Kroll Bond Rating Agency Assigns Preliminary Ratings to First CMBS Risk Retention Deal - WFCM 2016-BNK1

NEW YORK--()--Kroll Bond Rating Agency, Inc. (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of the first CMBS risk retention deal (see ratings list below). The transaction, WFCM 2016-BNK1, is an $870.6 million CMBS conduit transaction collateralized by 39 commercial mortgage loans secured by 46 properties. On the securitization closing date, the loan originators are each expected to purchase and retain a portion of the RRI Interest. The RRI Interest is intended to comply with the definition of an “eligible vertical interest” under the credit risk retention rules and represents a 5.0% interest in the aggregate face value of the securities issued in the transaction.

The properties in the collateral pool are located in 23 states, with three that represent more than 10.0% of the pool balance: California (18.2%), Massachusetts (11.4%), and Texas (10.7%). The pool has exposure to all of the major property type sectors, with three that represent more than 15.0% of the pool balance: office (31.6%), retail (26.2%), and lodging (15.2%). The loans have principal balances ranging from $2.9 million to $80.0 million for the largest loan in the pool, The Shops at Crystals (9.2%), a 262,327 sf luxury retail center located in Las Vegas, Nevada. The top five loans, which also include Vertex Pharmaceuticals HQ (9.2%), One Stamford Forum (8.2%), Renaissance Dallas (6.9%), and Pinnacle II (4.6%), represent 38.1% of the initial pool balance, while the top 10 loans represent 58.7%.

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 7.6% 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, 39.3% less than third party appraisal values. The pool has an in-trust KLTV of 91.7% and an all-in KLTV of 96.6%. The model deploys rent and occupancy stresses, probability of default regressions, and loss given default calculations to determine losses for each collateral loan, which are then used to assign our credit ratings.

For complete details on the analysis, please see our presale report, WFCM 2016-BNK1 published today at www.kbra.com. The report includes our KBRA Comparative Analytic Tool (KCAT). KCAT is 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 provided in our CMBS Monthly Trend Watch publication.
  • Excel based property cash flow statements for the top 20 loans.

Preliminary Ratings Assigned: WFCM 2016-BNK1

      Class       Initial Class Balance

 

   

Expected KBRA Rating

A-1       $36,136,000       AAA(sf)
A-2       $230,000,000       AAA(sf)
A-3       $267,018,000       AAA(sf)
A-SB       $45,766,000       AAA(sf)
A-S       $67,197,000       AAA(sf)
X-A       $578,920,000*       AAA(sf)
X-B       $150,933,000*       AAA(sf)
B       $44,452,000       AA-(sf)
C       $39,284,000       A-(sf)
X-D       $39,284,000*       BBB-(sf)
D       $39,284,000       BBB-(sf)
X-E       $18,608,000*       BB-(sf)
E       $18,608,000       BB-(sf)
X-F       $8,271,000*       B-(sf)
F       $8,271,000       B-(sf)
X-G       $31,013,795       NR
G       $31,013,795       NR
RRI Interest       $43,527,883       NR

*Notional balance.

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 can be found in the report entitled CMBS: WFCM 2016-BNK1 Representations & Warranties Disclosure Report.

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

CMBS: WFCM 2016-BNK1 Presale Report

CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published December 3, 2015

CMBS Property Evaluation Methodology, published December 3, 2015

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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

Kroll Bond Rating Agency, Inc.
Analytical Contacts:
John Triantafyllou, (646) 731-2396
jtriantafyllou@kbra.com
or
Robin Regan, (646) 731-2358
rregan@kbra.com
or
Yee Cent Wong, (646) 731-2374
ywong@kbra.com
or
Alec Abrams, (646) 731-2401
aabrams@kbra.com

Contacts

Kroll Bond Rating Agency, Inc.
Analytical Contacts:
John Triantafyllou, (646) 731-2396
jtriantafyllou@kbra.com
or
Robin Regan, (646) 731-2358
rregan@kbra.com
or
Yee Cent Wong, (646) 731-2374
ywong@kbra.com
or
Alec Abrams, (646) 731-2401
aabrams@kbra.com