Market Overview

Kroll Bond Rating Agency Assigns Final Ratings to FREMF 2012-KF01 and Freddie Mac Structured Pass-Through Certificates Series K-F01


Kroll Bond Rating Agency (KBRA) assigned its final ratings to four classes of FREMF 2012-KF01 mortgage pass-through certificates and two classes of Freddie Mac structured pass-through certificates (SPCs) Series K-F01. Concurrently, we have withdrawn our preliminary ratings on the certificates, which were assigned on September 27, 2012 (see our ratings listed below).

The transaction is a $1.37 billion CMBS multi-borrower transaction that is comprised of floating rate loans originated in conjunction with the Freddie Mac's Capital Markets Execution (CME) program, which is the CME program's inaugural floating rate securitization.

There are 80 loans in the transaction that are each secured by a single property. One of the outstanding loans, Flagler Pointe Apartments (1.1%), is expected to pre-pay prior to the November distribution date.

The underlying properties are located in 21 states, with the two largest concentrations in Texas (25.7%) and California (17.9%), and over half of the pool (60.1%) is located in primary markets. The majority of the collateral is garden-style projects (83.1%) ranging from 47 to 972 units. Student housing (5.5%) and independent/assisted living projects (5.5%) are the only other property type exposures representing more than 5.0% of the pool balance.

KBRA's analysis of the transaction incorporated our multi-borrower rating process that begins with our analysts' evaluation of underlying collateral properties' financial and operating performance. The analysis included a detailed evaluation of the underlying collateral properties using our CMBS Property Evaluation Guidelines to determine Kroll Net Cash Flow (KNCF). The resulting KNCF for the collateral properties was 2.8% below issuer net cash flow on a weighted average basis. KBRA capitalization rates were applied to each asset's KCNF to derive individual property values that, on an aggregate basis, were 33.9% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction was 8.29%, and the pool has a KLTV of 102.1%.

KCNF and KBRA capitalization rates were among the key inputs used in our credit modeling process. The model deploys rent and occupancy stresses, probability of default regressions, and loss given default calculations to determine losses for each collateral loan that were used by KBRA to assign our credit ratings for this transaction.

FREMF 2012-KF01 Mortgage Pass-Through Certificates
Class Rating Balance (USD) Rating Action
A AAA (sf) $ 1,131,164,000 Assigned
X AAA (sf) $ 1,371,108,297 Assigned
B A- (sf) $ 102,833,000 Assigned
C           BBB+ (sf)           $ 34,278,000           Assigned
Freddie Mac Structured Pass-Through Certificates, Series K-F01
Class Rating Balance (USD) Rating Action
A AAA (sf) $1,131,164,000 Assigned
X     AAA (sf)     $1,371,108,297     Assigned

Related publications (available at

CMBS: FREMF 2012-KF01 Pre-Sale Report
CMBS: FREMF 2012-KF01 17g-7 Disclosure Report
CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published February 23, 2012
CMBS Property Evaluation Guidelines, published June 10, 2011

Kroll Bond Rating Agency
Analytical Contacts:
Nitin Bhasin, CFA, 646-731-2334
Troy Doll, 646-731-2336

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