Kroll Bond Rating Agency Assigns Preliminary Ratings to JPMCC 2017-JP5

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 16 classes of the JPMCC 2017-JP5 transaction (see ratings list below). JPMCC 2017-JP5 is a $1.1 billion CMBS conduit transaction collateralized by 43 commercial mortgage loans secured by 59 properties. On the securitization closing date, the transaction’s retaining sponsor, Starwood Mortgage Funding VI LLC, intends to comply with the US credit risk retention rules by having a majority owned affiliate, LNR Securities Holdings, LLC, purchase an “eligible horizontal retained interest” in the transaction. The eligible horizontal retained interest will represent at least 5.0% of the fair value of all the classes issued in the transaction. This is the first CMBS conduit transaction to utilize a horizontal risk retention structure.

The underlying collateral properties are located in 22 states, with three state exposures that each represents more than 10.0% of the pool balance: California (20.3%), Texas (16.5%), and Hawaii (11.0%). The pool has exposure to most of the major property types, with four that each represents more than 10.0% of the pool balance: office (38.1%), retail (19.3%), lodging (19.0%) and mixed use (17.5%). The loans have principal balances ranging from $2.8 million to $80.0 million for the largest loan in the pool, Hilton Hawaiian Village (7.3%), a 2,860-key full-service hotel located on Waikiki Beach in Honolulu, Hawaii, approximately 2.7 miles southeast of the city’s CBD. The five largest loans, which also include Moffett Gateway (7.3%), Dallas Design District (6.9%), Fresno Fashion Fair Mall (6.3%), and Riverway (5.9%), represent 33.7% of the initial pool balance, while the 10 largest loans comprise 56.6%.

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 7.1% 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, 39.3% less than third party appraisal values. The pool has an in-trust KLTV of 96.8% and an all-in KLTV of 105.6%. 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 pre-sale report, JPMCC 2017-JP5 published today at www.kbra.com. The report includes our 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 included in our CMBS Monthly Trend Watch publication.
  • Excel based property cash flow statements for the top 20 loans.

Preliminary Ratings Assigned: JPMCC 2017-JP5

Class     Initial Class Balance     Expected KBRA Rating
A-1     $43,930,000     AAA (sf)
A-2     $82,828,000     AAA (sf)
A-3     $38,000,000     AAA (sf)
A-4     $135,000,000     AAA (sf)
A-5     $396,306,000     AAA (sf)
A-SB     $69,023,000     AAA (sf)
A-S     $71,044,000     AAA (sf)
X-A     $836,131,000*     AAA (sf)
B     $51,917,000     AA+ (sf)
X-B     $51,917,000*     AAA (sf)
C     $56,015,000     A (sf)
X-C     $56,015,000*     AAA (sf)
D     $36,888,000     BBB+ (sf)
D-RR**     $27,325,000     BBB (sf)
E-RR**     $28,691,000     BB- (sf)
F-RR**     $17,761,000     B- (sf)
NR-RR**     $38,254,046     NR

*Notional balance
**These classes are expected to be retained by a majority-owned affiliate of the transaction’s retaining sponsor and to constitute an “eligible horizontal residual interest” in accordance with the US risk retention requirements.

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: JPMCC 2017-JP5 Representations & Warranties Disclosure Report.

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

CMBS: JPMCC 2017-JP5 Presale Report

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

CMBS Property Evaluation Methodology, published December 3, 2015

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
Erika Hinman, Associate
(646) 731-2418
ehinman@kbra.com
or
Michael Brown, Senior Director
(646) 731-2307
mbbrown@kbra.com
or
Robin Regan, Managing Director
(646) 731-2358
rregan@kbra.com
or
Griffin Flagg, Analyst
(646) 731-2433
gflagg@kbra.com

Contacts

Analytical Contacts:
Kroll Bond Rating Agency
Erika Hinman, Associate
(646) 731-2418
ehinman@kbra.com
or
Michael Brown, Senior Director
(646) 731-2307
mbbrown@kbra.com
or
Robin Regan, Managing Director
(646) 731-2358
rregan@kbra.com
or
Griffin Flagg, Analyst
(646) 731-2433
gflagg@kbra.com