KBRA Assigns Preliminary Ratings to VCC 2018-2

NEW YORK--()--Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to 18 classes of Velocity Commercial Capital Loan Trust 2018-2 (VCC 2018-2) mortgage-backed certificates.

VCC 2018-2 is a $324.2 million securitization collateralized by 944 commercial loans secured by mortgages on 944 small balance residential rental and commercial real estate (CRE) properties. The pool consists of adjustable-rate, full recourse loans, all of which fully amortize over their respective terms. The weighted average appraisal loan-to-value ratio (LTV) and FICO score for the pool are 63.3% and 709, respectively.

The underlying properties are located in or near 123 Core Based Statistical Areas (CBSAs) across 33 states and the District of Columbia. The top-three CBSAs represent 51.5% of the portfolio and include New York-Newark-Jersey City, NY-NJ (32.0%), Los Angeles-Long Beach-Anaheim, CA (12.7%), and Miami-Fort Lauderdale-West Palm Beach, FL (6.8%). The three largest state exposures represent 57.9% of the portfolio and consist of New York (24.0%), California (22.3%), and Florida (11.6%).

The residential assets are comprised of 1-4 unit rental properties (555 assets, 49.2% of the total pool balance). The commercial properties are largely comprised of mixed use (106 assets, 26.5% of CRE), multifamily (96 assets, 23.6%), retail (71 assets, 18.3%) and office (47 assets, 11.2%) properties. The remaining commercial properties (69 assets, 20.4% of CRE) include industrial/warehouse, auto service centers, manufactured housing and self storage properties. The issuer assigned 21 assets a property type of commercial condominium. The loans have principal balances ranging from $73,500 (0.02%) to $2.7 million (0.9%), with an average cut-off date balance of $343,430.

KBRA relied on its RMBS and CMBS methodologies in order to analyze the transaction. In doing so, KBRA divided the pool into two distinct loan groupings to which we applied residential (sub-pool 1: 555 loans, 49.2% of the total pool balance) and commercial (sub-pool 2: 389 loans, 50.8%) analyses, which are hereafter referred to as the investor 1-4 unit residential and CRE buckets, respectively. KBRA determined losses at each rating category for each of the sub-pools, assuming a straight sequential payment structure, which were combined to reflect the quality of the collateral, diligence, and information quality relative to typical RMBS and CMBS transactions. The losses were subsequently incorporated into our cash flow modeling, which was used to evaluate the transaction’s credit enhancement levels in the context of its modified pro rata structure.

For complete details on the analysis, please see our pre-sale report, VCC 2018-2 published today at www.kbra.com. The preliminary ratings are based on information known to KBRA at the time of publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: VCC 2018-2

 
Liability Structure

Class
(1)(3)(4)

   

Initial Class
Balance(2)

    Class Type    

Credit
Enhancement

   

KBRA
Rating

   

Rated Final
Distribution
Date

A     $209,269,000     Senior/Exchangeable/Fixed Rate     35.45%     AAA (sf)     October 2048
A-S $209,269,000 Senior/Initial Exchangeable/Fixed Rate 35.45% AAA (sf) October 2048
A-IO $209,269,000 Senior/Interest-Only/Initial Exchangeable/Fixed Rate N/A AAA (sf) October 2048
M-1 $31,447,000 Subordinate/Exchangeable/Fixed Rate 25.75% AA (sf) October 2048
M1-A $31,447,000 Subordinate/Initial Exchangeable/Fixed Rate 25.75% AA (sf) October 2048
M1-IO $31,447,000 Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate N/A AA (sf) October 2048
M-2 $14,103,000 Subordinate/Exchangeable/Fixed Rate 21.40% A (sf) October 2048
M2-A $14,103,000 Subordinate/Initial Exchangeable/Fixed Rate 21.40% A (sf) October 2048
M2-IO $14,103,000 Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate N/A A (sf) October 2048
M-3 $8,753,000 Subordinate/Exchangeable/Fixed Rate 18.70% BBB (sf) October 2048
M3-A $8,753,000 Subordinate/Initial Exchangeable/Fixed Rate 18.70% BBB (sf) October 2048
M3-IO $8,753,000 Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate N/A BBB (sf) October 2048
M-4 $13,779,000 Subordinate/Exchangeable/Fixed Rate 14.45% BB (sf) October 2048
M4-A $13,779,000 Subordinate/Initial Exchangeable/Fixed Rate 14.45% BB (sf) October 2048
M4-IO $13,779,000 Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate N/A BB (sf) October 2048
M-5 $5,511,000 Subordinate/Exchangeable/Fixed Rate 12.75% B (sf) October 2048
M5-A $5,511,000 Subordinate/Initial Exchangeable/Fixed Rate 12.75% B (sf) October 2048
M5-IO $5,511,000 Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate N/A B (sf) October 2048
M-6 $25,126,000 Subordinate/Exchangeable/Fixed Rate 5.00% NR October 2048
M6-A $25,126,000 Subordinate/Initial Exchangeable/Fixed Rate 5.00% NR October 2048
M6-IO $25,126,000 Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate N/A NR October 2048
M-7 $16,209,835 Subordinate/Principal-Only 0.00% NR October 2048
P $100 Prepayment Premiums N/A NR October 2048
XS N/A Monthly Excess Cashflow N/A NR October 2048
R     N/A     Residual     N/A     NR     October 2048
(1)   All Classes shown above are Offered Notes except for the Classes M-7, P, XS and R Certificates.
(2) Principal or Notional Amount, as applicable.
(3) The Class M-7 certificates are principal-only and are not entitled to receive distributions of interest. In addition, this class is expected to be retained by the loan seller or a majority-owned affiliate in satisfaction of the US risk retention rules. The loan seller is also retaining the Class M-7 certificates in satisfaction of the EU risk retention requirements.
(4) This class is expected to be retained by the loan seller or a majority-owned affiliate in satisfaction of the US risk retention rules. In addition, the Class P certificates, which are entitled only to prepayment premiums, will also be retained by the loan seller or a majority-owned affiliate in satisfaction of the US risk retention requirements.
 

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 designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus, is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is 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
Ravish Kamath, 646-731-2328
Director
rkamath@kbra.com
or
Kristymarie Cariello, 646-731-2494
Director
kcariello@kbra.com
or
Pramit Sheth, 646-731-2330
Senior Director
psheth@kbra.com
or
Jack Kahan, 646-731-2486
Managing Director
jkahan@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical
Ravish Kamath, 646-731-2328
Director
rkamath@kbra.com
or
Kristymarie Cariello, 646-731-2494
Director
kcariello@kbra.com
or
Pramit Sheth, 646-731-2330
Senior Director
psheth@kbra.com
or
Jack Kahan, 646-731-2486
Managing Director
jkahan@kbra.com