Kroll Bond Rating Agency Assigns Preliminary Ratings to JPMDB 2017-C5

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of the JPMDB 2017-C5 transaction (see ratings list below). JPMDB 2017-C5 is a $1.0 billion CMBS conduit transaction collateralized by 35 commercial mortgage loans secured by 50 properties.

This will be the first CMBS conduit where a “third party purchaser” will satisfy the US risk retention requirements solely through the purchase of an “eligible horizontal residual interest.” Massachusetts Mutual Life Insurance Company will satisfy the retention obligations of the retaining sponsor under the US risk retention rules and is expected to purchase the Class D-RR, E-RR, F-RR and NR-RR certificates on the closing date, representing 5.0% of the fair value of the transaction, based on GAAP. This transaction represents the second CMBS conduit with an “eligible horizontal residual interest.”

The underlying collateral properties are located in 18 states, with three state exposures that each represents more than 10.0% of the pool balance: New York (22.9%), Ohio (15.8%), and Texas (10.4%). 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 (32.7%), lodging (19.3%), retail (19.2%) and mixed-use (18.7%). The loans have principal balances ranging from $4.8 million to $80.0 million for the largest loan in the pool, 229 West 43rd Street Retail Condo (7.7%), a 248,457 sf retail condominium unit in New York City’s Times Square South neighborhood. The five largest loans, which also include 350 Park Avenue (6.4%), Prudential Plaza (6.2%), Hilton Hawaiian Village (6.0%), and Key Center Cleveland (5.8%), represent 32.0% of the initial pool balance, while the top 10 loans represent 53.7%.

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 7.4% 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, 39.1% less than third party appraisal values. The pool has an in-trust KLTV of 96.8% and an all-in KLTV of 106.6%. 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 presale report, JPMDB 2017-C5 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: JPMDB 2017-C5

Class     Initial Class Balance     Expected KBRA Rating
A-1     $32,683,000     AAA (sf)
A-2     $37,129,000     AAA (sf)
A-3     $11,341,000     AAA (sf)
A-4     $135,000,000     AAA (sf)
A-5     $457,116,000     AAA (sf)
A-SB     $57,148,000     AAA (sf)
A-S     $93,910,000     AAA (sf)
X-A     $824,327,000*     AAA (sf)
B     $44,347,000     AA (sf)
C     $45,651,000     A (sf)
X-B     $89,998,000*     AAA (sf)
D     $23,478,000     BBB+ (sf)
E-RR**     $29,999,000     BBB- (sf)
F-RR**     $20,869,000     BB (sf)
G-RR**     $10,434,000     B+ (sf)
NR-RR**     $44,347,191     NR

*Notional balance
**These classes are expected to be retained by a “third-party purchaser” 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: JPMDB 2017-C5 Representations & Warranties Disclosure Report.

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

CMBS: JPMDB 2017-C5 Pre-Sale 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
Kenneth Kor, 646-731-2339
kkor@kbra.com
or
Yee Cent Wong, 646-731-2374
ywong@kbra.com
or
Dayna Carley, 646-731-2391
dcarley@kbra.com
or
Lynn D’Eugenio, 646-731-2487
ldeugenio@kbra.com

Contacts

Analytical Contacts:
Kroll Bond Rating Agency
Kenneth Kor, 646-731-2339
kkor@kbra.com
or
Yee Cent Wong, 646-731-2374
ywong@kbra.com
or
Dayna Carley, 646-731-2391
dcarley@kbra.com
or
Lynn D’Eugenio, 646-731-2487
ldeugenio@kbra.com