KBRA Assigns Preliminary Ratings to WFCM 2017-C40

NEW YORK--()--Kroll Bond Rating Agency, Inc. (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of the WFCM 2017-C40 transaction (see ratings list below). WFCM 2017-C40 is a $705.4 million CMBS conduit transaction collateralized by 64 commercial mortgage loans secured by 150 properties.

The properties in the collateral pool are located in 33 states, with California (20.9%) and Texas (15.5%) 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: retail (37.9%), office (22.7%), and lodging (18.9%). The loans have principal balances ranging from $1.3 million to $60.0 million for the largest loan in the pool, 225 & 233 Park Avenue South (8.5%), a 675,756 sf, Class-A office property located in the Gramercy Park neighborhood of Manhattan. The five largest loans, which also include Mall of Louisiana (7.1%), Marketplace at Millcreek (5.6%), Sava Holdings IHG Portfolio (5.2%), and Wilshire Pacific Plaza (4.7%), represent 31.1% of the initial pool balance, while the 10 largest loans represent 49.2%.

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 6.5% 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, 41.0% less than third party appraisal values. The pool has an in-trust KLTV of 95.6% and an all-in KLTV of 100.8%. 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 pre-sale report, WFCM 2017-C40 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-C40

       
Class  

Initial
Class Balance

Expected KBRA
Rating

A-1   $23,786,000   AAA(sf)
A-2   $23,626,000   AAA(sf)
A-3   $185,000,000   AAA(sf)
A-4   $203,796,000   AAA(sf)
A-SB   $32,869,000   AAA(sf)
A-S   $56,122,000   AAA(sf)
X-A   $469,077,000¹   AAA(sf)
X-B   $118,944,000¹   AAA(sf)
B   $32,668,000   AA(sf)
C   $30,154,000   A(sf)
X-D   $34,344,000¹   BBB-(sf)
D   $34,344,000   BBB-(sf)
E   $6,701,000   BBB-(sf)
F   $9,214,000   BB-(sf)
G   $6,701,000   B(sf)
H   $3,350,000   NR
J   $21,779,541   NR
RR Interest***   N/A   N/A

* Notional balance.
**To satisfy the US risk retention rules, each of Wells Fargo Bank, NA and Barclays Bank are expected to purchase a portion of the RR Interest which is expected to be a “single vertical security” and an “eligible vertical interest”.
***The RR Interest will equal approximately 5.0% of each class of non-residual certificates issued.

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 available here.

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, Inc.
Erika Hinman, (646) 731-2418
Associate
ehinman@kbra.com
or
Michael Brown, (646) 731-2307
Senior Director
mbbrown@kbra.com
or
Dayna Carley, (646) 731-2391
Senior Director
dcarley@kbra.com
or
Nelson Jayakar, (646) 731-3317
Analyst
njayakar@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency, Inc.
Erika Hinman, (646) 731-2418
Associate
ehinman@kbra.com
or
Michael Brown, (646) 731-2307
Senior Director
mbbrown@kbra.com
or
Dayna Carley, (646) 731-2391
Senior Director
dcarley@kbra.com
or
Nelson Jayakar, (646) 731-3317
Analyst
njayakar@kbra.com