TEXT-Fitch Affirms FREMF 2012-K706 and Freddie Mac Pass-Through Certificates, Series K-706

Thu Feb 14, 2013 6:20pm EST

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NEW YORK, February 14 (Fitch) Fitch Ratings has affirmed six classes of FREMF 2012-K706 multifamily mortgage pass-through certificates and three classes of Freddie Mac structured pass-through certificates, series K-706. A detailed list of rating actions follows at the end of this press release.

SENSITIVITY/RATING DRIVERS

The affirmations are based on the stable performance of the underlying collateral pool. As of the January 2013 distribution date, the pool has had no delinquent or specially serviced loans. The pool's aggregate principal balance has been paid down by 0.3% to $1.22 billion from $1.23 billion at issuance. Approximately 37% of the loans reported year-end (YE) 2011 financials and 44 of the loans (73% of the pool) reported year-to-date (YTD) September 2012 financials. The pool's overall net operating income (NOI) has been stable with a 3% NOI increase compared to issuer underwriting at issuance.

The largest loan of the pool (10.0% of the pool) is secured by Crystal Plaza, a 539-unit, high-rise apartment complex situated on approximately five acres in Arlington, VA. The property was built in 1967 and underwent capital improvements in 2003. The property benefits from attractive amenities, proximity to Washington, D.C., and access to public transportation, employment centers, retail shopping, and major thoroughfares. Amenities include an outdoor swimming pool, barbecue grills and outdoor dining tables, 24-hour concierge, two 24-hour fitness centers, Iinternet lounge, central courtyard, game room, business center, rooftop sundeck, conference room, library, two laundry facilities, and garage parking. Occupancy was 91% as of September 2012.

The second largest loan (5.9% of the pool) is secured by Paradise Island, a 1,112-unit, 55-building apartment complex located in Jacksonville, FL. The property was developed in four phases between 1990 and 1999 and renovated in 2010. Property amenities include four swimming pools, a community center, leasing and management offices, laundry facilities, fitness centers, racquetball, tennis, and volleyball courts, a car wash, and garages. Occupancy was 99% as of September 2012. Loan is part of an A ($62.03 million) and B note ($10.0 million) structure, wherein the B-Note is subordinate.

The third largest loan (3.7% of the pool) is secured by Cascade Ridge Apartments, a 518-unit, 48 48-building multifamily property located in Federal Way, WA. The property was built in 1989 and renovated from 2007-2008. The property is situated on 29 acres, approximately 10 miles north of Tacoma and features an attractive amenities package. The property is managed by FPI Management Inc., which managed a portfolio of more than 60,000 units and 1,669 units locally at issuance. Occupancy was 93% as of December 2011.

Fitch affirms the following classes as indicated:

FREMF 2012-K706 Multifamily Mortgage Pass-Through Certificates

--$86.5 million class A-1 at 'AAAsf'; Outlook Stable;

--$933.0 million class A-2 at 'AAAsf'; Outlook Stable;

--$1.02 billion* class X1 at 'AAAsf'; Outlook Stable;

--$1.02 billion* class X2-A at 'AAAsf'; Outlook Stable;

--71.4 million class B at 'Asf'; Outlook Stable;

--30.4 million class C at 'BBBsf'; Outlook Stable. Freddie Mac Structured Pass-Through Certificates, Series K-706

--$89.8 million class A-1 at 'AAAsf'; Outlook Stable;

--$933.0 million class A-2 at 'AAAsf'; Outlook Stable;

--$1.02 billion* class X1 at 'AAAsf'; Outlook Stable.

*Notional amount and interest only.

Of FREMF 2012-K706, Fitch does not rate the $193.0 million interest-only class X2-B, the $193.0 million interest-only class X3, the $91.2 million class D, or $10.0 million class P. Of the Freddie Mac Structured Pass-Through Certificates, Series K-706, Fitch does not rate the $193.0 million interest-only class X3.

Additional information on Fitch's criteria for analyzing U.S. CMBS transactions is available in the Dec. 18, 2012 report, 'U.S. Fixed-Rate Multiborrower CMBS Surveillance and Re-REMIC Criteria', which is available at 'www.fitchratings.com' under the following headers:

Structured Finance >> CMBS >> Criteria Reports

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