KBRA Assigns Preliminary Ratings to FREMF 2019-K103 and Freddie Mac Structured Pass-Through Certificates K-103

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to nine classes of FREMF Series 2019-K103 mortgage pass-through certificates and five classes of Freddie Mac structured pass-through certificates (SPCs), Series K-103 (see ratings list below). FREMF Series 2019-K103 is a $1.3 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2019-K103 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

The underlying transaction is collateralized by 46 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $3.1 million to $86.8 million. The largest exposure is represented by Park Regency Club Apartments (6.8%), a 460-unit, Class-B, garden-style complex located in Downey, California, approximately 15 miles southeast of Los Angeles’ CBD. The five largest loans represent 26.7% of the cut-off date balance and also include Villas At Wood Ranch (6.3%), York Brook Apartments (4.8%), Madison Ellis Preserve (4.7%), and The Park At Hurstbourne Apartments (4.1%). The assets are located in 22 states, with the three largest concentrations in California (13.9%), Colorado (9.3%), and Florida (8.8%).

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 U.S. CMBS Property Evaluation Methodology. KBRA’s weighted average KNCF for the portfolio is 3.0% 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 42.6% less than third-party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.59%. 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 2019-K103, published at www.kbra.com. 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 2019-K103

Class

Class Balance (US$)

Expected KBRA Rating

A-1

$109,473,000

AAA (sf)

A-2

$929,128,000

AAA (sf)

A-M

$59,029,000

A+ (sf)

B

$51,053,000

BBB+ (sf)

C

$31,908,000

BBB- (sf)

D

$95,723,806

NR

X1

$1,038,601,000*

AAA (sf)

XAM

$59,029,000*

AAA (sf)

X2-A

$1,038,601,000*

AAA (sf)

X2-B

$237,713,806*

AAA (sf)

X3

$178,684,806*

NR

*Notional Balance

Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K-103

Class

Class Balance (US$)

Expected KBRA Rating

A-1

$109,473,000

AAA (sf)

A-2

$929,128,000

AAA (sf)

A-M

$59,029,000

A+ (sf)

X1

$1,038,601,000*

AAA (sf)

XAM

$59,029,000*

AAA (sf)

X3

$178,684,806*

NR

*Notional Balance

To access ratings, reports and disclosures, click 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 designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is 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

Analytical Contacts:

Patrick Skowronski, Senior Analyst
(646) 731-3376
pskowronski@kbra.com

Yee Cent Wong, Senior Managing Director
(646) 731-2374
ywong@kbra.com

Dayna Carley, Senior Director
(646) 731-2391
dcarley@kbra.com

Business Development Contact:

Michele Patterson, Managing Director
(646) 731-2397
mpatterson@kbra.com

Contacts

Analytical Contacts:

Patrick Skowronski, Senior Analyst
(646) 731-3376
pskowronski@kbra.com

Yee Cent Wong, Senior Managing Director
(646) 731-2374
ywong@kbra.com

Dayna Carley, Senior Director
(646) 731-2391
dcarley@kbra.com

Business Development Contact:

Michele Patterson, Managing Director
(646) 731-2397
mpatterson@kbra.com