MRO Magazine

Fitch to Rate FREMF 2016-K52 Multifamily Mtge PT Ctfs & Freddie Mac SPC Ser K-052; Presale Issued


January 25, 2016
By Business Wire News

NEW YORK

Fitch Ratings has issued a presale report on FREMF 2016-K52 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates Series K-052.

Fitch expects to rate the transaction and assign Rating Outlooks as follows:

FREMF 2016-K52 Multifamily Mortgage Pass-Through Certificates

–$162,056,000 class A-1 ‘AAAsf’; Outlook Stable;

–$979,000,000 class A-2 ‘AAAsf’; Outlook Stable;

–$1,141,056,000* class X1 ‘AAAsf’; Outlook Stable;

–$1,141,056,000* class X2-A ‘AAAsf’; Outlook Stable;

–$115,153,000 class B ‘BBB+sf’; Outlook Stable;

–$34,895,000 class C ‘BBB-sf’; Outlook Stable.

Freddie Mac Structured Pass-Through Certificates Series K-052

–$162,056,000 class A-1 ‘AAAsf’; Outlook Stable;

–$979,000,000 class A-2 ‘AAAsf’; Outlook Stable;

–$1,141,056,000* class X1 ‘AAAsf’; Outlook Stable.

*Notional amount and interest only.

The expected ratings are based on information provided by the issuer as of Jan. 21, 2016. Fitch does not expect to rate the following classes of FREMF 2016-K52: the $254,732,336 interest-only class X3, the $254,732,336 interest-only class X2-B, or the $104,684,336 class D.

Additionally, Fitch does not expect to rate the following class of Freddie Mac Structured Pass-Through Certificates Series K-052: the $254,732,336 interest-only class X3.

The certificates represent the beneficial interests in a pool of 91 commercial mortgages secured by 96 properties. The Freddie Mac Structured Pass-Through Certificates Series K-052 (Freddie Mac SPC K-052) represents a pass-through interest in the corresponding class of securities issued by FREMF 2016-K52. Each Freddie Mac SPC K-052 security has the same designation as its underlying FREMF 2016-K52 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 63.8% of the properties by balance and cash flow analysis of 72.8% of the pool.

The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.02x, a Fitch stressed loan-to value (LTV) of 117.4%, and a Fitch debt yield of 7.18%. Fitch’s aggregate net cash flow represents a variance of 11.1% to issuer cash flows.

KEY RATING DRIVERS

Fitch Leverage: The pool’s Fitch DSCR and LTV are 1.02x and 117.4%, respectively. This represents higher leverage over the 10-year, K-Series Freddie Mac deals in 2015 which had average DSCR and LTV of 1.08x and 115.5%, respectively.

Above-Average Pool Amortization: Based on the loans’ scheduled maturity balance, the pool is expected to amortize 12.9% during the life of the transaction. This is above the recent amortization levels for Freddie Mac securitizations, which had an average of 10.2% for 2015 Fitch rated, 10-year, K-Series Freddie Mac deals. Within the pool, 12 loans representing 17.8% of the pool are full-term interest-only, and 45 loans representing 43.7% of the pool have partial-term interest-only components.

Manufactured Housing and Healthcare Concentration: Fourteen loans (7.4%) and five loans (1.4%) 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 Fitch-rated, 10-year, K-Series Freddie Mac property concentrations for Manufactured Housing and Healthcare are 5.8% and 1.9%, respectively.

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 2016-K52 pool could withstand a 44.2% decline in value (based on appraised values at issuance) and an approximately 19.9% decrease to the most recent actual cash flow prior to experiencing $1 of loss to any ‘AAAsf’ rated class. In addition, Fitch found that the pool could withstand a 36.8% decline in value and an approximately 9.3% 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 KPMG 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 91 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 at the bottom of the related rating action commentary (RAC).

Additional information is available at www.fitchratings.com.

FREMF 2016-K52 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-052

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=876824

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 2016-K52 Appendix

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=876988

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=998341

ABS Due Diligence Form 15E 1

https://www.fitchratings.com/creditdesk/press_releases/content/ridf15E_frame.cfm?pr_id=998341&flm_nm=15e_998341_1.pdf

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=998341

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.

Fitch Ratings
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Leo Marcus
Associate Director
+1-212-612-7845
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Secondary Analyst
Chase Hatchett
Analyst
+1-646-582-4949
or
Committee Chairperson
Eric Rothfeld
Managing Director
+1-212-908-0761
or
Media Relations:
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sandro.scenga@fitchratings.com