Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 17 classes of BENCHMARK 2018-B3 (see ratings list below), a $1.1 billion CMBS conduit transaction collateralized by 45 commercial mortgage loans secured by 89 properties.
The collateral properties are located in 22 states, with one state exposure, California (23.7%), representing more than 10.0% of the pool balance. The pool has exposure to all the major property types, with four each representing 10.0% or more of the pool balance: office (35.7%), lodging (20.1%), retail (20.0%) and multifamily (12.6%). The loans have principal balances ranging from $2.7 million to $62.0 million for the largest loan in the pool, 6420 Wilshire (5.7%), a 204,035 sf office building located in Los Angeles, California, approximately nine miles west of the city’s CBD. The five largest loans, which also include EOS 21 (5.5%), The SoCal Portfolio (4.6%), Twelve Oaks Mall (4.6%) and InterContinental San Francisco (4.6%), represent 24.9% 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 6.7% 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, 39.8% less than third party appraisal values. The pool has an in-trust KLTV of 101.2% and an all-in KLTV of 106.2%. 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, BENCHMARK 2018-B3 published today at www.kbra.com. The report includes our BENCHMARK 2018-B3 KBRA Conduit 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: BENCHMARK 2018-B3
| Class | Initial Class Balance | Expected KBRA Rating | ||||
| A-1 | $25,000,000 | AAA(sf) | ||||
| A-2 | $162,100,000 | AAA(sf) | ||||
| A-3 | $66,600,000 | AAA(sf) | ||||
| A-4 | See Footnote (1) | AAA(sf) | ||||
| A-5 | See Footnote (1) | AAA(sf) | ||||
| A-AB | $46,000,000 | AAA(sf) | ||||
| A-S | $84,672,000 | AAA(sf) | ||||
| B | $49,164,000 | AA(sf) | ||||
| C | $50,530,000 | A-(sf) | ||||
| D | $36,873,0002 | BBB(sf) | ||||
| E-RR3 | $21,851,0002 | BBB-(sf) | ||||
| F-RR3 | $12,291,000 | BB+(sf) | ||||
| G-RR3 | $12,291,000 | BB-(sf) | ||||
| H-RR3 | $15,022,000 | B-(sf) | ||||
| NR-RR3 | $45,067,711 | NR | ||||
| X-A | $849,448,0004 | AAA(sf) | ||||
| X-B | $99,694,0004 | AAA(sf) | ||||
| X-D | $36,873,0002,4 | BBB(sf) | ||||
| 1 The 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 $465.1 million. Each class’ initial certificate balance is expected to fall within the following ranges: Class A-4 - $75.0 million to $175.0 million; and Class A-5 - $290.1 million to $390.1 million. 2 Approximate initial certificate balances. The certificate balances of the Class D and Class E-RR certificates (and, accordingly, the approximate notional amount of the Class X-D certificates) will not be determined until final pricing. However, the aggregate certificate balance of the Class D and E-RR certificates is expected to be approximately $58.7 million. Each class’ initial certificate balance is expected to fall within the following ranges: Class D - $35.0 million to $38.3 million; and Class E-RR - $20.4 million to $23.7 million. The notional balance of the Class X-D certificates will be equal to the certificate balance of the Class D certificates. Credit enhancement for the Class D is expected to fall within a range of 9.920% to 9.620%. 3 In 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 are intended to constitute an “eligible horizontal residual interest” and will represent at least 5.0% of the fair market value of all non-residual certificates issued. 4 Notional 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: BENCHMARK 2018-B3 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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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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180319005845/en/
Contacts:
Analytical:
Ravish
Kamath, 646-731-2328
Director
rkamath@kbra.com
or
Yee
Cent Wong, 646-731-2374
Senior Managing Director
ywong@kbra.com
or
Dayna
Carley, 646-731-2391
Senior Director
dcarley@kbra.com
or
Anna
Hertzman, 646-731-2367
Managing Director
ahertzman@kbra.com
