Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to nine classes of FREMF Series 2020-K104 mortgage pass-through certificates and five classes of Freddie Mac structured pass-through certificates (SPCs), Series K-104 (see ratings list below). FREMF 2020-K104 is a $1.4 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2020-K104 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.
The underlying transaction is collateralized by 57 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $1.3 million to $97.2 million. The largest exposure is represented by Winexburg Manor Apartment Homes (6.7%), a 625-unit, garden-style and mid-rise multifamily complex located in Silver Spring, Maryland. The five largest loans represent 27.1% of the cut-off date balance and also include The Reserve At Carlsbad (6.4%), The Hamilton House (5.6%), Brightview Annapolis (4.4%), and The Harrison (4.0%). The assets are located in 26 states, with the three largest concentrations in California (20.5%), Maryland (11.1%), and Texas (10.1%).
KBRA’s analysis of the underlying transaction incorporated our CMBS Multi-Borrower rating process that begins with our analysts' evaluation of the underlying collateral properties' financial and operating performance, which is used to determine KBRA’s estimate of sustainable net cash flow (KNCF) and KBRA value using our U.S. CMBS Property Evaluation Methodology. KBRA’s weighted average KNCF for the portfolio is 3.6% less than the issuer’s NCF. KBRA capitalization rates were applied to each asset’s KNCF to derive individual property values that, on an aggregate basis, were 44.0% less than third-party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.64%. The KBRA credit model deploys rent and occupancy stresses, probability of default regressions, and loss-given default calculations to determine losses for each collateral loan, which are then used to assign our credit ratings.
For complete details of the analysis, please see our pre-sale report, FREMF 2020-K104, published at www.kbra.com. The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of final ratings that differ from the preliminary ratings.
Preliminary Ratings Assigned: FREMF 2020-K104
Class | Class Balance (US$) | Expected KBRA Rating |
A-11 | 153,600,000 | AAA (sf)2 |
A-21 | 1,019,540,000 | AAA (sf)2 |
A-M1 | 70,496,000 | A+ (sf)2 |
B | 57,844,000 | BBB+ (sf) |
C | 36,152,000 | BBB- (sf) |
D3 | 108,457,372 | NR |
Interest Only Certificates | Interest Only Certificates | Interest Only Certificates |
X11 | 1,173,140,0004 | AAA (sf)2 |
XAM1 | 70,496,0004 | AAA (sf)2 |
X2-A | 1,173,140,0004 | AAA (sf) |
X2-B | 272,949,3724 | AAA (sf) |
X31 | 202,453,3724 | N/R |
Preliminary Ratings Assigned: Freddie Mac Structured Pass-Through Certificates, Series K-104
Class | Class Balance (US$) | Expected KBRA Rating |
A-1 | 153,600,000 | AAA (sf)2 |
A-2 | 1,019,540,000 | AAA (sf)2 |
A-M | 70,496,000 | A+ (sf)2 |
X1 | 1,173,140,0004 | AAA (sf)2 |
XAM | 70,496,0004 | AAA (sf)2 |
X3 | 202,453,3724 | N/R |
1Freddie Mac will provide a payment guarantee for these certificates and will purchase such classes and deposit them into a separate trust in exchange for the structured pass-through certificates (“SPCs”).
2KBRA’s rating of this class was assigned without taking the Freddie Mac payment guarantee into account. KBRA would consider this class AAA (sf) if the guarantee was taken into account.
3The Class D certificates receive principal only.
4Notional balance calculated as described in the Legal Analysis section of this presale report.
To access ratings, reports and disclosures, click here.
Related Publications: (available at www.kbra.com)
- FREMF 2020-K104 Pre-Sale Report
- U.S. CMBS Multi-Borrower Rating Methodology
- U.S. CMBS Property Evaluation Methodology
- Methodology for Rating Interest-Only Certificates in CMBS Transactions
- Global Structured Finance Counterparty Methodology
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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.
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