NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to seven classes of AREIT 2018-CRE1, a $480.4 million commercial real estate collateralized loan obligation (CRE CLO) securitization. The transaction will initially be collateralized by 18 whole loans and participations, as well as cash equal to the par amount of the delayed close asset, as discussed below. Ten assets (55.3%) are whole loans and the remaining nine assets (44.7%) are pari passu participations, with related companion participations that represent unfunded future advance obligations held outside of the trust.
One mortgage asset may be originated and acquired by the trust within 90 days after the securitization closing date (delayed close asset) using the cash proceeds escrowed at closing for such purpose. Assuming this acquisition occurs, the transaction will be collateralized by 19 non-recourse loans and participations with an aggregate balance of $480.4 million. The mortgage assets will be secured by the fee simple interests in 18 properties (93.5%) and leasehold interest in one property (6.5%). During the two-year acquisition period following the closing date, principal proceeds received on the mortgage assets can be used to acquire non-trust companion participations, provided such companion participations are funded and satisfy the acquisition criteria. In addition, defaulted assets and impaired assets can be sold to the majority holder of the Class G notes at par.
KBRA’s analysis of the transaction involved a detailed evaluation of the underlying cash flows using our CMBS Property Evaluation Methodology and the application of our US CMBS Multi-Borrower Rating Methodology. The results of the analysis yielded a KNCF for the underlying collateral properties that was, on average, 14.0% less than the issuer cash flow. KBRA primarily relied on the direct capitalization approach to arrive at a valuation of each of the underlying properties. The KBRA values were, on average, 40.0% and 48.5% lower than the appraiser’s as-is values and stabilized values, respectively. The resulting KBRA in-trust Loan to Value (KLTV) (assuming the acquisition of the delayed close asset) was 122.8%. We also conducted scenario analyses to evaluate and incorporate the impact of the transaction’s structural features in our ratings assignment process.
For complete details on the analysis, please see our pre-sale report, AREIT 2018-CRE1 published at www.kbra.com. The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.
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Preliminary Ratings Assigned: AREIT 2018-CRE1 |
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| Class | Initial Note Balance | Expected KBRA Rating | ||||||
| A | $254,600,000 | AAA(sf) | ||||||
| A-S | $42,033,000 | AAA(sf) | ||||||
| B | $27,622,000 | AA-(sf) | ||||||
| C | $25,820,000 | A-(sf) | ||||||
| D | $36,629,000 | BBB-(sf) | ||||||
| E | $16,212,000 | BB-(sf) | ||||||
| F | $19,816,000 | B-(sf) | ||||||
| G | $57,645,911 | NR | ||||||
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 CMBS: AREIT 2018-CRE1 Representations & Warranties Disclosure.
Related Publications: (available at www.kbra.com)
- AREIT 2018-CRE1 Pre-Sale Report
- AREIT 2018-CRE1 CRE CLO KBRA Comparative Analytic Tool (CRE CLO KCAT)
- U.S. CMBS Multi-Borrower Rating Methodology
- CMBS Property Evaluation Methodology
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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.
