KBRA Assigns Preliminary Ratings to WFCM 2018-C48

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 16 classes of WFCM 2018-C48 (see ratings list below), a $833.9 million CMBS conduit transaction collateralized by 52 commercial mortgage loans secured by 95 properties.

The collateral properties are located in 30 states, with three state exposures each representing 10.0% or more of the pool balance: Georgia (14.1%), Tennessee (12.9%), and Florida (12.0%). The pool has exposure to all of the major property types, with five representing more than 10.0% of the pool balance: office (21.9%), retail (20.6%), industrial (18.2%), lodging (17.5%), and multifamily (15.4%). The loans have principal balances ranging from $1.5 to $66.1 million for the largest loan in the pool, Miami Industrial Portfolio (7.9%), which is secured by two warehouse/showroom properties comprising a total of 745,597 sf located in Miami, Florida. The five largest loans, which also include Sheraton Grand Nashville Downtown (7.2%), Walgreens – Ginsberg Portfolio (4.8%), Riverworks (4.6%), and 1000 Windward Concourse (3.7%), represent 28.2% of the initial pool balance, while the top 10 loans represent 45.0%.

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 7.2% 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, 38.4% less than third party appraisal values. The pool has an in-trust KLTV of 99.9% and an all-in KLTV of 103.8%. 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, WFCM 2018-C48 published at www.kbra.com. The report includes our WFCM 2018-C48 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: WFCM 2018-C48
Class	Initial Class Balance	Expected KBRA Rating
A-1	$18,490,000	AAA(sf)
A-2	$36,431,000	AAA(sf)
A-3	$23,767,000	AAA(sf)
A-SB	$32,713,000	AAA(sf)
A-4	See Footnote (1)	AAA(sf)
A-5	See Footnote (1)	AAA(sf)
A-S	$59,418,000	AAA(sf)
B	$40,654,000	AA+(sf)
C	$38,570,000	A(sf)
D	$31,848,000^2	BBB+(sf)
E-RR^3	$14,018,000^2	BBB-(sf)
F-RR^3	$20,848,000	BB(sf)
G-RR^3	$9,382,000	B(sf)
H-RR^3	$35,442,944	NR
X-A	$583,753,000^4	AAA(sf)
X-B	$138,642,000^4	AAA(sf)
X-D	$31,848,000^2,4	BBB+(sf)

¹The exact initial certificate balances of the Class A-4 and A-5 certificates will not be determined until final pricing. However, the aggregate certificate balance of the Class A-4 and A-5 certificates is expected to be $472,352,000. The initial certificate balance for each class is expected to fall within the following ranges: Class A-4 - $100,000,000 to $230,000,000; Class A-5 - $242,352,000 to $372,352,000.
²Approximate initial certificate balances. The certificate balances of the Class D and E-RR certificates (and accordingly, the approximate notional balance of the Class X-D certificates) will not be determined until final pricing. However, each class’ initial certificate balance is expected to fall within the following ranges: Class D – $30,647,000 to $31,848,000; Class E-RR – $14,018,000 to $15,219,000. The notional balance of the Class X-D certificates will be equal to the certificate balance of the Class D certificates.
³In satisfaction of the US Risk Retention rules, these classes are expected to be purchased and retained by 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.
⁴Notional 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)

• CMBS: WFCM 2018-C48 Pre-Sale Report

• CMBS: WFCM 2018-C48 Pre-Sale ReportU.S. CMBS Multi-Borrower Rating Methodology
• CMBS Property Evaluation Methodology
• Methodology for Rating Interest-Only Certificates in CMBS Transactions

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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.