NEW YORK–(COMMERCIAL THREAD) – Kroll Bond Rating Agency (KBRA) is pleased to announce preliminary ratings assigned to four classes of FREMF 2020-K740 Series Mortgage Transfer Certificates and three classes of Freddie Mac Structured Transfer Certificates (SPC ), series K -740. FREMF 2020-K740 is a $ 1.3 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued under the underlying securitization Series 2020-K740 and deposit the underlying guaranteed certificates in a separate trust that will issue the SPCs.
The underlying transaction is secured by 44 multi-family fixed rate mortgages. The loans have principal balances ranging from $ 1.7 million to $ 110.0 million. The largest exhibit is represented by One Sutton Place North (8.6%), a 234-unit high-rise multi-family complex located in the Manhattan neighborhood of New York. The top five loans account for 33.6% of the balance at the due date and also include One East River Place (7.3%), Optima Signature (6.9%), Sunrise Harbor (5.8%) and Hanover Southampton (5.1%). The assets are located in 21 states, with the three largest concentrations in New York (21.1%), Texas (12.5%) and Georgia (10.1%).
KBRA’s analysis of the underlying transaction has incorporated our multi-borrower CMBS rating process which is combined with our analysts’ assessment of the financial and operational performance of the underlying secured properties, which is used to determine the KBRA’s estimate of sustainable net cash flow (KNCF) and value of KBRA. using our Methodology for evaluating the properties of CMBS in the United States. KBRA’s weighted average KNCF for the portfolio is 4.2% below the issuer’s NCF. KBRA cap rates were applied to the KNCF of each asset to derive individual real estate values which, on an aggregate basis, were 49.4% lower than third party appraised values. KBRA’s weighted average capitalization rate for the transaction is 8.20%. The KBRA credit model deploys rent and occupancy constraints, probability of default regressions, and default-on-loss calculations to determine the losses for each secured loan, which are then used to assign our credit ratings.
Further information on key credit considerations, sensitivity analyzes that examine the factors that may affect these credit ratings and how they might lead to an upgrade or downgrade, and ESG factors (where they are a key factor in changing the credit rating or rating outlook) can be viewed in the full rating report mentioned above.
A description of all substantially significant sources that were used to prepare the credit rating and information about the method (s) (including significant models and sensitivity analyzes of the relevant key rating assumptions, if any) used to determine the credit rating is available in the United States Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further information relating to this rating measure is available in the US Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures can be found at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the United States Securities and Exchange Commission. In addition, KBRA is appointed as the designated rating agency by the Ontario Securities Commission for issuers of asset-backed securities to file a simplified prospectus or a shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider and is a credit rating agency (ARC) certified with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a rating agency.