Kroll Bond Rating Agency Assigns Preliminary Ratings to COMM 2016-DC2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 18 classes of the COMM 2016-DC2 transaction (see ratings list below). COMM 2016-DC2 is an $806.2 million CMBS conduit transaction collateralized by 63 commercial mortgage loans secured by 91 properties.

The properties in the collateral pool are located 23 states, with three states, California (22.0%), Georgia (14.7%) and Texas (10.5%) representing more than 10.0% of the pool balance. The pool has exposure to all the major property types, with four that represent more than 10.0% of the pool balance: retail (31.2%), office (16.0%), hospitality (13.6%) and manufactured housing community (10.1%). The loans have principal balances ranging from $895,302 to $75.0 million for the largest loan in the pool, Sun MHC Portfolio (9.3%), which is comprised of 12 manufactured housing communities located in six states. The top five loans, which also include North Point Center East (7.7%), Williamsburg Premium Outlets (6.2%), InterContinental Kansas City Hotel (5.6%) and Netflix HQ 1 (5.2%), represent 34.0% of the initial pool balance, while the top 10 loans represent 51.8%.

KBRA’s analysis of the transaction incorporated our multi-borrower rating process that begins with our analysts' evaluation of underlying collateral properties' financial and operating performance, which determine KBRA’s estimate of sustainable net cash flow (KNCF) and KBRA value using our CMBS Property Evaluation Methodology. On an aggregate basis, KNCF was 4.2% less than the issuer cash flow. KBRA capitalization rates were applied to each asset’s KNCF to derive values that were, on an aggregate basis, 38.1% less than third party appraisal values. The pool has an in-trust KLTV of 105.7% and an all-in KLTV of 106.0%. The model deploys rent and occupancy stresses, probability of default regressions, and loss given default calculations to determine losses for each collateral loan, which are then used to assign our credit ratings.

For complete details on the analysis, please see our presale report, COMM 2016-DC2 published today at www.kbra.com. The report includes our new KBRA Comparative Analytic Tool (KCAT). KCAT is an easy to use, Excel based workbook that provides the following information:

  • KBRA Deal Tape – contains KBRA loan level details for every loan in the pool, and the ability for users to input adjustments to KNCF and KBRA Cap Rates and see the related impact on key deal metrics.
  • KBRA Credit Metrics Comparison Tool – Enables the user to compare the subject transaction to a user-defined transaction comp set. The feature provides many of the fields that are provided in our CMBS Monthly Trend Watch publication.
  • Excel based property cash flow statements for the top 20 loans.

Preliminary Ratings Assigned: COMM 2016-DC2

Class       Class Balance (US$)       Expected Rating
A-1       $35,639,000       AAA(sf)
A-2       $4,483,000       AAA(sf)
A-3       $15,740,000       AAA(sf)
A-4       $165,000,000       AAA(sf)
A-5       $283,192,000       AAA(sf)
A-SB       $60,282,000       AAA(sf)
X-A       $614,723,000 *       AAA(sf)
X-B       $82,635,000 *       AAA(sf)
X-C       $42,326,000 *       BBB-(sf)
X-D       $23,178,000 *       BB-(sf)
X-E       $14,108,000 *       B-(sf)
X-F       $29,225,159 *       NR
A-M       $50,387,000       AAA(sf)
B       $40,310,000       AA(sf)
C       $42,325,000       A(sf)
D       $42,326,000       BBB-(sf)
E       $13,100,000       BB+(sf)
F       $10,078,000       BB-(sf)
G       $14,108,000       B-(sf)
H       $29,225,159       NR

*Notional balance

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s asset-level representations, warranties and enforcement mechanisms set forth in the related offering documents when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled CMBS: COMM 2016-DC2 Representations & Warranties Disclosure Report.

Related publications (available at www.kbra.com):

CMBS: COMM 2016-DC2 Presale Report

CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published December 3, 2015

CMBS Property Evaluation Methodology, published December 3, 2015

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About Kroll Bond Rating Agency KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Ravish Kamath, (646) 731-2328
rkamath@kbra.com
or
Michael Brown, (646) 731-2307
mbbrown@kbra.com
or
Robin Regan, (646) 731-2358
rregan@kbra.com
or
Sacheen Shah, (646) 731-2417
sshah@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Ravish Kamath, (646) 731-2328
rkamath@kbra.com
or
Michael Brown, (646) 731-2307
mbbrown@kbra.com
or
Robin Regan, (646) 731-2358
rregan@kbra.com
or
Sacheen Shah, (646) 731-2417
sshah@kbra.com