style multifamily complex located in Lutz, Florida. The top five loans represent 17.3% of the cut-off date balance, and also include Tanglewood Apartments (4.2%), Central Park East (3.0%), Fairwinds Rio Rancho and Van Mall Retirement Center (2.5%), and 8500 Harwood Apartments (2.4%). The properties are located in 27 states, with the three largest concentrations in California (10.6%), Florida (9.3%), and Texas (9.0%).
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 is used to determine KBRA’s estimate of sustainable net cash flow (KNCF) and KBRA value using our CMBS Property Evaluation Guidelines. KBRA’s weighted average KNCF for the portfolio is 3.1% 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 35.7% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.67%. 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.
For complete details of the analysis, please see our Presale Report, FREMF 2014-K40, published today at www.kbra.com.
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 2014-K40
| Class | Rating | Balance | ||||
| A-1 | AAA (sf) | $225,920,000 | ||||
| A-2 | AAA (sf) | $1,104,576,000 | ||||
| X1* | AAA (sf) | $1,330,496,000 | ||||
| X2-A* | AAA (sf) | $1,330,496,000 | ||||
| X2-B* | AAA (sf) | $234,793,670 | ||||
| B | A+ (sf) | $78,264,000 | ||||
| C | BBB+ (sf) | $39,132,000 | ||||
| X3* | NR | $234,793,670 | ||||
| D | NR | $117,397,670 | ||||
| *Notional Amount |
Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K40
| Class | Rating | Balance | ||||
| A-1 | AAA (sf) | $225,920,000 | ||||
| A-2 | AAA (sf) | $1,104,576,000 | ||||
| X1* | AAA (sf) | $1,330,496,000 | ||||
| X3* | NR | $234,793,670 | ||||
| *Notional Amount |
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 2014-K40 17g-7 Disclosure Report.
Related publications (available at www.krollbondratings.com):
CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published February 23, 2012
CMBS Property Evaluation Guidelines, published June 10, 2011
About Kroll Bond Rating Agency
KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).
