Freddie Mac has announced a new $1.25 billion offering of commercial-mortgage securities and repackaged notes from its multifamily “K-Deal” platform using via its real estate mortgage investment conduit (REMIC) and SPC trusts.
FREMT 2020-K740 Mortgage Trust & Freddie Mac SPCs will market notes backed by a pool of 44 fixed-rate loans secured by 44 multi-family and manufactured housing properties with an outstanding trust balance of $1.285 billion. The deal is among the largest Freddie Mac has on its fourth-quarter K-Deal platform issuance calendar.
By utilizing the REMIC structure, Freddie can widen the potential investor base for the notes to real estate investment trusts and other certain institutional buyers.
The deal includes four classes of notes with preliminary triple-A ratings from Moody’s Investors Service. Kroll Bond Rating Agency has affixed early AAA ratings to two of the senior-most tranches, a $59.3 million Class A-1 notes offering and a Class A-2 tranche of $990.1 million in notes. Both tranches have credit enhancement of 18.375%.
Freddie Mac will also offer a series of six interest-only tranches, three of which carry triple-A ratings as well.
A separate pool of pass-through notes will be issued by Freddie Mac’s SPC Trust that will receive cash flows from corresponding guaranteed note classes issued from the REMIC Trust.
The 44 loans were originated 13 different lenders, and sold to the REMIC Trust by Freddie Mac. PNC Bank's Midland Loan Services will be master servicer of the transaction.
Loans covering more than 27% of the pool balance are secured by properties located in major metropolitan statistical areas such as New York (15.8%), Chicago (6.9%) and Boston (5%).
About 65% of the properties have made deposits into COVID-19 debt service reserves to cover principal and interest payments to MBS investors in the event of deferred tenant payments for the properties, according to presale reports.
