KBRA Assigns Preliminary Ratings to FREMF 2018-K732 and Freddie Mac Structured Pass-Through Certificates K-0732

Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of
preliminary ratings to nine classes of FREMF Series 2018-K732 mortgage
pass-through certificates and five classes of Freddie Mac structured
pass-through certificates (SPCs), Series K-0732 (see ratings list
below). FREMF Series 2018-K732 is a $1.1 billion CMBS multi-borrower
transaction. Freddie Mac will guarantee six classes of certificates
issued in the underlying Series 2018-K732 securitization and will
deposit the guaranteed underlying certificates into a separate trust
that will issue the SPCs.

The underlying transaction is collateralized by 44 fixed-rate
multifamily mortgage loans. The loans have principal balances that range
from $2.7 million to $59.1 million. The largest exposure is represented
by LINQ At Berryessa Station (5.5%), a 230-unit, Class-A, mid-rise
multifamily complex located in San Jose, California, approximately three
miles northeast of the city’s CBD. The five largest loans represent
23.7% of the cut-off date balance and also include Pacific Shores
Apartments (5.1%), MHC Crossed Loan Portfolio (5.0%), Stadium Village
(4.3%), and Walnut Grove Landing Apartments (3.9%). The assets are
located in 16 states, with the three largest concentrations in Florida
(15.9%), Texas (14.9%), and Georgia (13.3%).

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 CMBS
Property Evaluation Methodology. KBRA’s weighted average KNCF
for the portfolio is 3.6% 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 41.7% less
than third party appraisal values. The weighted average KBRA
capitalization rate for the transaction is 8.76%. 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.

For complete details of the analysis, please see our pre-sale report, FREMF
2018-K732, published today at www.kbra.com.
The report includes our KBRA
Comparative Analytic Tool (KCAT). KCAT is an easy to use,
Excel-based workbook that provides the following information:

The preliminary ratings are based on information known to KBRA at the
time of this publication. Information received subsequent to this
release could result in the assignment of final ratings that differ from
the preliminary ratings.

Preliminary Ratings Assigned: FREMF 2018-K732

*Notional balance

Preliminary Ratings Assigned: Freddie Mac Structured
Pass-Through Certificates, Series K-0732

*Notional balance

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required,
pursuant to SEC Rule 17g-7, to provide a description of a transaction’s
representations, warranties and enforcement mechanisms that are
available to investors when issuing credit ratings. KBRA’s disclosure
for this transaction can be found in the report available here.

Related Publications: (available
at www.kbra.com)


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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S.
Securities and Exchange Commission as an NRSRO. In addition, KBRA is
recognized by the National Association of Insurance Commissioners as a
Credit Rating Provider and a certified Credit Rating Agency (CRA) by the
European Securities and Markets Authority (ESMA). Kroll Bond Rating
Agency Europe Limited is registered with ESMA as a CRA.

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