Freddie Mac K-deal program secured $ 1.2 billion from CMBS

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The FREMF 2021-K135 Commercial Mortgage Backed Securities (CMBS) multi-borrower transaction, secured by loans jointly contracted with the Federal Home Loan Mortgage Corp, or Freddie Mac’s, the K-Deal program, is coming to market for raise approximately $ 1.2 billion in funding.

The pool is made up of 45 loans across 50 townhouses and multi-family properties. The Kroll Bond rating agency plans to rate the Notes and estimates the interest-only index to be 58.5%. The properties have a capitalization rate of 8.2% and an ownership score of 3.29.

Garden apartments make up the majority of the pool, accounting for 75.6%. Beyond that, tall and mid-rise buildings, townhouses, and other properties account for 9.2%, 4.7%, 4.1%, and 6.3% of the pool, respectively.

Some 75% of the loans, or 38, are interest-only partial-term (OI) loans, and only six, or 22.9% of the pool, are full-term OI loans. A single loan, representing 2.1% of the pool, has a depreciable balloon, according to KBRA.

At the period of closing, the assets of the trust had a loan-to-value ratio of 68.5%. KBRA plans to assign “AAA” ratings to most of the Notes.

The trust will issue 10 classes of multi-family mortgage transfer certificates, KBRA said. Three of the classes will issue principal and interest payment entitlement notes, while five classes will receive interest only, one class will only receive principal payments, and once the class is a residual class, KBRA said. Freddie Mac will purchase and guarantee the first six classes of certificates.

In a positively rated aspect, the pool has low exposure to non-essential multifamily exposure. Four of the underlying loans are secured by nine properties which include assisted living and pre-fabricated housing.

FREMF 2021-K135 is geographically diverse, with properties located in 27 metropolitan areas. Top five MSAs are Dallas-Fort Worth (9.3%), Stamford (7.9%), Houston (6.6%), New York (6.2%) and Salt Lake City (6.2%) .

In negative credit potential, six of the loans have existing senior equity with characteristics similar to the debt. In addition, each of the mortgages allows the related borrower to contract additional, secured subordinated debt, generally starting 12 months after the first loan was granted.

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