Kroll Bond Rating Agency Assigns Preliminary Ratings to CLNS Trust 2017-IKPR

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to eight classes of CLNS Trust 2017-IKPR, a $754.0 million CMBS SASB transaction (see ratings list below).

The collateral for the securitization consists of a $754.0 million single, non-recourse, first lien, floating-rate mortgage loan that is secured by the borrowers’ fee simple interests in 46 lodging properties totaling 5,962 keys and leasehold interest in one 136-key hotel asset. For the TTM 2/2017 period, the portfolio’s occupancy was 77.9% with an average daily rate (ADR) of $138.76, resulting in revenue per available room (RevPAR) of $108.13.

The underlying collateral properties consist of 36 extended-stay properties (76.6%), five limited-service properties (9.1%) three full-service properties (8.4%), and three select-service properties (5.8%) located in 30 different MSAs in 16 states. The properties are operated under national flags consisting of Residence Inn by Marriott (30 properties, 61.4%), HYATT house (five properties, 14.4%), Hampton Inn (five properties, 9.1%), Courtyard by Marriott (three properties, 5.8%), Westin (one property, 4.3%), Four Points by Sheraton (one property, 3.2%), Sheraton (one property, 1.0%) and TownePlace Suites by Marriott (one property, 0.8%).

KBRA’s analysis of the transaction included a detailed evaluation of the properties’ cash flows using our CMBS Property Evaluation Methodology, and the application of our CMBS Single Borrower and Large Loan Rating Methodology. The results of our analysis yielded a KBRA net cash flow (KNCF) for the portfolio of $79.4 million. To value the portfolio, KBRA applied a blended capitalization rate of 11.22% to arrive at a KBRA value of $745.5 million, which includes partial credit for capital improvement reserves in the amount of $50.0 million that will be funded prior to May 16, 2017. The resulting KBRA Loan to Value (KLTV) is 101.1%. In our analysis of the transaction, we also reviewed and considered third party engineering, environmental and appraisal reports; management agreements; franchise agreements; STR reports; the results of our site inspections of 16 of the properties; and legal documentation review.

For further details on KBRA’s analysis, please see our Pre-Sale Report, CLNS Trust 2017-IKPR, which was published today at www.kbra.com.

The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: CLNS Trust 2017-IKPR

       
Class     Expected Rating     Balance (US$)
A     AAA(sf)     $239,210,000
X-CP     AAA(sf)     $326,230,000*
X-EXT     AAA(sf)     $469,490,000*
B     AA-(sf)     $84,455,000
C     A- (sf)     $62,795,000
D     BBB-(sf)     $83,030,000
E     BB-(sf)     $130,815,000
F     B- (sf)     $115,995,000
RR Interest**     NR     $37,700,000
 
*Notional balance
**To satisfy the US risk retention rules, the RR Interest will constitute an “eligible vertical interest” representing 5.0% of all of the certificates (excluding the residual class) and the RR interest issued by the trust. Each of the originators are expected to retain a portion of the RR Interest.
 

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 representations, warranties, and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled CLNS Trust 2017-IKPR Representations & Warranties Disclosure.

Related Publications: (available at www.kbra.com)
CMBS Presale Report: CLNS Trust 2017-IKPR
CMBS Property Evaluation Methodology
CMBS Single Borrower and Large Loan Rating Methodology
Methodology for Rating Interest-Only Certificates in CMBS Transactions

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:
Laura Wolinsky, 646-731-2379
lwolinsky@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com
or
Erika Hinman, 646-731-2418
ehinman@kbra.com
or
Follow us on Twitter!
@KrollBondRating

Contacts

Kroll Bond Rating Agency
Analytical:
Laura Wolinsky, 646-731-2379
lwolinsky@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com
or
Erika Hinman, 646-731-2418
ehinman@kbra.com
or
Follow us on Twitter!
@KrollBondRating