KBRA is pleased to announce the assignment of preliminary ratings to four classes of FREMF Series 2022-K146 mortgage pass-through certificates and three classes of Freddie-Mac structured pass-through certificates (SPCs), Series K-146. FREMF 2022-K146 is a $1.26 billion CMBS multi-borrower transaction. Freddie Mac will guarantee six classes of certificates issued in the underlying Series 2022-K146 securitization and will deposit the guaranteed underlying certificates into a separate trust that will issue the SPCs.

The underlying transaction is collateralized by 43 fixed-rate multifamily mortgage loans. The loans have principal balances that range from $5.2 million to $120.0 million. The largest exposure is represented by Promenade Apartments, Buildings 4 & 5 (9.5%), which is secured by a garden-style multifamily complex located in Irvine, California. The five largest loans represent 29.7% of the cut-off date balance and also include Fox Run Apartments and Townhomes (5.8%), Escape At Arrowhead (5.5%), Seneca Bay (4.7%), and Vintage Horizon West (4.1%). The assets are located in 25 states, with the three largest concentrations in California (16.2%), Maryland (10.1%), and Arizona (9.2%). 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 4.2% 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 49.5% less than third-party appraisal values. The weighted average KBRA capitalization rate for the transaction is 8.34%. 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.

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Related Publications

• U.S. CMBS Multi-Borrower Rating Methodology
• U.S. CMBS Property Evaluation Methodology
• Methodology for Rating Interest-Only Certificates in CMBS Transactions
• Global Structured Finance Counterparty Methodology
• ESG Global Rating Methodology

Disclosures

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 Information Disclosure Form(s) 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 Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. 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.

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