The FREMF 2021-K744 Trust is preparing to issue $780.3 million in commercial mortgage-backed securities, in a multi-borrower transaction backed by loans in conjunction with the better performing K-Deal program from the Federal Home Loan Mortgage Corporation, or Freddie Mac.
Freddie Mac’s K-Deal brand, which actually comprises 16 programs, focuses on the agency’s core multi-borrower securitized loans, and was initiated after the Great Recession, according to Kroll Bond Rating Agency. It has a track record of better performance, with a default rate of 0.35% among seven of about 16 securitization programs over 300 transactions that were studied from June 2009 to December 2020, KBRA said.
Ten classes of multifamily mortgage pass-through certificates will be issued from the trust, which is secured by 29 loans on 29 properties. Not only does that fewer loans than comparable transactions, but at 8.26%, the cap rate is lower, too, KBRA said.
Garden apartment style developments accounts for the highest concentration of properties, at 89.2%, followed by mid-rise developments, which account for 6.1% of the pool concentration; independent living, with 3.3% of the pool concentration; and age-restricted properties, 1.4%, KBRA said.
The pool’s exposure to non-core multifamily assets is limited, at just 3.3%, an exposure that is lower than the average of 7.3% of the comparison set, KBRA said.
In terms of geographic diversity, the largest state represented in the pool is California, at 30.0%, KBRA said.
Highly levered, the transaction has an in-trust KBRA lopan-to-value ratio of 123.2%, slightly below the average of 124.7% among similar rated deals. Yet a sizeable majority of the pool has primary market exposure, at 68.3%, the highest among the comparison set, KBRA said. Meanwhile, the deal’s exposure to tertiary markets is just 8.5%, below the average of 13.3% for the comparison set.
KBRA expects to assign ‘AAA’ ratings to virtually all of the rated classes, which carry a final distribution date of August 2053.
