News Column

Fitch Affirms FREMF 2011-K703

June 5, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed three classes of Freddie Mac's FREMF Mortgage Trust, series 2011-K703 multifamily mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The affirmations are the result of stable performance of the underlying pool since issuance. As of the May 2014 distribution date, the pool's aggregate principal balance has been reduced by 1.8% to $1.2 billion from $1.23 billion at issuance. Per the servicer reporting, one loan (1.2% of the pool) is defeased. Fitch has designated three loans as Fitch Loans of Concern, and no loans have been in special servicing since issuance.

The largest Fitch Loan of Concern is the Lofts 54 loan (0.9% of the pool), which is secured by a 172-unit student housing property located near the University of Illinois in Champaign, IL. The property's net operating income (NOI) decreased approximately 27% in 2013 due to a decline in occupancy. The resulting decrease in NOI resulted in a debt service coverage ratio (DSCR) of 0.96x as of year-end 2013. The servicer reports that a new borrower had acquired the property in the fourth-quarter of 2012 and occupancy has increased to 96% as of year-end 2013 from 78% as of second-quarter 2013. Additionally, the servicer reports the property's expenses increased as a result of marketing and advertising by the new borrower.

The next Fitch Loan of Concern is the Marshall Woods loan (0.1%), which is secured by a 66-unit apartment property located in Upper Darby, PA. The servicer-reported property occupancy and DSCR was 92% and 1.02x, respectively, as of year-end 2013. The servicer reports that the lower DSCR is attributed to both a slight decrease in revenue and an increase in expenses due to property renovations.

The last Fitch Loan of Concern is the Carole House loan (0.1%), which is secured by a 35-unit apartment building located in Upper Darby, PA. The year-end 2013 occupancy and DSCR was 100% and 0.69x, respectively. The decrease in DSCR is a result of a 23% increase in expenses that are primarily associated with utilities and repairs and maintenance.

RATING SENSITIVITY

The Rating Outlooks for all classes remains Stable. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's overall portfolio-level metrics. Additional information on rating sensitivity is available in the 'FREMF 2011-K703 (Sept. 15, 2011) report, available at www.fitchratings.com.

Fitch affirms the following classes as indicated:

--$62.5 million class A-1 at 'AAAsf', Outlook Stable;

--$963.3 million class A-2 at 'AAAsf', Outlook Stable;

--$85.8 million class B at 'A-sf', Outlook Stable;

--$1.03* billion class X1 at 'AAAsf'; Outlook Stable.

Fitch does not rate the class C, X2 and X3 certificates.

*Notional and interest-only.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 11, 2013 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:

Structured Finance >> CMBS >> Criteria Reports

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

Applicable Criteria and Related Research:

FREMF 2011-K703

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651395

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=833237

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Sean Gibbs

Associate Director

+1 212-908-0311

Fitch Ratings, Inc.

33 Whitehall Street

New York, NY 10004

or

Committee Chairperson

Mary MacNeill

Managing Director

+1 212-908-0785

or

Media Relations, New York

Sandro Scenga, +1 212-908-0278

sandro.scenga@fitchratings.com


Source: Fitch Ratings


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