Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to four classes of FREMF Series 2020-K121 mortgage pass-through certificates and three classes of Freddie-Mac structured pass-through certificates (SPCs), Series K-121. FREMF 2020-K121 is a $1.4 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2020-K121 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.
The underlying transaction is collateralized by 62 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $1.6 million to $94.2 million. The largest exposure is represented by Artisan At Main Street Metro (6.7%), a 404-unit, garden-style multifamily complex located in Corona, California. The five largest loans represent 28.5% of the cut-off date balance and also include Multifamily Crossed Portfolio (6.1%), Harbor House (6.0%), Preserve At Creekside (5.0%) and Senior Living Crossed Portfolio (4.7%). The assets are located in 22 states, with three largest concentrations in California (21.2%), Texas (17.8%), and New York (8.5%).
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 3.4% 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 47.0% less than third-party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.62%. 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.
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. 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) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
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