Kroll Bond Rating Agency Assigns Preliminary Ratings to CFCRE 2017-C8

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 17 classes of the CFCRE 2017-C8 transaction (see ratings list below). CFCRE 2017-C8 is a $644.7 million CMBS conduit transaction collateralized by 43 commercial mortgage loans secured by 67 properties.

The underlying collateral properties are located in 25 states, with four state exposures each representing more than 10.0% of the pool: California (14.2%), Ohio (13.3%), Texas (11.9%), and New York (11.1%). The pool has exposure to all the major property types, with three that each represents more than 15.0% of the pool balance: office (28.4%), retail (25.9%), and lodging (18.8%). The loans have principal balances ranging from $2.5 million to $55.0 million for the largest loan in the pool, Ohio Valley Plaza (8.5%), a 657,669 sf anchored retail center located in St. Clairsville, Ohio, approximately 70 miles southwest of Pittsburgh, Pennsylvania. The five largest loans, which also include Pershing Square Building (6.8%), Crossings at Hobart (6.6%), Yeshiva University Portfolio (5.4%), and 380 Lafayette Street (5.0%), represent 32.5% of the initial pool balance, while the 10 largest loans represent 53.2%.

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, 40.1% less than third party appraisal values. The pool has an in-trust KLTV of 100.6% and an all-in KLTV of 100.7%. The model deploys rent and occupancy stresses, probability of default regressions, and loss given default calculations to determine losses for each collateral loan that are then used to assign our credit ratings.

For complete details on the analysis, please see our presale report, CFCRE 2017-C8 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: CFCRE 2017-C8
	Class	Initial Class Balance	Expected KBRA Rating
	A-1	$24,296,843	AAA (sf)
	A-2	$46,884,211	AAA (sf)
	A-SB	$36,236,843	AAA (sf)
	A-3	$155,000,000	AAA (sf)
	A-4	$188,844,211	AAA (sf)
	X-A	$451,262,108*	AAA (sf)
	A-M	$32,232,632	AAA (sf)
	B	$38,678,948	AA (sf)
	X-B	$70,911,580*	AAA (sf)
	C	$32,232,632	A (sf)
	X-C	$32,232,632*	AAA (sf)
	D	$38,678,948	BBB- (sf)
	X-D	$38,678,948*	BBB- (sf)
	E	$17,727,369	BB- (sf)
	X-E	$17,727,369*	BB- (sf)
	F	$7,251,579	B (sf)
	X-F	$7,251,579*	B (sf)
	G	$26,596,519	NR
	X-G	$26,596,519*	NR
	RR Interest**	N/A	NR

*Notional balance
**The RR Interest is intended to satisfy the definition of an eligible vertical interest under the US credit risk retention rules and will be retained by a majority-owned affiliate of Rialto Mortgage Finance, LLC. The initial aggregate amount of the RRI Interest will be equal to at least 5.0% of the certificate balance, notional amount or percentage interest, as applicable, of each class of non-residual certificates issued by the trust.

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 is contained in the report entitled CMBS: CFCRE 2017-C8 Representations & Warranties Disclosure Report.

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

CMBS: CFCRE 2017-C8 Pre-Sale Report

CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published January 4, 2017

CMBS Property Evaluation Methodology, published December 3, 2015

Methodology for Rating Interest-Only Certificates in CMBS Transactions, published June 6, 2016

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).