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

NEW YORK--()--Kroll Bond Rating Agency, Inc. (KBRA) is pleased to announce the assignment of preliminary ratings to 16 classes of the CSAIL 2017-C8 transaction (see ratings list below). CSAIL 2017-C8 is an $811.1 million CMBS conduit transaction collateralized by 32 commercial mortgage loans secured by 55 properties.

The properties in the collateral pool are located in 24 states, with only New York (33.1%) and California (19.2%) each representing more than 10.0% of the pool balance. The pool has exposure to all the major property types with the exception of self-storage and manufactured housing communities. There are four property types that each represent more than 10.0% of the pool balance: office (45.3%), lodging (14.5%), retail (14.5%) and mixed-use (12.1%).The loans have principal balances ranging from $5.0 million to $90.0 million for the largest loan in the pool, 85 Broad Street (11.1%), which is secured by a Class-A office building located in the Financial District of Lower Manhattan within New York City. The five largest loans, which also include 245 Park Avenue (9.9%), Apple Sunnyvale (8.7%), Ritz Carlton Rancho Mirage (6.7%), and Hotel Eastlund (5.1%), represent 41.3% of the initial pool balance, while the 10 largest loans represent 62.9%.

KBRA’s analysis of the transaction incorporated our multi-borrower rating process that begins with our analysts' evaluation of the 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 6.7% 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, 43.0% less than third party appraisal values. The pool has an in-trust KLTV of 88.2% and an all-in KLTV of 113.3%. 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, CSAIL 2017-C8 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 included in our CMBS Monthly Trend Watch publication.
  • Excel-based property cash flow statements for the top 20 loans.

Preliminary Ratings Assigned: CSAIL 2017-C8

             
Class             Initial Class Balance             Expected KBRA Rating
Pooled Certificates
A-1            

$17,863,000

            AAA (sf)
A-2             $163,585,000             AAA (sf)
A-3             $142,336,000             AAA (sf)
A-4             $213,505,000             AAA (sf)
A-SB             $30,449,000             AAA (sf)
X-A             $651,885,000*             AAA (sf)
X-B             $78,065,000*             AAA (sf)
A-S             $84,147,000             AAA (sf)
B             $44,608,000             AA- (sf)
C             $33,457,000             A- (sf)
D             $32,442,000             BBB- (sf)
E             $18,248,000             BB- (sf)
F             $7,097,000             B- (sf)
NR             $23,318,563             NR
VRR Interest**             $63,653,563***             NR
Exchangeable Certificates****
V1-A             $651,885,000             AAA(sf)
V1-B             $178,065,000             A-(sf)
V1-D             $32,442,000             BBB- (sf)
V1-E             $48,663,563             NR
V2             $811,055,563             NR
Non-Pooled Loan-Specific Certificates*****
85BD-A             $7,000,000             NR
85BD-X             $72,000,000             NR
85BD-B             $33,000,000             NR
85BD-C             $32,000,000             NR
* Notional balance
** To satisfy the US credit risk retention rules, NREC is expected to retain an “eligible vertical interest” in the form of certificates representing approximately 4.13% of the initial certificate balance in each class of pooled certificates. To satisfy the remaining portion of the US risk retention requirements, a third party purchaser is expected to purchase an “eligible horizontal residual interest” consisting of a portion of the Class F and NR certificates.
***The initial aggregate amount of the VRR Interest will be equal to approximately 4.13% of the initial certificate balance, notional amount or percentage interest, as applicable, of each class of pooled certificates issued by the trust.
****Represents the maximum balance of each class that could be issued in an exchange.

*****Such classes of loan-specific certificates are only entitled to distributions from amounts received with respect to the in-trust, non-pooled 85 Broad Street subordinate companion loan

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: CSAIL 2017-C8 Representations & Warranties Disclosure Report.

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

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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:
Kroll Bond Rating Agency
Ravish Kamath, 646-731-2328
rkamath@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com
or
Mathew Holmes, 646-731-2441
mholmes@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Ravish Kamath, 646-731-2328
rkamath@kbra.com
or
Michael Brown, 646-731-2307
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
rregan@kbra.com
or
Mathew Holmes, 646-731-2441
mholmes@kbra.com