NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency, Inc. (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of the WFCM 2017-C38 transaction (see ratings list below). WFCM 2017-C38 is a $1.2 billion CMBS conduit transaction collateralized by 76 commercial mortgage loans secured by 210 properties.
The properties in the collateral pool are located in 34 states, with New York (25.8%), California (16.8%) and Texas (11.6%) each representing more than 10.0% of the pool balance. The pool has exposure to all of the major property types, with three that each represents more than 15.0% of the pool balance: office (40.2%), retail (21.5%), and lodging (19.9%). The loans have principal balances ranging from $1.3 million to $115.0 million for the largest loan in the pool, General Motors Building (10.0%), a 2.0 million sf, Class-A office/retail building located in Midtown Manhattan. The five largest loans, which also include Del Amo Fashion Center (5.2%), 245 Park Avenue (4.8%), Starwood Capital Group Hotel Portfolio (4.3%), and Long Island Prime Portfolio - Melville (4.2%) represent 28.4% of the initial pool balance, while the 10 largest loans represent 45.6%.
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 7.7% 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, 38.7% less than third party appraisal values. The pool has an in-trust KLTV of 90.0% and an all-in KLTV of 100.5%. 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, WFCM 2017-C38 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: WFCM 2017-C38
| Class | Initial Class Balance | Expected KBRA Rating | |||||
| A-1 | $32,899,000 | AAA (sf) | |||||
| A-2 | $42,503,000 | AAA (sf) | |||||
| A-3 | $8,575,000 | AAA (sf) | |||||
| A-SB | $36,137,000 | AAA (sf) | |||||
| A-4 | $300,000,000 | AAA (sf) | |||||
| A-5 | $366,318,000 | AAA (sf) | |||||
| A-S | $119,369,000 | AAA (sf) | |||||
| X-A | $786,432,000* | AAA (sf) | |||||
| X-B | $214,864,000* | AAA (sf) | |||||
| B | $50,556,000 | AA- (sf) | |||||
| C | $44,939,000 | A- (sf) | |||||
| X-D | $49,152,000* | BBB- (sf) | |||||
| D | $49,152,000 | BBB- (sf) | |||||
| E** | $22,470,000 | BB (sf) | |||||
| F** | $11,234,000 | B+ (sf) | |||||
| G** | $39,322,437 | NR | |||||
| Vertical RR Interest** | $31,175,550 | NR | |||||
* Notional balance.
** To satisfy the US risk retention rules, Wells Fargo Bank, as the retaining sponsor, is expected to retain an eligible vertical interest representing approximately 2.70% of all ABS interests in the trust and to offset a portion of the risk retention requirement by the portion of the Vertical RR Interest acquired by Barclays Bank PLC which will 37.31% of the Vertical RR Interest on the closing date. To satisfy the remaining US risk retention obligations, a third party purchaser will purchase and retain an “eligible horizontal residual interest” consisting of the Class E, F and G certificates, representing between approximately 2.31% and 2.43% of the fair value of all non-residual interests issued by the issuer on the closing date.
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: WFCM 2017-C38 Representations & Warranties Disclosure Report.
Related publications (available at www.kbra.com):
- CMBS: WFCM 2017-C38 Pre-Sale Report
- CMBS: U.S. CMBS Multi-Borrower Rating Methodology
- CMBS: U.S. CMBS Multi-Borrower Rating MethodologyCMBS Property Evaluation 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).
