Market Overview

Kroll Bond Rating Agency Assigns Preliminary Ratings to FREMF2012-K711 and Freddie Mac Structured Pass-Through Certificates


Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to seven classes of FREMF 2012-K711 mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates (SPCs), Series K711, a $1.38 billion CMBS multi-borrower transaction (see ratings listed below).

The pool is secured by the borrowers' interests in 76 multifamily properties, with 74 of the loans (93.9 %) secured by the related borrower's fee simple interest in the related property. The loans have principal balances that range from $1.7million to $68.8million for the largest loan, which is secured by the fee simple interest in Canyon Creek Apartments (5.0%), a 558-unit garden-style apartment building located in Bothell, Washington. The top five loans represent 20.2% of the pool cut-off balance, and include Hudson Park North in Yonkers, NY (4.5%), Lincoln Meadows in Schaumburg, IL (4.4%), Seramonte Apartments in Hamden, CT (3.4%) and Gardens East Apartments in Palm Beach Gardens, FL (2.9%). The top ten exposures represent 33.6%. The majority of the properties are garden-style apartment projects (60 properties, 80.6%). The properties range in size from 21 to 576 units. The underlying collateral properties are geographically dispersed throughout 22 states. The three largest state exposures are Florida (21.5%, 15 properties), California (12.5%, 13 properties) and Washington (10.2%, five properties). No other state individually represents more than 8.0% of the total pool balance.

KBRA's analysis of the 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 are used to determine KBRA's estimate of sustainable net cash flow (KNCF) and KBRA value. The analysis incorporates a detailed evaluation of the underlying collateral properties' financial and operating performance using our CMBS Property Evaluation Guidelines to determine Kroll Net Cash Flow (KNCF), which is a key input used in our credit modeling process. KBRA's weighted average KNCF for the portfolio is 2.6% 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 35.0% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.5%.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 on the analysis, please see our Presale Report, FREMF 2012-K711, published today at

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.


Preliminary Ratings Assigned: FREMF 2012-K711

Class                 Rating                 Balance
A-1                 AAA (sf)                 $110,000,000
A-2                 AAA (sf)                 $1,042,049,000
X1*                 AAA (sf)                 $1,152,049,000
X2-A*                 AAA (sf)                 $1,152,049,000
X2-B*                 AAA (sf)                 $227,650,919
B                 A- (sf)                 $89,680,000
C                 BBB+(sf)                 $34,493,000
* Notional Amount

Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K711

Class Rating Balance
A-1 AAA (sf) $110,000,000
A-2 AAA (sf) $1,042,049,000
X1* AAA (sf) $1,152,049,000
* Notional Amount

Rule 17g-7 Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description regarding the representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA's disclosure for this transaction can be found in the report entitled FREMF 2012-K711 17g-7 Disclosure Report.

Related publications (available at

CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published February 23, 2012

CMBS Property Evaluation Guidelines, published June 10, 2011

About Kroll Bond Rating Agency

Kroll Bond Rating Agency, Inc. ( is registered with the SEC as a nationally recognized statistical rating organization (NRSRO). Kroll Bond Rating Agency was established in 2010 to restore trust in credit ratings by establishing new standards for assessing risk and by offering accurate, clear, and transparent ratings.

Kroll Bond Rating Agency
Analytic Contacts:
Monika Joshi, 646-731-2360
Robin Regan, 646-731-2358
Pramit Sheth, 646-731-2330
Troy Doll, 646-731-2336

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