Kroll Bond Rating Agency Assigns Preliminary Ratings to GSMS 2017-GS7

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 16 classes of the GSMS 2017-GS7 transaction (see ratings list below). GSMS 2017-GS7 is a $1.1 billion CMBS conduit transaction collateralized by 32 commercial mortgage loans secured by 35 properties.

The properties in the collateral pool are located in 14 states, District of Columbia, and the Cayman Islands, with three state exposures that each represents more than 10.0% of the pool balance: New York (29.0%), California (26.0%), and Texas (10.3%). The pool has exposure to most of the major property types, with two that represent more than 15.0% of the pool balance: office (50.4%) and retail (16.8%). The loans have principal balances ranging from $4.6 million to $137.3 million for the largest loan in the pool, 1999 Avenue of the Stars (12.7%), an 821,357 sf, Class-A office tower located in the Century City neighborhood of Los Angeles. The five largest loans, which also include Long Island Prime Portfolio – Uniondale Pool (7.9%), Lafayette Centre (7.4%), Loma Linda (7.4%), and Long Island Prime Portfolio – Melville (6.7%), represent 42.0% of the initial pool balance, while the top 10 loans represent 64.3%.

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 8.6% 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, 39.7% less than third party appraisal values. The pool has an in-trust KLTV of 96.7% and an all-in KLTV of 112.9%. 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, GSMS 2017-GS7 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: GSMS 2017-GS7

                             
  Class       Initial Class Balance       Expected KBRA Rating  
  A-1       18,155,000         AAA (sf)  
  A-2       56,176,000         AAA (sf)  
  A-3       315,000,000         AAA (sf)  
  A-4       340,612,000         AAA (sf)  
  A-AB       27,207,000         AAA (sf)  
  A-S       74,363,000         AAA (sf)  
  X-A       831,513,000*         AAA (sf)  
  B       47,322,000         AA (sf)  
  C       51,378,000         A (sf)  
  X-B       98,700,000*         AAA (sf)  
  D       20,281,000         A- (sf)  
  E       16,852,000         BBB+ (sf)  
  X-D       20,281,000         A- (sf)  
 

   F-RR**   

      21,005,000         BBB (sf)  
  G-RR**       27,042,000         BB (sf)  
  H-RR**       12,168,000         B+ (sf)  
  J-RR**       54,082,732         NR  
      *Notional balance
** To satisfy the US risk retention rules, a third party purchaser is expected to purchase these classes, which are intended to constitute an “eligible horizontal residual interest”, representing at least 5.0% of the fair value of the non-residual certificates.
 

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 CMBS: GSMS 2017-GS7 Representations & Warranties Disclosure Report.

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

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
Kenneth Kor, 646-731-2339
Associate
kkor@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Anna Hertzman, 646-731-2367
Managing Director
ahertzman@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Kenneth Kor, 646-731-2339
Associate
kkor@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Anna Hertzman, 646-731-2367
Managing Director
ahertzman@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com