KBRA Assigns Preliminary Ratings to CGCMT 2018-B2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 12 classes of CGCMT 2018-B2 (see ratings list below), a $1.1 billion CMBS conduit transaction collateralized by 52 commercial mortgage loans secured by 142 properties.

The collateral properties are located in 30 states and the District of Columbia, with one state exposure, California (19.7%), representing more than 10.0% of the pool balance. The pool has exposure to all of the major property types, with five each representing 10.0% or more of the pool balance: office (26.3%), retail (22.8%), self-storage (18.8%), mixed-use (14.1%), and lodging (11.0%). The loans have principal balances ranging from $2.0 million to $105.0 million for the largest loan in the pool, Extra Space – TIAA Self Storage Portfolio (9.9%), which is comprised of 24 self-storage facilities located in 11 states and Washington D.C. The five largest loans, which also include Park Place East and Park Place West (5.1%), The SoCal Portfolio (4.7%), Westin Tysons Corner (4.5%), and Extra Space Self Storage Portfolio (4.0%), represent 28.2% of the initial pool balance, while the top 10 loans represent 45.4%.

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 5.7% 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, 40.7% less than third party appraisal values. The pool has an in-trust KLTV of 104.1% and an all-in KLTV of 108.0%. 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, CGCMT 2018-B2 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: CGCMT 2018-B2

Class   Initial Class Balance   Expected KBRA Rating
A-1   $28,000,000   AAA(sf)
A-2   $69,000,000   AAA(sf)
A-3   See Footnote (1)   AAA(sf)
A-4   See Footnote (1)   AAA(sf)
A-AB   $49,000,000   AAA(sf)
A-S   $76,957,000   AAA(sf)
B   $49,202,000   AA-(sf)
C   $47,940,000   A-(sf)
D   $52,986,000   BBB-(sf)
E   $25,232,000   NR
F   $10,092,000   NR
G   $40,371,466   NR
X-A   $783,442,0002   AAA(sf)
X-B   $97,142,0002   AAA(sf)
X-D   $52,986,0002   BBB-(sf)
X-E   $25,232,0002   NR
X-F   $10,092,0002   NR
X-G   $40,371,4662   NR
VRR3   N/A   N/A
1The exact initial certificate balances of the Class A-3 and A-4 certificates will not be determined until final pricing. However, the aggregate certificate balance of the Class A-3 and A-4 certificates is expected to be $560,485,000. Each class’ initial certificate balance is expected to fall within the following ranges: Class A-3 - $70.0 million to $170.0 million; and Class A-4 - $390.485 million to $490.485 million. 2Notional balance. 3To satisfy the US Risk Retention rules, each of CREFI, MSBNA, Starwood and BANA are expected to purchase a portion of the VRR Interest, which is expected to be a “single vertical security” and an “eligible vertical interest”. The VRR 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 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

Kroll Bond Rating Agency
Analytical:
Kenneth Kor, (646) 731-2339
Associate Director
kkor@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
Griffin Flagg, (646) 731-2433
Analyst
gflagg@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical:
Kenneth Kor, (646) 731-2339
Associate Director
kkor@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
Griffin Flagg, (646) 731-2433
Analyst
gflagg@kbra.com