Kroll Bond Rating Agency Assigns Preliminary Ratings to FREMF 2017-K62 and Freddie Mac Structured Pass-Through Certificates K-062

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to seven classes of FREMF Series 2017-K62 mortgage pass-through certificates and five classes of Freddie Mac structured pass-through certificates (SPCs), Series K-062 (see ratings list below). FREMF Series 2017-K62 is a $1.4 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2017-K62 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

The underlying transaction is collateralized by 67 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $3.2 million to $103.1 million. The largest exposure is represented by Pembrooke On The Green (7.1%), a 959-unit, Class-B, garden-style multifamily complex located in Denver, Colorado, approximately 12 miles southeast of the city’s CBD. The five largest loans represent 23.6% of the cut-off date balance and also include Abbey Woods (6.5%), Arcadia Townhomes (3.6%), Santana Ridge (3.3%), and The Avenue (3.1%). The assets are located in 25 states, with three representing more than 10.0% of the pool: Texas (16.5%), Colorado (12.6%) and Washington (11.1%).

KBRA’s analysis of the underlying 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 Methodology. KBRA’s weighted average KNCF for the portfolio is 3.5% 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 38.8% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.81%. 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 2017-K62, published today at www.kbra.com. The report includes our KBRA Comparative Analytic Tool (KCAT). KCAT is an easy to use, Excel-based workbook that provides the following information:

  • KBRA Deal Tape – contains KBRA loan level details for every loan in the pool, and the ability for users to input adjustments to KNCF and KBRA Cap Rates and see the related impact on key deal metrics.
  • KBRA Credit Metrics Comparison Tool – Enables the user to compare the subject transaction to a user-defined transaction comp set.
  • Excel based property cash flow statements for the top 20 loans.

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 2017-K62

         
Class   Class Balance (US$)   Expected Rating
A-1   $145,471,000   AAA(sf)
A-2   $1,016,993,000   AAA(sf)
A-M   $79,423,000   A+(sf)
X1   $1,162,464,000   AAA(sf)
XAM   $79,423,000*   AAA(sf)
B   $57,762,000   BBB+(sf)
C   $36,101,000   BBB-(sf)
X3   $202,168,106*   NR
D   $108,305,106   NR

*Notional balance

 

Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K-062

         
Class   Class Balance (US$)   Expected Rating
A-1   $145,471,000   AAA(sf)
A-2   $1,016,993,000   AAA(sf)
A-M   $79,423,000   A+(sf)
X1   $1,162,464,000*   AAA(sf)
XAM   $79,423,000*   AAA(sf)
X3   $202,168,106*   NR

*Notional balance

 

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms set forth in the related offering documents when issuing credit ratings when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled FREMF 2017-K62 Representations & Warranties Disclosure.

Related publications (available at www.kbra.com):

FREMF 2017-K62 Presale Report 
CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published January 4, 2017
CMBS Property Evaluation Methodology, published December 3, 2015 
Methodology for Rating Interest-Only Certificates in CMBS Transactions, published June 6, 2016

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).

Contacts

Analytical Contacts:
Kroll Bond Rating Agency
Alec Abrams, 646-731-2401
aabrams@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Dayna Carley, 646-731-2391
dcarley@kbra.com
or
Patrick McQuinn, 646-731-2445
pmcquinn@kbra.com

Follow us on Twitter!
@KrollBondRating

Contacts

Analytical Contacts:
Kroll Bond Rating Agency
Alec Abrams, 646-731-2401
aabrams@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Dayna Carley, 646-731-2391
dcarley@kbra.com
or
Patrick McQuinn, 646-731-2445
pmcquinn@kbra.com

Follow us on Twitter!
@KrollBondRating