KBRA Assigns Preliminary Grades to FREMF 2022-K138 and Freddie Mac Structured Pass-Through Certificate Series K-138

NEW YORK, January 31, 2022–(BUSINESS WIRE)–KBRA is pleased to announce the assignment of preliminary ratings to four classes of FREMF Mortgage Transfer Certificate Series 2022-K138 and three classes of Freddie-Mac Structured Transfer Certificate (SPC), K-138 series. FREMF 2022-K138 is a $1.27 billion multi-borrower CMBS transaction. Freddie Mac will guarantee six classes of certificates issued under the underlying Series 2022-K138 securitization and deposit the underlying guaranteed certificates in a separate trust that will issue the SPCs.

The underlying transaction is secured by 37 multi-family fixed rate mortgages. The loans have principal balances that range from $4.9 million to $127.0 million. The greatest exposure is represented by Pier Village I (10.0%), which is secured by a garden-style multifamily complex located in Long Branch, New Jersey. The five largest loans represent 34.7% of the balance at the cut-off date and also include The Phoenix (9.5%), Hanover Cross Street (5.1%), Two Twelve Clayton (5.1%) and Garden Grove Apartments (5.0%). Assets are located in 17 states, with the three largest concentrations in California (14.0%), New Jersey (10.0%) and Texas (9.6%).

KBRA’s analysis of the underlying transaction has incorporated our CMBS multi-borrower rating process which begins with our analysts’ assessment of the financial and operational performance of the underlying collateral properties, which is used to determine the KBRA’s estimate of sustainable net cash flow (KNCF) and value of KBRA. using our US CMBS property valuation methodology. KBRA’s weighted average KNCF for the portfolio is 5.2% lower than the issuer’s NCF. KBRA capitalization rates were applied to each asset’s KNCF to derive individual property values ​​which, on an aggregate basis, were 48.2% lower than third-party appraisal values. KBRA’s weighted average capitalization rate for the transaction is 8.35%. The KBRA credit model deploys rent and occupancy constraints, probability of default regressions, and loss-given-default calculations to determine losses for each secured loan, which are then used to assign our credit ratings.

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Disclosures

Further information on key credit considerations, sensitivity analyzes which look at factors that may affect these credit ratings and how they could lead to an upgrade or downgrade, and ESG factors (where they are a driver key to the change in credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially significant sources that were used to prepare the credit rating and information on the methodology(ies) (including all significant models and sensitivity analyzes of the main relevant rating assumptions, the where applicable) used to determine credit rating are available in the information disclosure form(s) located here.

Information on the meaning of each rating category can be found here.

Additional information relating to this rating metric is available in the information disclosure form(s) referenced above. Additional information regarding KBRA’s policies, methodologies, grading scales and disclosures is available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the United States Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a rating agency with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a rating agency with the UK Financial Conduct Authority under the temporary registration scheme. In addition, KBRA is designated as the Designated Rating Agency 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.

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