Fitch Upgrades FREMF 2011-K10

NEW YORK--()--Fitch Ratings has upgraded one class of Freddie Mac's FREMF Mortgage Trust, series 2011-K10 multifamily mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The upgrade is the result of stable performance and an increase in defeasance since the last review; as of this review, approximately 19% of the pool is defeased. As of the April 2016 distribution date, the pool's aggregate principal balance has been reduced by 14.25% to $999 million from $1.17 billion at issuance. Per the servicer reporting, 12 loans (18.4% of the pool) are defeased. Three loans (3.2%) are on the servicer's watch list, two of which (1.7%) have been designated as Fitch Loans of Concern for occupancy and/or debt service coverage ratio (DSCR) declines. No loans have been in special servicing since issuance.

The largest Fitch Loan of Concern (1.4% of the pool) is secured by a 300-unit two story apartment complex located in Killeen-Temple, TX. As of December 2015, occupancy declined to 80% from 92% at year-end 2014 while the DSCR declined 9% to 1.51x from 1.66x. Fitch will continue to monitor the property's performance.

The largest loan in the pool (12.1%) is secured by East Coast 6, a 499-unit high rise apartment complex located in Long Island City, NY. The property is part of a larger site that represents stage II of the Queens West waterfront development land use improvement master-planned project located along the East River in Hunters Point. As of February 2016, occupancy was 99%.

The second largest loan in the pool (4.2%) is secured by Middletown Trace Apartments is a 508-unit garden-style apartment complex located in Langhorne, PA. The property was built in 1972 and undergone recent renovations on 25% of the units. As of December 2015, occupancy increased to 99% from 95% at year-end 2014.

The third largest loan in the pool (3.8%) is secured by The Links at the Rock is a 684-unit, garden-style apartment complex located in North Little Rock, AR. The property was built in 2008. The collateral also includes a nine-hole golf course that runs through the apartment complex. As of December 2015, occupancy was 96% and DSCR was 1.40x.

RATING SENSITIVITIES

The Rating Outlook on class B remains Stable. Fitch does not foresee further positive or negative rating actions 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 2011-K10 Multifamily Mortgage Pass-Through Certificates, available at www.fitchratings.com.

DUE DILIGENCE USAGE

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

There was a variance from criteria related to class B. The surveillance criteria indicated that a further rating upgrade was possible for this class. However, Fitch has determined that further rating upgrades are not warranted at this time. The upgrade reflects the current pool performance and credit enhancement.

Fitch has upgraded the following class:

--$68.5 million class B to 'Asf' from 'A-sf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

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

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1004704

Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1004704

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings
Primary Analyst:
Catherine Barbieri, +1-212-908-0638
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Christopher Bushart, +1-212-908-0606
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst:
Catherine Barbieri, +1-212-908-0638
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson:
Christopher Bushart, +1-212-908-0606
Senior Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
New York
sandro.scenga@fitchratings.com