Fitch Affirms Freddie Mac 2014-K39 and Freddie Mac Structured Pass-Through Certificates K-039

CHICAGO--()--Fitch Ratings has affirmed seven classes of Freddie Mac 2014-K39 multifamily mortgage pass-through certificates along with three classes of Freddie Mac structured pass-through certificates, K-039. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

The affirmations of the Freddie Mac 2014-K39 are based on the stable performance of the underlying collateral pool. The pool's aggregate principal balance has been paid down by 0.01% to $1.32 billion from 1.33 billion at issuance. Based on the year-end 2014 financials provided by the servicer, the pool's overall net operating income (NOI) has been stable with a 3.2% increase over the reported portfolio NOI at issuance. Fitch has not designated any loans as Fitch Loans of Concern. No loans are on the master servicer's watchlist or have been transferred to the special servicer since issuance. The 105 loans' final maturity dates are in 2023 (3.7%), 2024 (95.5%), 2028 (0.6%) and 2029 (0.3%).

The affirmations of the Freddie Mac K-039 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 2014-K39.

The largest loan of the pool (9.42%) is secured by The Bays Apartment Homes, a 556-unit garden-style apartment community located in Newport Beach, CA. The community amenities for residents include two pools, spa, laundry facilities, clubhouse, fitness and hiking trails. The sponsor developed the community in three phases between 1974 through 1984 and continues to show a commitment to the subject through continuous investment over the term of ownership. As noted at issuance, the sponsor made a major capital improvement in the subject to upgrade the individual units by replacing countertops, cabinets, appliances, new flooring, and fixtures during the past two years. Property performance at year-end (YE) 2014 has improved with an occupancy of 96% compared with 93% at issuance, and with a 7% improvement in NOI.

The second largest loan (3.05%) is secured by Woodbridge Pines Apartment Homes, a 220-unit garden style apartment complex located in Irvine, CA. The subject is situated on 10.75 acres and is comprised of 29 two-story buildings, a clubhouse, and laundry facility. The subject in an independently owned and operated property within a larger development named Woodbridge Village. The amenities at the property include a business center, pool/spa, outside barbecue area and a children's playground. YE 2014 debt service coverage ratio (DSCR) increased to 1.33x from 1.28x as a result of higher rental rates despite a decrease in the subject's occupancy rate to 95% from 98% in 2013.

The third largest loan (2.57%) is secured by a 256-unit high rise co-op located in the Greenwich Village section of Manhattan, within the New York MSA. The subject consists of a retail portion (not part of the collateral) and a residential portion that houses the co-op units. The property benefits from a location situated between the Midtown and Lower Manhattan employment centers. The co-op amenities include restaurants in the retail portion, a roof deck, and courtyard with custom artwork.

RATING SENSITIVITIES

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 2014-K39 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-039' (Sept. 2, 2014), available at 'www.fitchratings.com'.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following classes:

FREMF 2014-K39 Multifamily Mortgage Pass-Through Certificates

--$148.1 million class A-1 at 'AAAsf'; Outlook Stable;

--$977.5 million class A-2 at 'AAAsf'; Outlook Stable;

--$63.2 million class B at 'Asf'; Outlook Stable;

--$99.7 million class C at 'BBB+sf'; Outlook Stable;

--$1.126 billion class X1 at 'AAAsf'; Outlook Stable;

--$1.126 billion class X2-A at 'AAAsf'; 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-039

--$148.8 million class A-1 at 'AAAsf'; Outlook Stable;

--$977.5 million class A-2 at 'AAAsf'; Outlook Stable;

--$1.126 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

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Related Research

FREMF 2014-K39 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-039 -- Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864126

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=989962

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=989962

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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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:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

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:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com