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

DBRS has today confirmed two classes of Multifamily Mortgage Pass-Through Certificates Series 2010-K8 issued by FREMF 2010-K8 Mortgage Trust, Series 2010-K8 as follows:

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

The trends are Stable.

The rating confirmations reflect the overall stable performance of the transaction since issuance, with the pool consisting of 72 fixed-rate loans secured by 72 multifamily properties. As of the September 2014 remittance report, the transaction has experienced collateral reduction of 4.5% since issuance, as a result of scheduled loan amortization. According to YE2013 reporting, the pool has a stable weighted-average (WA) debt service coverage ratio (DSCR) of 1.68 times (x) and a WA debt yield of 11.9%. The transaction also benefits from defeasance collateral as one loan, representing 1.68% of the current pool balance, is fully defeased. DBRS also shadow rates one loan, representing 0.92% of the current pool balance, as investment grade. DBRS has today confirmed that the performance of this loan remains consistent with investment-grade loan characteristics.

As of the September 2014 remittance report, there are seven loans on the servicer’s watchlist, representing 4.0% of the current pool balance. One of these loans is highlighted below:

The Village at Rockborough (Prospectus ID#18), Village at Cedarbrooke (Prospectus ID#19) and Village at Kingsborough (Prospectus ID#20) loans are secured by multifamily properties in Wichita, Kansas, located in separate submarkets. The loans are cross-defaulted, cross-collateralized and share the same borrower. Only the Village at Kingsborough loan is currently on the servicer’s watchlist; however, all three properties were previously on the servicer’s watchlist due to various property condition issues, including down units caused by a fire, water damage to foundation and plumbing issues. Additional deferred maintenance items cited included deteriorating parking lot asphalt and rotting wood and exterior property damage. The Village at Rockborough and Village at Cedarbrooke assets have been removed from the servicer’s watchlist as their respective property condition and loan performance have improved; however, the Kingsborough asset remains on the servicer’s watchlist due to a low YE2013 DSCR of 0.97x, which was caused by a low occupancy rate. According to the June 2014 rent roll, occupancy has improved to 93.9% compared with 78.6% in June 2013, which should assist in stabilizing the property. Despite the deferred maintenance issues across all the three properties, the loans are current and had a YE2013 WA DSCR of 1.12x in YE2013 and WA occupancy of 88.3% as of June 2014. The loans are in the final stages of being assumed, with a condition of the assumption requiring the new borrower to establish a repair escrow account, in excess of the planned expenditures used to address the deferred maintenance.

The DBRS analysis considered the largest 15 loans, the shadow-rated loan and the loans on the servicer’s watchlist, which together, comprise approximately 59.0% of the current pool balance.

For additional details on the DBRS viewpoint for this transaction, and for details on the largest loans in the pool and the loans on the servicer’s watchlist, please see the September 2014 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 (November 2012), which can be found on our website under Methodologies.

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