Kroll Bond Rating Agency Assigns Preliminary Ratings to WFCM 2017-C39

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of the WFCM 2017-C39 transaction (see ratings list below). WFCM 2017-C39 is a $1.1 billion CMBS conduit transaction collateralized by 64 commercial mortgage loans secured by 149 properties.

The properties in the collateral pool are located in 34 states and the District of Columbia, with New York (21.6%), and New Jersey (12.2%) 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 (36.6%), retail (30.1%), and lodging (17.8%). The loans have principal balances ranging from $1.9 million to $70.0 million for the largest loan in the pool, 225 & 233 Park Avenue South (6.2%), a 675,756 sf, Class-A office property located in the Gramercy Park neighborhood of Manhattan. The five largest loans, which also include 211 Mount Airy Road (5.7%), Lakeside Shopping Center (5.1%), Long Island Prime Portfolio – Uniondale (4.4%), and Columbia Park Shopping Center (4.4%), represent 25.9% of the initial pool balance, while the 10 largest loans represent 45.2%.

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, 38.0% less than third party appraisal values. The pool has an in-trust KLTV of 94.6% and an all-in KLTV of 104.6%. 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-C39 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-C39

Class       Initial Class Balance       Expected KBRA Rating
A-1       $27,816,000       AAA (sf)
A-2       $80,706,000       AAA (sf)
A-3       $4,389,000       AAA (sf)
A-SB       $44,790,000       AAA (sf)
A-4       $305,000,000       AAA (sf)
A-5       $330,283,000       AAA (sf)
X-A       $792,984,000*       AAA (sf)
A-S       $106,203,000       AAA (sf)
B       $50,978,000       AA (sf)
C       $46,729,000       A (sf)
D       $19,032,000       A- (sf)
X-B       $222,942,000*       AAA (sf)
E-RR**       $37,610,000       BBB- (sf)
F-RR**       $25,489,000       BB- (sf)
G-RR**       $11,328,000       B (sf)
H-RR**       $42,481,836       NR

*Notional balance.

**To satisfy the US risk retention rules, a third-party purchase is expected to purchase an “eligible horizontal residual interest” consisting of the Class E-RR, F-RR, G-RR and H-RR certificates, which will represent at least 5.0% of the fair market value of all non-residual certificates issued, as determined under GAAP.

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: WFCM 2017-C39 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
Fred Perreten, 646-731-2454
Director
fperreten@kbra.com
or
Yee Cent Wong, 646-731-2374
Managing Director
ywong@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com
or
Stephanie Ruys de Perez, 646-731-2466
Senior Analyst
sruysdeperez@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Fred Perreten, 646-731-2454
Director
fperreten@kbra.com
or
Yee Cent Wong, 646-731-2374
Managing Director
ywong@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com
or
Stephanie Ruys de Perez, 646-731-2466
Senior Analyst
sruysdeperez@kbra.com