KBRA Assigns Preliminary Ratings to BENCHMARK 2018-B2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 16 classes of BENCHMARK 2018-B2 (see ratings list below), a $1.5 billion CMBS conduit transaction collateralized by 57 commercial mortgage loans secured by 67 properties.

The collateral properties are located in 24 states and the District of Columbia, with one state exposure, California (21.0%), representing more than 10.0% of the pool balance. The pool has exposure to all of the major property types, with four each representing 10.0% or more of the pool balance: office (40.7%), lodging (18.6%), multifamily (16.8%) and retail (14.5%). The loans have principal balances ranging from $2.7 million to $79.5 million for the largest loan in the pool, Central Park of Lisle (5.3%), a 693,606 sf, suburban office complex located in Lisle, Illinois, approximately 28 miles west of the Chicago CBD. The five largest loans, which also include Promenade Shops at Aventura (4.6%), Apple Campus 3 (4.5%), EOS 21 (4.0%), and Rochester Hotel Portfolio (4.0%), represent 22.4% of the initial pool balance, while the top 10 loans represent 40.9%.

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 7.3% 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, 41.1% less than third party appraisal values. The pool has an in-trust KLTV of 96.4% and an all-in KLTV of 108.7%. 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, BENCHMARK 2018-B2 published today at www.kbra.com. The report includes our KBRA Conduit CMBS 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: BENCHMARK 2018-B2

           
Class       Initial Class Balance       Expected KBRA Rating
A-1       $29,604,000       AAA(sf)
A-2       $341,798,000       AAA(sf)
A-3       $60,000,000       AAA(sf)
A-4       $125,000,000       AAA(sf)
A-5       $444,175,000       AAA(sf)
A-SB       $54,333,000       AAA(sf)
A-S       $165,771,000       AAA(sf)
B       $60,281,000       AA-(sf)
C       $60,280,000       A-(sf)
D       $18,838,000       BBB+(sf)
E-RR1       $52,746,000       BBB-(sf)
F-RR1       $18,837,000       BB(sf)
G-RR1       $18,838,000       B(sf)
NR-RR1       $56,512,898       NR
X-A       $1,220,681,0002       AAA(sf)
X-B       $60,281,0002       AAA(sf)
X-D       $18,838,0002       BBB+(sf)
1   In satisfaction of the US risk retention rules, these classes will be retained by a third-party purchaser, are intended to constitute an “eligible horizontal residual interest” and will represent at least 5.0% of the fair market value of all non-residual certificates.
2 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 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 KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical:
Kroll Bond Rating Agency
Ravish Kamath, 646-731-2328
Director
rkamath@kbra.com
or
Yee Cent Wong, 646-731-2374
Managing Director
ywong@kbra.com
or
Dayna Carley, 646-731-2391
Senior Director
dcarley@kbra.com
or
Anna Hertzman, 646-731-2367
Managing Director
ahertzman@kbra.com

Contacts

Analytical:
Kroll Bond Rating Agency
Ravish Kamath, 646-731-2328
Director
rkamath@kbra.com
or
Yee Cent Wong, 646-731-2374
Managing Director
ywong@kbra.com
or
Dayna Carley, 646-731-2391
Senior Director
dcarley@kbra.com
or
Anna Hertzman, 646-731-2367
Managing Director
ahertzman@kbra.com