KBRA Assigns Preliminary Ratings to FREMF 2020-K737 and Freddie Mac Structured Pass-Through Certificates Series K-737

Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to nine classes of FREMF Series 2020-K737 mortgage pass-through certificates and five classes of Freddie Mac structured pass-through certificates (SPCs), Series K-737 (see ratings list below). FREMF 2020-K737 is a $1.5 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2020-K737 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

The underlying transaction is collateralized by 51 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $2.5 million to $171.2 million. The largest exposure is represented by North Harbor Tower (11.5%), a 600-unit, Class-A, high-rise complex located in downtown Chicago, Illinois. The five largest loans represent 28.5% of the cut-off date balance and also include Merrick Apartments (5.5%), Pointe At Foothills Apartment Homes (4.0%), Mirasol (3.8%), and The Creek @ 2645 (3.6%). The assets are located in 20 states, with the three largest concentrations in California (18.7%), Illinois (12.6%), and Texas (12.1%).

KBRA’s analysis of the underlying transaction incorporated our 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 U.S. CMBS Property Evaluation Methodology. 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 45.4% less than third-party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.50%. 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 pre-sale report, FREMF 2020-K737, published at www.kbra.com. 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 2020-K737

Class

Class Balance (US$)

Expected KBRA Rating

A-1

$183,080,000

AAA (sf)

A-2

$1,025,078,000

AAA (sf)

A-M

$66,708,000

A+ (sf)

B

$59,296,000

BBB+ (sf)

C

$37,060,000

BBB (sf)

D

$111,181,201

NR

X1

$1,208,158,000*

AAA (sf)

XAM

$66,708,000*

AAA (sf)

X2-A

$1,208,158,000*

AAA (sf)

X2-B

$274,245,201*

AAA (sf)

X3

$207,537,201*

NR

*Notional Balance

Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K-737

Class

Class Balance (US$)

Expected KBRA Rating

A-1

$183,080,000

AAA (sf)

A-2

$1,025,078,000

AAA (sf)

A-M

$66,708,000

A+ (sf)

X1

$1,208,158,000*

AAA (sf)

XAM

$66,708,000*

AAA (sf)

X3

$207,537,201*

NR

*Notional Balance

To access ratings, reports and disclosures, click here.

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

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

View source version on businesswire.com: https://www.businesswire.com/news/home/20200121005756/en/

Contacts

Analytical Contacts:

Patrick Skowronski, Senior Analyst
(646) 731-3376
pskowronski@kbra.com

Yee Cent Wong, Senior Managing Director
(646) 731-2374
ywong@kbra.com

Ravish Kamath, Director
(646)-731-2328
rkamath@kbra.com

Mimi Ophir, Director
(646) 731-3383
mophir@kbra.com

Business Development Contact:

Michele Patterson, Managing Director
(646) 731-2397
mpatterson@kbra.com