News Column

Fitch Affirms FREMF 2012-K710 & Freddie Mac Structured Pass-Through Certificates, Series K-710

June 5, 2014

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed six classes of FREMF 2012-K710 Multifamily Mortgage pass-through certificates and three classes of Freddie Mac Structured Pass-Through Certificates, Series K-710. 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. The pool has had no delinquent or specially serviced loans since issuance. The pool's aggregate principal balance has been reduced by 0.8% to $1.27 billion from $1.28 billion at issuance. Fitch has designated two loans (1.4%) as Fitch Loans of Concern.

The affirmations of the Freddie Mac K-710 certificates are based on the pass-through nature of the certificates, as they are dependent on the underlying ratings of corresponding classes of FREMF 2012-K710.

The largest loan of the pool (10.7% of the pool) is secured by Ocean At 1 West, a 492-unit high-rise apartment complex in downtown Manhattan. The 31-story building has 4,589 square foot (sf) ground floor retail, 15,000 sf office space on the mezzanine section, a multi-level below-ground parking garage with 98 spaces and apartments on floors 14 through 31. The property was affected by Hurricane Sandy, which impacted revenues by approximately $1.8 million due to rent concessions. The servicer reports that the insurance proceeds of $16.8 million should be enough to cover all the expenses caused by the storm. There is pending tenant/landlord litigation based on the preparation and response to the storm. Fitch has not received any updated information regarding the litigation at this time.

The largest Fitch Loan of Concern, Cedar Ridge (0.7%), is secured by a 100-unit student housing facility serving the University of Connecticut located in Willington, CT. The servicer-reported occupancy was 64% as of year-end 2012 due to poor leasing performance of the previous management company for the 2012/2013 school year. As a result, the borrower replaced the management company in April 2013 and the property's occupancy has increased to 91% as of February 2014. Historically the property has operated with occupancy levels around 90% and the borrower reports that the property is approximately 77% pre-leased for the 2014/2015 academic year.

The next largest Fitch Loan of Concern is the Woodlake Villas Apartments loan (0.6%), which is secured by a 218-unit multifamily property located in Las Vegas, NV. The property's performance declined slightly in 2013 due to a decrease in occupancy and an increase in operating expenses. Additionally, the net operating income (NOI) decreased approximately 8% in 2013 from 2012 resulting in a debt service coverage ratio of 1.18x as of year-end 2013. The servicer-reported occupancy was 93% as of year-end 2013 from 100% as of year-end 2012.

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 'FREMF 2012-K710 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-710' (August 3, 2012), available at www.fitchratings.com.

Fitch affirms the following classes as indicated:

FREMF 2012-K710 Multifamily Mortgage Pass-Through Certificates

--$107 million class A-1 at 'AAAsf', Outlook Stable;

--$945.5 million class A-2 at 'AAAsf', Outlook Stable;

--$93.2 million class B at 'A-sf', Outlook Stable;

--$32.1 million class C at 'BBBsf', Outlook Stable;

--$1.05* billion class X1 at 'AAAsf', Outlook Stable;

--$1.05* billion class X2-A at 'AAAsf', Outlook Stable.

Fitch does not rate the class D, X2-B and X3 certificates.

Freddie Mac Structured Pass-Through Certificates, Series K-710

--$107 million class A-1 at 'AAAsf', Outlook Stable;

--$945.5 million class A-2 at 'AAAsf', Outlook Stable;

--$1.05* billion class X1 at 'AAAsf', Outlook Stable.

Fitch does not rate the class X3 certificates.

*Notional and interest-only.

A comparison of the transaction's Representations, Warranties, and Enforcement (RW&E) mechanisms to those of typical RW&Es for the asset class is available in the following report:

--'FREMF 2012-K710 Multifamily Mortgage Pass-Through Certificates and Freddie Mac Structured Pass-Through Certificates, Series K-710 -- Appendix' (Aug. 03, 2012).

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);

--'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria' (Dec. 11, 2013).

Applicable Criteria and Related Research:

U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=724961

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=833222

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

Sandro Scenga, New York, +1-212-908-0278

sandro.scenga@fitchratings.com

Source: Fitch Ratings


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