Fitch Assigns Final Ratings to FREMF 2015-K51 Multifamily Mtge PT Ctfs & Freddie Mac SPC Ser K-051
December 18, 2015 | By Business Wire News
NEW YORK
Fitch Ratings has assigned the following ratings and Rating Outlooks to FREMF 2015-K51 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates Series K-051.
FREMF 2015-K51 Multifamily Mortgage Pass-Through Certificates
–$180,000,000 class A-1 ‘AAAsf’; Outlook Stable;
–$796,077,000 class A-2 ‘AAAsf’; Outlook Stable;
–$976,077,000* class X1 ‘AAAsf’; Outlook Stable;
–$976,077,000* class X2-A ‘AAAsf’; Outlook Stable;
–$100,149,000 class B ‘BBB+sf’; Outlook Stable;
–$29,895,000 class C ‘BBB-sf’; Outlook Stable.
Freddie Mac Structured Pass-Through Certificates Series K-051
–$180,000,000 class A-1 ‘AAAsf’; Outlook Stable;
–$796,077,000 class A-2 ‘AAAsf’; Outlook Stable;
–$976,077,000* class X1 ‘AAAsf’; Outlook Stable.
*Notional amount and interest only.
Fitch does not rate the following classes of FREMF 2015-K51: the $219,730,280 interest-only class X3, the $219,730,280 interest only class X2-B, or the $89,686,280 class D. Fitch does not rate the $219,730,280 class X3 of the Structured Pass-Through Certificates, Series K-051.
The certificates represent the beneficial interests in a pool of 99 commercial mortgages secured by 99 properties. The Freddie Mac Structured Pass-Through Certificates Series K-051 (Freddie Mac SPC K-051) represents a pass-through interest in the corresponding class of securities issued by FREMF 2015-K51. Each Freddie Mac SPC K-051 security has the same designation as its underlying FREMF 2015-K51 class. All loans were originated specifically for Freddie Mac by approved Seller Servicers. The certificates follow a sequential-pay structure.
Fitch reviewed a comprehensive sample of the transaction’s collateral, including site inspections on 64.6% of the properties by balance and cash flow analysis of 71.2% of the pool.
The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.09x, a Fitch stressed loan to value (LTV) of 112.4%, and a Fitch debt yield of 7.66%. Fitch’s aggregate net cash flow represents a variance of 9.19% to issuer cash flows.
KEY RATING DRIVERS
Fitch Leverage: The pool’s Fitch DSCR and LTV are 1.09x and 112.4%, respectively. The 2015 year-to-date (YTD) average DSCR and LTV for Fitch-rated, 10-year, K-Series Freddie Mac deals is 1.08x and 115.3%, respectively.
Diverse Pool by Loan Concentration: The top 10 loans comprise 26.9% of the pool, which is lower than the 2015 YTD average of 33.9% for Fitch rated, 10-year, K-Series Freddie Mac deals. The largest loan in the pool, Elan 33 West, represents 4.2% of the pool, while the second largest loan, Landmark At Sugarland, represents 3.5% of the pool.
Manufactured Housing and Healthcare Concentration: Twelve loans (8.9%) and two loans (1.5%) are classified as Manufactured Housing and Healthcare, respectively. Manufactured Housing and Healthcare are considered more volatile and/or require more operational experience than traditional multifamily assets. The average 2015 YTD Fitch-rated, 10-year, K-Series Freddie Mac property concentrations for Manufactured Housing and Healthcare are 5.4% and 1.9%, respectively.
Above-Average Pool Amortization: Within the pool, 17 loans representing 13.5% of the pool are full-term interest-only, and 55 loans representing 70.0% of the pool have partial-term interest-only components. Based on the loans’ scheduled maturity balance, the pool is expected to amortize 10.9% during the life of the transaction. This is above the recent amortization levels for Freddie Mac securitizations, which had an average of 10.1% for 2015 YTD Fitch rated, 10-year, K-Series Freddie Mac deals.
Low Mortgage Coupons: The pool’s weighted average coupon is 4.19%, well below historical averages and slightly above recent 2015 Fitch-rated, 10-year, K-Series Freddie Mac deals. Fitch accounted for increased refinance risk in a higher interest rate environment by reviewing an interest rate sensitivity that assumes an interest rate floor of 4.5% for multifamily properties, in conjunction with Fitch’s stressed refinance rates, which were 8.6% on a weighted average basis.
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 ‘BBB-sf’ and ‘AAAsf’ rated classes. Fitch found that the FREMF 2015-K51 pool could withstand a 46.1% decline in value (based on appraised values at issuance) and an approximately 26.1% decrease to the most recent actual cash flow prior to experiencing $1 of loss to any ‘AAAsf’ rated class. Additionally, Fitch found that the pool could withstand a 39.0% decline in value and an approximately 16.3% decrease in the most recent actual cash flow prior to experiencing $1 of loss to the ‘BBB-sf’ rated class.
DUE DILIGENCE USAGE
Fitch was provided with third-party due diligence information from PricewaterhouseCoopers LLP. The third-party due diligence information was provided on Form ABS Due Diligence-15E and focused on a comparison and re-computation of certain characteristics with respect to each of the 99 mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis. A copy of the ABS Due Diligence Form-15E received by Fitch in connection with this transaction may be obtained through the link contained on the bottom of the related rating action commentary (RAC).
Additional information is available at www.fitchratings.com.
Applicable Criteria
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158
Criteria for Analyzing Multiborrower U.S. and Canadian Commercial Mortgage Transactions (pub. 01 Dec 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874795
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952
Rating Criteria for Structured Finance Servicers (pub. 23 Apr 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864375
Rating Criteria for U.S. Commercial Mortgage Servicers (pub. 14 Feb 2014)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=735382
U.S. and Canadian Fixed-Rate Multiborrower CMBS Surveillance and U.S. Re-REMIC Criteria (pub. 13 Nov 2015)
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873395
Related Research
FREMF 2015-K51 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-051 — Appendix
https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875132
Additional Disclosures
Dodd-Frank Rating Information Disclosure Form
https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=997076
ABS Due Diligence Form 15E 1
Solicitation Status
https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=997076
Endorsement Policy
https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.
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