DBRS Confirms Two Classes of FREMF 2010-K8 Mortgage Trust, Series 2010-K8

DBRS has today confirmed two classes of FREMF 2010-K8 Mortgage Trust, Series 2010-K8 as follows:

-- Class B at A (high) (sf)
-- Class X2 at AAA (sf)

Both classes have Stable trends.

This transaction comprises 72 fixed-rate loans secured by 72 multifamily properties. One loan, representing 0.91% of the outstanding pool balance, is shadow-rated investment grade by DBRS.

As of the September 2012 remittance report, the pool has experienced collateral reduction of 1.80% since issuance, with all original loans outstanding. There are no defeased loans in the pool. The weighted-average debt service coverage ratio (DSCR) for the pool was 1.50 times (x), with a weighted-average debt yield of 10.30%, up from 1.40x and 9.20% at issuance, respectively. The largest fifteen loans in the pool, representing 52.94% of the outstanding balance, had a weighted-average DSCR of 1.44x at YE2011 and exhibited a weighted-average debt yield of 10.05%, as calculated in the YE2011 net cash flow (NCF) figures for each loan and the outstanding loan balance as of the September 2012 remittance report. Cash flow growth for the largest fifteen loans has been healthy since then, at a weighted-average growth rate of 14.29% from the DBRS underwritten NCF figure at issuance.

As of the September 2012 remittance report, there was one loan on the servicer’s watchlist, Prospectus ID #66, (920 Wilcox Apartments), representing 0.91% of the pool. The loan is secured by a 25-unit garden apartment community in Los Angeles, California. The loan is on the watchlist for a low DSCR, which was at 0.50x at YE2011 and at 0.90x as of Q1 2012. The DSCR had improved to 1.15x with the Q2 2012 analysis. The issuer underwrote a DSCR of 1.32x for this loan. According to the servicer, the borrower has been working on renovating units as they have become available over the past year, contributing to spikes in vacancy in 2011 and early 2012. As the units turn over and renovations are completed, the borrower has been raising the asking rental rate for the upgraded units. The property was 84.62% occupied at August 2012, up from 77% at YE2011, and the borrower expects occupancy to return to 2010 levels (which hovered near 95%) in the near term as the renovations are completed.

For additional details on the DBRS viewpoint for this transaction, and for details on the largest loans in the pool and the loan on the servicer’s watchlist, please see the September 2012 Monthly Surveillance Report for this transaction, which will be published shortly.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are CMBS Rating Methodology (January 2012) and CMBS North American Surveillance Methodology (May 2011), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.