KBRA Assigns Preliminary Ratings to UBS 2018-C9

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of UBS 2018-C9 (see ratings list below), a $839.9 million CMBS conduit transaction collateralized by 43 commercial mortgage loans secured by 112 properties.

The collateral properties are located in 24 states, with two state exposures each representing more than 10.0% of the pool balance: California (25.8%) and Texas (13.1%). The pool has exposure to all of the major property types, with four each representing 10.0% or more of the pool balance: office (35.5%), retail (20.7%), lodging (13.9%) and industrial (10.6%). The loans have principal balances ranging from $2.6 million to $65.0 million for the largest loan in the pool, Aspen Lake Office Portfolio (7.7%), which is comprised three adjacent office properties in Austin, Texas. The five largest loans, which also include AFIN Portfolio (7.1%), Midwest Hotel Portfolio (6.0%), City Square and Clay Street (5.4%) and ExchangeRight Net Leased Portfolio 20 (4.6%), represent 30.8% of the initial pool balance, while the top 10 loans represent 50.2%.

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 5.9% 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, 41.3% less than third party appraisal values. The pool has an in-trust KLTV of 101.2% and an all-in KLTV of 106.4%. 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, UBS 2018-C9 published today at www.kbra.com. The report includes our UBS 2018-C9 KBRA Conduit 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: UBS 2018-C9

 
    Class       Initial Class Balance       Expected KBRA Rating    
    A-1      

      $17,267,000

      AAA(sf)    
    A-2      

      $37,271,000

      AAA(sf)    
    A-SB      

      $37,671,000

      AAA(sf)    
    A-3      

      $125,000,0001

      AAA(sf)    
    A-4      

      $370,724,0001

      AAA(sf)    
    A-S      

      $56,693,000

      AAA(sf)    
    B      

      $41,995,000

      AA(sf)    
    C      

      $39,896,000

      A-(sf)    
    D      

      $26,636,0001

      BBB(sf)    
    D-RR2      

      $18,509,0001

      BBB-(sf)    
    E-RR2      

      $20,997,000

      BB-(sf)    
    F-RR2      

      $10,499,000

      B-(sf)    
    NR-RR2      

      $36,746,550

      NR    
    X-A      

      $587,933,0003

      AAA(sf)    
    X-B      

      $138,584,0003

      AAA(sf)    
    X-D      

      $26,636,0003

      BBB(sf)    

1Approximate initial certificate balances. The exact initial certificate balances of the Class A-3, Class A-4, Class D and Class D-RR 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 approximately $495.7 million, and the aggregate certificate balance of the Class D and D-RR certificates is expected to be approximately $45.1 million. Each class’ initial certificate balance is expected to fall within the following ranges: Class A-3 - $70.0 million to $175.0 million; Class A-4 - $320.724 million to $420.724 million; Class D - $24.35 million to $28.981 million and Class D-RR - $16.164 million to $20.795 million. 2In satisfaction of the US Risk Retention rules, these classes are expected to be purchased and retained by RREF III-D AIV RR H, LLC, a third-party purchaser on the closing date. Such classes will represent an “eligible horizontal residual interest” and will represent at least 5.0% of the fair market value of all non-residual certificates issued. 3Notional 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:
KBRA
Albert Lee, 646-731-2448
Associate Director
alee@kbra.com
or
Yee Cent Wong, 646-731-2374
Managing Director
ywong@kbra.com
or
Susannah Keagle, 646-731-3357
Senior Director
skeagle@kbra.com
or
James Wang, 646-731-2450
Senior Director
jwang@kbra.com

Contacts

Analytical:
KBRA
Albert Lee, 646-731-2448
Associate Director
alee@kbra.com
or
Yee Cent Wong, 646-731-2374
Managing Director
ywong@kbra.com
or
Susannah Keagle, 646-731-3357
Senior Director
skeagle@kbra.com
or
James Wang, 646-731-2450
Senior Director
jwang@kbra.com