NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of UBS 2018-C11 (see ratings list below), a $803.8 million CMBS conduit transaction collateralized by 48 commercial mortgage loans secured by 91 properties.
The collateral properties are located in 26 states, with three state exposures each representing more than 10.0% of the pool balance: New York (18.5%) and California (13.7%), and Virginia (13.6%). The pool has exposure to all of the major property types, with four each representing 10.0% or more of the pool balance: office (36.3%), retail (27.2%), mixed-use (15.8%) and lodging (14.8%). The loans have principal balances ranging from $3.0 to $50.0 million for the largest loan in the pool, 20 Times Square (6.2%), which is secured by the land underlying a 42-story mixed-use tower located in the Times Square district of New York City. The five largest loans, which also include Riverfront Plaza (6.2%), Torrance Technology Campus (5.0%), 5th Street Station (4.5%), and Orlando Airport Marriott Lakeside (4.3%), represent 26.2% of the initial pool balance, while the top 10 loans represent 44.2%.
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 7.6% 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, 39.5% less than third party appraisal values. The pool has an in-trust KLTV of 96.6% and an all-in KLTV of 107.3%. 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-C11 published at www.kbra.com. The report includes our UBS 2018-C11 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-C11
|Class||Initial Class Balance||Expected KBRA Rating|
|A-4||See Footnote (1)||AAA(sf)|
|A-5||See Footnote (1)||AAA(sf)|
|VRR Interest||See Footnote (4)||NR|
|1The exact initial certificate balances of the Class A-4 and Class A-5 certificates will not be determined until final pricing. The aggregate initial certificate balance of the Class A-4 and Class A-5 certificates is expected to be approximately $372,569,000. Each class’ initial certificate balance is expected to fall within the following ranges: Class A-4 - $125,000,000 - $162,000,000; Class A-5 - $210,569,000 - $247,569,000. 2To satisfy the US Risk Retention rules, Argentic Real Estate Finance LLC (directly or through a majority-owned affiliate) is expected to retain an “eligible horizontal residual interest” consisting of the Class E-RR, F-RR and NR-RR certificates, representing approximately 2.79% of the aggregate fair value of all of the non-residual interests issued by the issuer, determined in accordance with GAAP. 3Notional balance. 4To satisfy the remaining risk retention requirements, Argentic Real Estate Finance LLC is expected to retain a portion of the VRR interest, which is an “eligible vertical interest” in the form of a single vertical security in the aggregate amount of approximately 2.21% of the aggregate certificate balance of all of the non-residual interests issued by the issuer.|
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)
- CMBS: UBS 2018-C11 Pre-Sale Report
- U.S. CMBS Multi-Borrower Rating Methodology
- CMBS Property Evaluation Methodology
- Methodology for Rating Interest-Only Certificates in CMBS Transactions
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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.