DBRS Confirms Ratings of FREMF 2013-K26 Mortgage Trust, Series 2013-K26

DBRS Limited (DBRS) has today confirmed the ratings of the following Multifamily Mortgage Pass-Through Certificates, Series 2013-K26 issued by FREMF 2013-K26:

-- Classes A-1 at AAA (sf)
-- Classes A-2 at AAA (sf)
-- Classes X1 at AAA (sf)
-- Classes X2-A at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)

All trends are Stable.

The rating confirmations reflect the overall stability of the pool, which has experienced a collateral reduction of 0.9% since issuance as a result of scheduled loan amortization. At issuance, the pool consisted of 81 fixed-rate loans secured by 81 multifamily properties. As of the March 2015 remittance, all of the original 81 loans remain in the pool with an aggregate outstanding principal balance of $1,453.0 million. The top 15 loans continue to exhibit stable performance with a weighted-average (WA) debt service coverage ratio (DSCR) and WA debt yield of 1.56 times (x) and 8.0%, respectively. There are no delinquent or specially serviced loans as of the March 2015 remittance. However, there is one loan on the servicer’s watchlist which is highlighted below.

Villa San Marco (Prospectus ID#70, representing 0.4% of the current pool balance) is secured by a multifamily property located in Tallahassee, Florida, with close proximity to Florida State University, Florida A&M University and Tallahassee Community College. The loan is on the servicer’s watchlist as a result of the Q3 2014 DSCR and occupancy rate declining to 0.73x and 84.0%, respectively, from 0.91x and 98% at YE2013. The asset is classified as a student-housing property, and according to the September 2014 rent roll, the property was achieving average rental rates of $355 per bed. The servicer has reported that the decline in performance is attributed to new competition that has entered the local market, which has led the borrower to lower rates and offer incentives in order to attract and retain tenants. The July 2014 servicer site inspection shows the property to be in average condition. DBRS has followed up with the servicer in regards to the borrower’s current marketing strategy and pre-leasing figures ahead of the 2015–2016 school year. Despite the recent decline in performance, the loan benefits from an experienced and financially strong borrower, who is a repeat client of Freddie Mac.

DBRS maintains an investment-grade shadow rating on the Oakwood Falls Church loan, which represents 3.7% of the current pool balance. DBRS has today confirmed that the performance of the loan remains consistent with investment-grade loan characteristics.

DBRS continues to monitor this transaction in its Monthly CMBS Surveillance Report, with additional information on the DBRS viewpoint for this transaction, including details on the largest loans in the pool and the loan on the servicer’s watchlist. The April 2015 monthly surveillance report for this transaction will be published shortly. If you are interested in receiving this report, contact us at info@dbrs.com

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

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

The applicable methodologies are North American CMBS Rating Methodology (March 2015) and CMBS North American Surveillance (January 2015), which can be found on our website under Methodologies.