KBRA Assigns Preliminary Ratings to BX 2018-MCSF

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to nine classes of BX 2018-MCSF, a CMBS single-borrower securitization.

The collateral for the transaction is a $382.0 million non-recourse, first lien mortgage loan. The floating rate loan has an initial two-year term with five, one-year extension options and requires monthly interest-only payments. The loan is secured by the borrower’s fee simple interest in a 758,687 sf, Class-A office property located in San Francisco, California known as Market Center. The subject is located in San Francisco’s South Financial District in close proximity to its eastern waterfront. The property consists of 734,156 sf of office space, 18,235 sf of retail space, and 6,296 sf that is used as storage. The subject also features an outdoor deck, a large landscaped courtyard, secure bicycle parking racks, and 36 parking spaces located within a subterranean parking garage.

As of January 2018, the property was 91.3% leased to approximately 60 tenants. The five largest tenants at the property are Uber, a peer-to-peer ridesharing, food delivery, and transportation network company; Mindspace, an international co-working space provider; DivcoWest, a real estate investment and management company; Crowe Horwath LLP, an accounting and consulting firm, and TIBCO Software, a software company. Together, these five tenants account for 45.8% of the total sf and 53.0% of total base rent.

KBRA’s analysis of the transaction included a detailed evaluation of the properties’ cash flows using our CMBS Property Evaluation Methodology and the application of our CMBS Single Borrower and Large Loan Rating Methodology. The results of our analysis yielded a KBRA net cash flow (KNCF) of $28.0 million. To value the property, we applied an implied capitalization rate of 7.25% to arrive at a KBRA value of $386.7 million. The resulting KBRA Loan to Value (KLTV) is 98.8%. In our analysis of the transaction, we also reviewed and considered third party engineering, environmental, and appraisal reports; the results of our site inspection of the property, and legal documentation review.

For further details on KBRA’s analysis, please see our pre-sale report, entitled BX 2018-MCSF, which was published today 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.

Preliminary Ratings Assigned: BX 2018-MCSF

Class     Expected KBRA Rating     Initial Class Balance
A     AAA(sf)     $172,500,000
X-CP     AAA(sf)     $172,500,000*
X-EXT     AAA(sf)     $172,500,000*
B     AA(sf)     $32,000,000
C     A+(sf)     $21,500,000
D     BBB(sf)     $34,000,000
E     BB(sf)     $52,000,000
F     B(sf)     $50,900,000
HRR**     B-(sf)     $19,100,000
       

*Notional balance.

**To satisfy the US risk retention rules, a third party purchaser is expected to retain the HRR certificates. The Class HRR certificates are expected to constitute an “eligible horizontal residual interest” for purposes of the US risk retention rules and will have a fair value equal to at least 5.0% of the fair value of all ABS interests issued on the closing date, calculated in accordance with 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 BX 2018-MCSF Representations & Warranties Disclosure.

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 Contacts:
Ravish Kamath, Director
(646) 731-2328
rkamath@kbra.com
or
Michael Brown, Senior Director
(646) 731-2307
mbbrown@kbra.com
or
Susannah Keagle, Senior Director
(646) 731-3357
skeagle@kbra.com
or
Mathew Holmes, Analyst
(646) 731-2441
mholmes@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Ravish Kamath, Director
(646) 731-2328
rkamath@kbra.com
or
Michael Brown, Senior Director
(646) 731-2307
mbbrown@kbra.com
or
Susannah Keagle, Senior Director
(646) 731-3357
skeagle@kbra.com
or
Mathew Holmes, Analyst
(646) 731-2441
mholmes@kbra.com