NEW YORK--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on FREMF 2013-K28 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-028.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
FREMF 2013-K28 Multifamily Mortgage Pass-Through Certificates
--$271,795,000 class A-1 'AAAsf'; Outlook Stable;
--$1,329,000,000 class A-2 'AAAsf'; Outlook Stable;
--$1,600,795,000* class X1 'AAAsf'; Outlook Stable;
--$1,600,795,000* class X2-A 'AAAsf'; Outlook Stable;
--$109,253,000 class B 'A-sf'; Outlook Stable;
--$47,501,000 class C 'BBBsf'; Outlook Stable.
Freddie Mac Structured Pass-Through Certificates, Series K-028
--$271,795,000 class A-1 'AAAsf'; Outlook Stable;
--$1,329,000,000 class A-2 'AAAsf'; Outlook Stable;
--$1,600,795,000* class X1 'AAAsf'; Outlook Stable.
*Notional amount and interest only.
The expected ratings are based on information provided by the issuer as of June 3, 2013. Fitch does not expect to rate the following classes of FREMF 2013-K28: the $299,259,031 interest-only class X2-B, the $299,259,031 interest-only class X3, or the $142,505,031 class D. Fitch does not expect to rate the $299,259,031 interest-only class X3 of the Structured Pass-Through Certificates, Series K-028.
The certificates represent the beneficial interests in a pool of 88 commercial mortgages secured by 88 properties. The Freddie Mac Structured Pass-Through Certificates, Series K-028 (Freddie Mac SPC K-028) represents a pass-through interest in the corresponding class of securities issued by FREMF 2013-K28. Each Freddie Mac SPC K-028 security has the same designation as its underlying FREMF 2013-K28 class. All loans were originated by various seller/servicers according to the guidelines of the Freddie Mac Capital Markets Execution (CME) product. The certificates follow a sequential-pay structure.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 73.4% of the properties by balance and cash flow analysis of 77.7% of the pool.
The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.08x, a Fitch stressed loan-to value (LTV) of 115.8%, and a Fitch debt yield of 7.23%. Fitch's aggregate net cash flow represents a variance of 6.71% to issuer cash flows.
KEY RATING DRIVERS
High Fitch Leverage: The Fitch stressed LTV ratio is 115.8% and is above the average of 2012 Fitch-rated 10-year K-series Freddie Mac deals. The DSCR, at 1.08x, is also above the average of the 2012 Fitch-rated 10-year K-series Freddie Mac deals.
Partial Interest and Interest Only Loans: 67% of the pool has a partial-term interest-only component, and 9.3% of the loans in the pool are full-term interest only. Based on the loans' scheduled maturity balances, the pool is expected to amortize 14.8% over the next 10 years.
Loan Concentration: The K28 pool has lower concentration compared to other recently analyzed Freddie pools and regular conduit transactions. As a result, correlations within the model will have less of an effect on levels, and LCI add-on was small. The top 10 loans constitute 31.6% of the pool, which is one of the lowest levels seen in recent Freddie transactions. No single loan constitutes a material concentration in the pool. The top loan is 4.7% of pool, while the second largest loan is 4.6% of the pool.
Strong Origination Practices: All loans were originated by various sellers/originators according to Freddie Mac CME product guidelines and adhere to the originator best practices identified by Fitch. Freddie Mac multifamily loans had an average delinquency of 0.16% as of first-quarter 2013 compared to 8.91% on Fitch-rated CMBS multifamily loans as of the same period. Based on these program attributes, Fitch applies a programmatic credit to Freddie Mac transactions.
Geographic Diversity: The greatest state concentrations are California (22.2%), Texas (17.8%) and Florida (9.8%). No other state represents more than 6.4% of the total collateral balance.
No In-Place Subordinate Debt: No loans have existing subordinate debt. All loans in the transaction are permitted to incur future subordinate debt, contingent upon: a maximum combined LTV equal to the lesser of 80% or the original LTV; combined DSCR of at least 1.25x; Freddie Mac approval; at least 12 months after first mortgage. This feature is very common in Freddie Mac transactions.
RATING SENSITIVITIES
Fitch performed two model-based break-even analyses to determine the level of cash flow and value deterioration the pool could withstand prior to $1 of loss being experienced by the 'BBBsf' and 'AAAsf' rated classes. Fitch found that the FREMF 2013-K28 pool could withstand a 40.63% decline in value (based on appraised values at issuance) and an approximately 15.32% decrease to the most recent actual cash flow prior to experiencing $1 of loss to the 'BBBsf' rated class. Additionally, Fitch found that the pool could withstand a 42.34% decline in value and an approximately 17.76% decrease in the most recent actual cash flow prior to experiencing $1 of loss to any 'AAAsf' rated class.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report.
The Master Servicer and Special Servicer will be KeyCorp Real Estate Capital Markets, Inc. and Wells Fargo, National Association, rated 'CMS1' and 'CSS2-', respectively, by Fitch.
The presale report is available at 'www.fitchratings.com.'
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions', Aug. 8, 2012;
--'U.S. Commercial Mortgage Servicer Rating Criteria', Feb. 18, 2011;
--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and ReREMIC Criteria', Dec. 18, 2012;
--'Global Structured Finance Rating Criteria', May 24, 2013;
--'Criteria for Special-Purpose Vehicles in Structured Finance Transactions', June 13, 2011.
Applicable Criteria and Related Research: FREMF 2013-K28 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-028 (US CMBS)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=710399
Criteria for Analyzing Multiborrower U.S. Commercial Mortgage Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685995
U.S. Commercial Mortgage Servicer Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=584005
U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696969
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Criteria for Special-Purpose Vehicles in Structured Finance Transactions -- Effective 13 June 2011 to 30 May 2012
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=635249
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=793361
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