KBRA Assigns Preliminary Ratings to FREMF 2018-K73 and Freddie Mac Structured Pass-Through Certificates K-073

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to nine classes of FREMF Series 2018-K73 mortgage pass-through certificates and five classes of Freddie Mac structured pass-through certificates (SPCs), Series K-073 (see ratings list below). FREMF Series 2018-K73 is a $1.1 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2018-K73 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

The underlying transaction is collateralized by 50 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $1.7 million to $72.2 million. The largest exposure is represented by The Retreat (6.3%), a 316-unit, Class-B, garden-style multifamily complex located in Walnut Creek, California, approximately 18 miles east of the Oakland CBD. The five largest loans represent 25.7% of the cut-off date balance and also include Skye At Arbor Lakes Apartments (5.6%), Henson Creek Apartments (4.8%), Seneca At Cypress Creek (4.5%), and Pembroke Cove Apartments (4.5%). The assets are located in 26 states, with the three largest concentrations in California (23.3%), Florida (16.2%), and Maryland (6.6%).

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 3.7% 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 41.8% 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 pre-sale report, FREMF 2018-K73, published today at www.kbra.com. The report includes our KBRA Agency CMBS 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 2018-K73

 
Class   Class Balance (US$)   Expected KBRA Rating
A-1   $95,500,000   AAA(sf)
A-2   $831,672,000   AAA(sf)
X1   $927,172,000*   AAA(sf)
X2-A   $927,172,000*   AAA(sf)
A-M   $54,203,000   A+(sf)
XAM   $54,203,000*   AAA(sf)
X2-B   $213,962,871*   AAA(sf)
B   $45,646,000   BBB+(sf)
C   $28,528,000   BBB-(sf)
D   $85,585,871   NR
X3   $159,759,871*   NR
   

*Notional balance

 

Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K-073

   
Class   Class Balance (US$)   Expected KBRA Rating
A-1   $95,500,000   AAA(sf)
A-2   $831,672,000   AAA(sf)
X1   $927,172,000*   AAA(sf)
A-M   $54,203,000   A+(sf)
XAM   $54,203,000*   AAA(sf)
X3   $159,759,871*   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 available here.

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

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Courtney Kelly, Associate
(646) 731-3362
ckelly@kbra.com
or
Yee Cent Wong, Senior Managing Director
(646) 731-2374
ywong@kbra.com
or
Dayna Carley, Senior Director
(646) 731-2391
dcarley@kbra.com
or
Patrick McQuinn, Director
(646) 731-2445
pmcquinn@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Courtney Kelly, Associate
(646) 731-3362
ckelly@kbra.com
or
Yee Cent Wong, Senior Managing Director
(646) 731-2374
ywong@kbra.com
or
Dayna Carley, Senior Director
(646) 731-2391
dcarley@kbra.com
or
Patrick McQuinn, Director
(646) 731-2445
pmcquinn@kbra.com