Fitch Upgrades One Class of FREMF 2013-K713 and Freddie Mac Pass-Through Certificates, Series K-713

NEW YORK--()--Fitch Ratings has upgraded one and affirmed five classes of FREMF 2013-K713 multifamily mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates, series K-713. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade and affirmations reflect the stable performance of the underlying collateral pool and an increase in defeasance. As of the April 2016 distribution date, the pool has no delinquent or specially serviced loans. The pool's aggregate principal balance has been paid down by 2.84% to $1.56 billion from $1.60 billion at issuance. Additionally, the number of defeased loans has increased to nine (13.6% of the pool). The pool's overall net operating income (NOI) has improved, with a 22.8% NOI increase compared to issuer underwriting at origination.

Three loans are on the servicer's watch list, including a loan secured by 314-326 East 78th Street (1% of the pool). The property is located on the Upper East Side of Manhattan, built in 1906, and improved with three, six-story apartment buildings consisting of 98 units, with ground floor commercial units. A tenant-related fire occurred on April 8, 2015 at 314 East 78th Street. A total of 28 units in one of the three buildings were damaged. Reconstruction began in October 2015, but the building is still under a full vacate order from the city of New York. As a result, overall occupancy at the property is 71.4%. Thus far, hazard insurance proceeds of approximately $656 thousand have been received of which the servicer has disbursed $252 thousand. Despite the occupancy decline, NOI DSCR was 1.94x as of year-to-date (YTD) 3Q 2015. Fitch will continue to monitor.

The largest loan (11.1% of the pool) is secured by the Riata Portfolio, a portfolio of eight garden-style multifamily communities totalling 2,044 units located in Austin, TX, approximately 15 miles northwest of the downtown CBD. The buildings were built between 1997 and 2001 and renovated in 2012. The portfolio is supported by approximately 7 million square feet (sf) of office space within a two-mile radius. Occupancy and NOI DSCR was 95% and 1.60x, respectively, as of YTD 3Q 2015.

The second largest loan (4.3% of the pool) is secured by Fairway Palms and Ironwood Apartments, a 496-unit garden-style apartment community located in Rancho Cucamonga, CA approximately 40 miles east of the Los Angeles CBD within the Riverside-San Bernardino MSA. Built in 2002, the subject was initially developed as two individual properties, but both the previous and current ownership operate the communities as one combined property. Occupancy was 95% and NOI DSCR was 1.54x as of year-end (YE) September 2015.

RATING SENSITIVITIES

The Rating Outlooks on all classes remain Stable. Credit enhancement (C/E) to class B has improved with the defeasance of 13.6% of the pool. Fitch does not foresee further upgrades or a downgrade 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 'FREMF 2013-K713 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-713' (May 28, 2013) presale report, 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 upgraded the following ratings:

FREMF 2013-K713 Multifamily Mortgage Pass-Through Certificates

--$100.1 million class B to 'Asf' from 'A-sf'; Outlook Stable.

Fitch has affirmed the following ratings:

FREMF 2013-K713 Multifamily Mortgage Pass-Through Certificates

--$87.24 million class A-1 at 'AAAsf'; Outlook Stable;

--$1.21 billion class A-2 at 'AAAsf'; Outlook Stable;

--$1.30 billion* class X1 at 'AAAsf'; Outlook Stable;

--$1.30 billion* class X2-A at 'AAAsf'; Outlook Stable;

--$40 million class C at 'BBBsf'; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates, Series K-713

--$87.24 million class A-1 at 'AAAsf'; Outlook Stable;

--$1.21 billion class A-2 at 'AAAsf'; Outlook Stable;

--$1.30 billion* class X1 at 'AAAsf'; Outlook Stable.

*Notional amount and interest only.

Of FREMF 2013-K713, Fitch does not rate the $260.1 million interest-only class X2-B, the $260.1 million interest-only class X3, or the $120.1 million class D. Of the Freddie Mac Structured Pass-Through Certificates, Series K-713, Fitch does not rate the $260.1 million interest-only class X3.

There were two variances from criteria related to classes B and C. The surveillance criteria indicated that rating upgrades above the recommended ratings were possible for these two classes. However, Fitch has determined that further upgrades are not warranted at this time. The upgrades reflect the current pool performance and credit enhancement.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412

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

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

U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395

Related Research

FREMF 2013-K713 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K713: Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709496

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004701

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004701

Endorsement Policy

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

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Contacts

Fitch Ratings, Inc.
Primary Analyst
Martin Nunnally
Associate Director
+1-212-908-0871
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Christopher Bushart
Senior Director
+1-212-908-0606
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings, Inc.
Primary Analyst
Martin Nunnally
Associate Director
+1-212-908-0871
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Christopher Bushart
Senior Director
+1-212-908-0606
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com