DBRS Confirms All Classes of FREMF 2013-K26 Mortgage Trust, Series 2013-K26

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

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

All trends are Stable. DBRS does not rate the first loss piece, Class D.

These confirmations reflect the overall stable performance of the transaction. The transaction consists of 81 fixed-rate loans secured by 81 multifamily properties. The pool has experienced a collateral reduction of 3.2% since issuance as a result of scheduled amortization, with all of the original 81 loans outstanding. Approximately 97.4% of the pool reported YE2015 financials, including a weighted-average (WA) debt service coverage ratio (DSCR) of 1.88 times (x) and a WA debt yield of 10.1%. Comparatively, the YE2014 WA DSCR and WA debt yield were 1.76x and 9.7%, respectively. The pool also benefits from defeasance collateral, as four loans, representing 2.6% of the pool balance, are fully defeased.

As at the February 2017 remittance, there were four loans, representing 5.5% of the pool balance, on the servicer’s watchlist. The second-largest loan, Oakwood Falls Church (Prospectus ID#2; 3.6% of the pool), was placed on the watchlist because of a decrease in performance as a result of the contract with the U.S. Department of State, which was in place at issuance, being split with two other properties. This resulted in a decrease in revenue for furnished units at the subject, which have traditionally had higher rental rates than unfurnished units. As such, the shadow rating applied to this loan at issuance was removed during the last review. Two additional loans, together representing 1.2% of the pool balance, were placed on the watchlist for deferred maintenance and a fire, with insurance proceeds already having been received for the property affected by the fire.

DBRS has provided updated loan-level commentary and analysis for larger and/or pivotal watchlisted loans, as well as for the largest 15 loans in the pool, in the DBRS commercial mortgage-backed securities (CMBS) IReports platform. To view these and future loan-level updates provided as part of DBRS’s ongoing surveillance for this transaction, please log in to DBRS CMBS IReports at www.ireports.dbrs.com.

The ratings assigned to Classes B and C materially deviate from the higher ratings implied by the quantitative results. DBRS considers a material deviation to be a rating differential of three or more notches between the assigned rating and the rating implied by the quantitative results that is a substantial component of a rating methodology; in this case, the assigned ratings reflect the sustainability of loan-performance trends not demonstrated.

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

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

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

The principal methodologies are North American CMBS Rating Methodology (January 2017) and CMBS North American Surveillance (December 2016), which can be found on dbrs.com under Methodologies.