KBRA Assigns Preliminary Ratings to FREMF 2017-K68 and Freddie Mac Structured Pass-Through Certificates K-068

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to nine classes of FREMF Series 2017-K68 mortgage pass-through certificates and five classes of Freddie Mac structured pass-through certificates (SPCs), Series K-068 (see ratings list below). FREMF Series 2017-K68 is a $1.3 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2017-K68 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

The underlying transaction is collateralized by 75 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $873,000 to $119.6 million. The largest exposure is represented by Arden Pointe Apartments (9.1%), a 982-unit, Class-B, garden-style multifamily complex located in Laurel, Maryland, approximately 19 miles northeast of Washington DC and 23 miles southwest of Baltimore. The five largest loans represent 29.3% of the cut-off date balance and also include Lakewood Manor (7.7%), Rock Creek Landing (5.8%), Residences At Historic Alcoa Building (3.5%), and Witham Hill Oaks Apartments (3.3%). The assets are located in 25 states, with the three largest concentrations in California (18.8%), Texas (11.9%), and Maryland (9.6%).

KBRA’s analysis of the underlying transaction incorporated our 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 3.1% 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 40.4% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.82%. 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 Pre-Sale Report, FREMF 2017-K68, 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-K68

       
      Class       Class Balance (US$)       Expected KBRA Rating
      A-1       $136,505,000       AAA(sf)
      A-2       $947,873,000       AAA(sf)
      X1       $1,084,378,000*       AAA(sf)
      X2-A       $1,084,378,000*       AAA(sf)
      A-M       $42,589,000       AA(sf)
      XAM       $42,589,000*       AAA(sf)
      X2-B       $226,049,198*       AAA(sf)
      B       $52,417,000       A-(sf)
      C       $32,761,000       BBB(sf)
      D       $98,282,198       NR
      X3       $183,460,198*       NR

*Notional balance

 

Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K-068

 
      Class       Class Balance (US$)       Expected KBRA Rating
      A-1       $136,505,000       AAA(sf)
      A-2       $947,873,000       AAA(sf)
      X1       $1,084,378,000*       AAA(sf)
      A-M       $42,589,000       AA(sf)
      XAM       $42,589,000*       AAA(sf)
      X3       $183,460,198*       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 that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled FREMF 2017-K68 Representations & Warranties Disclosure Report.

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

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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:
Kroll Bond Rating Agency
Elizabeth Yash, 646-731-3346
Associate
eyash@kbra.com
or
Yee Cent Wong, 646-731-2374
Managing Director
ywong@kbra.com
or
Dayna Carley, 646-731-2391
Senior Director
dcarley@kbra.com
or
Patrick McQuinn, 646-731-2445
Associate Director
pmcquinn@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Elizabeth Yash, 646-731-3346
Associate
eyash@kbra.com
or
Yee Cent Wong, 646-731-2374
Managing Director
ywong@kbra.com
or
Dayna Carley, 646-731-2391
Senior Director
dcarley@kbra.com
or
Patrick McQuinn, 646-731-2445
Associate Director
pmcquinn@kbra.com