Fitch Affirms FREMF 2011-K10

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed one class of Freddie Mac's FREMF Mortgage Trust, series 2011-K10 multifamily mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release.

KEY RATING DRIVERSThe affirmations are the result of stable performance of the underlying pool since issuance. As of the June 2015 distribution date, the pool's aggregate principal balance has been reduced by 11.63% to $1.02 billion from $1.17 billion at issuance. Per the servicer reporting, eight loans (12.3% of the pool) are defeased. Fitch has designated two loans as Fitch Loans of Concern, and no loans have been in special servicing since issuance.

The largest Fitch Loan of Concern (FLOC) is secured by a 252 unit, 684-bed, student housing apartment complex located in Austin, TX (1.3% of the pool). The servicer-reported debt service coverage ratio (DSCR) declined to 0.94x at year-end (YE) 2013 from 1.31x at YE 2012. The decline in the DSCR was due to an increase in operating expenses primarily associated with repairs and maintenance. As of December 2014, the subject has improved significantly. Net operating income (NOI) increased 33% and DSCR increased to 1.25x.

The next FLOC is secured by a 102-unit garden-style apartment complex located in Conway, AR (0.4%). The property had experienced cash flow issues in 2013 due to a decline in occupancy, reporting at 77.5% as of YE 2013 compared to 95.1% at issuance. The property was sold and the loan was assumed by a new borrower in 2014. Transition from the original borrower to new borrower resulted in increased operating expenses and a corresponding drop in DSCR to 0.95x for YE 2014 from 1.18x at YE 2013. Per the servicer, the new borrower is expected to stabilize operating expenses and improve occupancy. As of December 2014, occupancy increased by 20% to 93.1%.

The largest loan in the pool (12% of the pool) is secured by East Coast 6, a 499-unit high rise apartment complex located in Long Island City, NY. The property is part of a larger site that represents stage II of the Queens West waterfront development land use improvement master-planned project located along the East River in Hunters Point. As of December 2014, occupancy was 99.2% and DSCR was 1.58x.

RATING SENSITIVITIESThe Rating Outlook on class B remains Stable. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's overall portfolio-level metrics. Additional information on rating sensitivity is available in the 'FREMF 2011-K10 Multifamily Mortgage Pass-Through Certificates, available at www.fitchratings.com.

DUE DILIGENCE USAGENo third party due diligence was provided or reviewed in relation to this rating action.

Fitch has affirmed the following class:

--$68.5 million class B at 'A-sf'; Outlook Stable.

Additional information is available at www.fitchratings.com.

Applicable CriteriaGlobal Structured Finance Rating Criteria (pub. 06 Jul 2015)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria (pub. 10 Dec 2014)https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=812608

Additional DisclosuresDodd-Frank Rating Information Disclosure Formhttps://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=987626Solicitation Statushttps://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987626Endorsement Policyhttps://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150708006415/en/

Fitch Ratings
Primary Analyst
Benson Thomas
Director
+1-212-908-0645
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Christopher Bushart
+1-212-908-0606
or
Media Relations
Sandro Scenga, New York, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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