Kroll Bond Rating Agency Assigns Preliminary Ratings to CD 2016-CD2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 21 classes of the CD 2016-CD2 transaction (see ratings list below). CD 2016-CD2 is a $975.4 million CMBS conduit transaction collateralized by 30 commercial mortgage loans secured by 37 properties. On the securitization closing date, the transaction sponsors intend to comply with the definition of an “eligible vertical interest” under the credit risk retention rules, by retaining certificates that amount to 5.0% of the initial balance of the securities issued in the transaction.

The properties in the collateral pool are located in 18 states, with New York (48.8%) being the only state that represents more than 10.0% of the pool balance. The pool has exposure to most of the major property type sectors, with four that represent more than 10.0% of the pool balance: office (35.7%), retail (23.6%), mixed-use (23.4%), and industrial (13.7%). The loans have principal balances ranging from $5.0 million to $100.0 million for the largest loan in the pool, 8 Times Square & 1460 Broadway (10.3%), a 214,341 mixed-use office/retail building located in the Times Square South neighborhood of New York City. The top five loans, which also include FedEx Ground Portfolio (8.7%), Prudential Plaza (7.7%), 229 West 43rd Street Retail Condo (7.7%), and 10 Hudson Yards (6.9%), represent 41.3% of the initial pool balance, while the top 10 loans represent 66.9%.

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 6.6% 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, 43.7% less than third party appraisal values. The pool has an in-trust KLTV of 95.9% and an all-in KLTV of 104.3%. 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, CD 2016-CD2 published today at www.kbra.com. The report includes our KBRA Comparative Analytic Tool (KCAT), 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: CD 2016-CD2

 

           
Class     Initial Class Balance     Expected KBRA Rating
A-1     $17,465,263           AAA(sf)
A-2     $69,061,053           AAA(sf)
A-SB     $34,742,105           AAA(sf)
A-3     $252,631,579           AAA(sf)
A-4     $308,873,684           AAA(sf)
X-A     $721,789,474     *     AAA(sf)
A-M     $39,015,789           AAA(sf)
B     $76,811,579           AA-(sf)
C     $42,673,684           A-(sf)
X-B     $76,811,579     *     AAA(sf)
X-C     $42,673,684     *     AAA(sf)
X-D     $57,304,211     *     BBB-(sf)
X-E     $28,043,158     *     BB-(sf)
X-F     $10,972,632     *     B-(sf)
X-G     $37,797,120     *     NR
D     $57,304,211           BBB- (sf)
E     $28,043,158           BB- (sf)
F     $10,972,632           B- (sf)
G     $37,797,120           NR
Exchangeable Certificates
V1-A     $721,789,474           AAA(sf)
V1-B     $76,811,579           AA-(sf)
V1-C     $42,673,684           A-(sf)
V1-D     $57,304,211           BBB-(sf)
V1-E     $76,812,910           NR
V2     $975,391,857           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: CD 2016-CD2 Representations & Warranties Disclosure Report.

Related publications (available at www.kbra.com):
CMBS: CD 2016-CD2 Presale Report
CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published December 3, 2015
CMBS Property Evaluation Methodology, published December 3, 2015
CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions, published June 6, 2016

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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

Analytical Contacts:
Kroll Bond Rating Agency
Lynn D’Eugenio, 646-731-2487
ldeugenio@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com
or
Stephanie Ruys de Perez, 646-731-2466
sruysdeperez@kbra.com

Contacts

Analytical Contacts:
Kroll Bond Rating Agency
Lynn D’Eugenio, 646-731-2487
ldeugenio@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com
or
Stephanie Ruys de Perez, 646-731-2466
sruysdeperez@kbra.com