Kroll Bond Rating Agency Assigns Preliminary Ratings to FREMF 2016-K58 and Freddie Mac Structured Pass-Through Certificates K-058

NEW YORK--(BUSINESS WIRE)-- Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to nine classes of FREMF Series 2016-K58 mortgage pass-through certificates and five classes of Freddie Mac structured pass-through certificates (SPCs), Series K-058. FREMF Series 2016-K58 is a $1.3 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2016-K58 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

The underlying transaction is collateralized by 74 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $2.3 million to $143.7 million. The largest exposure is represented by The Park At Arlington Ridge (11.2%), an 830-unit, Class-B, garden-style multifamily complex located in Arlington, Virginia, approximately six miles southwest of Washington DC. The five largest loans represent 23.6% of the cut-off date balance and also include Paseo Villas (2nd largest, 3.3%), Mansion At Technology Park (3rd largest, 3.3%), Rivet Apartments (4th largest, 2.9%), and ReNew At The Shops (5th largest, 2.9%). The assets are located in 29 states, with two state exposures individually accounting for more than 10.0% of the pool: Virginia (13.1%) and Texas (11.5%).

KBRA’s analysis of the underlying transaction incorporated our U.S. 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 CMBS Property Evaluation Methodology. KBRA’s weighted average KNCF for the portfolio is 3.4% 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 39.3% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.80%. 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 Presale Report, FREMF 2016-K58, published today at www.kbra.com. The report includes our KBRA Comparative Analytic Tool (KCAT). KCAT is an easy to use, Excel-based workbook that provides the following information:

• KBRA Deal Tape – contains KBRA loan level details for every loan in the pool, and the ability for users to input adjustments to KNCF and KBRA Cap Rates and see the related impact on key deal metrics.
• KBRA Credit Metrics Comparison Tool – Enables the user to compare the subject transaction to a user-defined transaction comp set.
• Excel based property cash flow statements for the top 20 loans.

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.

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms set forth in the related offering documents when issuing credit ratings when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled FREMF 2016-K58 Representations & Warranties Disclosure Report.

Related publications (available at www.kbra.com):

FREMF 2016-K58 Presale Report

CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published December 3, 2015

CMBS Property Evaluation Methodology, published December 3, 2015

Methodology for Rating Interest-Only Certificates in CMBS Transactions, published June 6, 2016

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

View source version on businesswire.com: http://www.businesswire.com/news/home/20161024005936/en/

Analytical:
Kroll Bond Rating Agency
Erika Hinman, 646-731-2418
Senior Analyst
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or
Yee Cent Wong, 646-731-2374
Managing Director
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or
Dayna Carley, 646-731-2391
Senior Director
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or
Javier Colon, 646-731-2460
Analyst
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Source: Kroll Bond Rating Agency

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