CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed all four classes of Freddie Mac 2012-K17 multifamily mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates, K-017. A detailed list of rating actions follows at the end of this release.
KEY RATING DRIVERS
The affirmations of Freddie Mac 2012-K17 are based on the stable performance of the underlying collateral pool. As of the February 2014 remittance, the pool had no delinquent or specially serviced loans. The pool's aggregate principal balance has been paid down by 1.6% to $1.252 billion from $1.272 billion at issuance. All 72 loans reported at least partial year 2013 financials. Based on full year or annualized financial statements, the pool's overall net operating income (NOI) improved 15% since issuance. However, the improvement reflects using annualized estimates and is not directly comparable to the full year performance for most of the loans. One loan (2.21% of the pool) is on the servicer's watchlist due to an increase in expenses and a drop in occupancy; however, performance improved during 2013.
The affirmations of the Freddie Mac K-017 certificates are the result of the pass-through nature of the certificates, as they are dependent on the underlying ratings of classes A-1 and A-2 classes.
RATINGS SENSITIVITY
All classes maintain Stable Outlooks. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's overall portfolio-level metrics. Additional information on rating sensitivity is available in the report 'FREMF 2012-K17 Multifamily Mortgage Pass-Through Certificates and Freddie mac Structured Pass-Through Certificates, Series K-017' (April 3, 2012), available at www.fitchratings.com.
The loan on the servicer's watchlist is Broadmoor At Jordan Creek (2.21%). The property is a 310 unit apartment complex located in West Des Moines, IA. The loan was placed on the watchlist in 2013 for a large increase in expenses and dip in occupancy to 87%. The property's occupancy recovered during the second half of 2013 to 99% as of the third quarter 2013 per the servicer's comments. Performance is expected to improve.
The largest loan of the pool (15.18%) is secured by Park Newport, a 1,306-unit four building apartment complex located in Newport Beach, CA. The apartment complex amenities include a movie theater, lounge, fitness center, market, and a dry cleaning facility. The development is situated overlooking Upper Newport Bay and is in close proximity to Fashion Island Mall which is a shopping and dining destination in Orange County, CA. The borrower in the last five years made a significant investment in the interior and exterior upgrades of the structures ensuring that the complex maintains its competitiveness with other premier complexes in the area.
The second largest loan (5.15%) is secured by Cottages of Baton Rouge, a 382-unit, 1,290-bed student housing complex serving Louisiana State University. The property is of superior quality to the neighboring competing assets. A new phase of student housing development was recently completed and the community boasts a full complement of amenities to the residents including weight room, fitness studio, study lounge, pool and tanning stalls. Development of competing assets has been minimal and demand for this product should continue to be strong as more than 20,000 students at the university live off campus.
Fitch has affirmed the following classes as indicated:
FREMF 2012-K17 Multifamily Mortgage Pass-Through Certificates
--$138
million class A-1 at 'AAAsf'; Outlook Stable;
--$926 million class
A-2 at 'AAAsf'; Outlook Stable;
--$1.064 billion class X1 at
'AAAsf'; Outlook Stable;
--$187.7 million class X2-A at 'AAAsf';
Outlook Stable;
--$92.2 million class B at 'A-sf'; Outlook Stable.
Fitch does not rate classes C, interest-only class X2-B, and interest-only class X3.
Freddie Mac Structured Pass-Through Certificates, Series K-017
--$138
million class A-1 at 'AAAsf'; Outlook Stable;
--$926 million class
A-2 at 'AAAsf'; Outlook Stable;
--$1.064 billion class X1 at
'AAAsf'; Outlook Stable.
Fitch does not rate interest-only class X3.
Additional information is available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured
Finance Rating Criteria' (May 24, 2013);
--'U.S. Fixed-Rate
Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).
A comparison of the transaction's Representations, Warranties, and Enforcement (RW&E) mechanisms to those of typical RW&Es for the asset class is available in the following reports:
--'FREMF 2012-K17 Multifamily Mortgage Pass-Through Certificates and
Freddie mac Structured Pass-Through Certificates, Series K-017' (April
3, 2012);
--'FREMF 2012-K17 Multifamily Mortgage Pass-Through
Certificates and Freddie Mac Structured Pass-Through Certificates,
Series K-017 -- Appendix' (April 3, 2012).
Applicable Criteria and Related Research:
Global Structured Finance
Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
U.S.
Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961
FREMF
2012-K17 Multifamily Mortgage Pass-Through Certificates and Freddie Mac
Structured Pass-Through Certificates, Series K-017
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=675108
FREMF
2012-K17 Multifamily Mortgage Pass-Through Certificates and Freddie Mac
Structured Pass-Through Certificates, Series K-017 -- Appendix
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=675874
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=821311
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