Market Overview

KBRA Assigns Preliminary Ratings to CD 2018-CD7

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Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of
preliminary ratings to 15 classes of CD 2018-CD7 (see ratings list
below), a $717.4 million CMBS conduit transaction collateralized by 42
commercial mortgage loans secured by 72 properties.

The collateral properties are located in 23 states, with four state
exposures each representing more than 10.0% of the pool balance: Florida
(15.5%), New York (13.6%), Michigan (11.7%), and Virginia (10.5%). The
pool has exposure to all of the major property types, with four each
representing 10.0% or more of the pool balance: office (26.1%), retail
(25.9%), multifamily (22.6%) and lodging (14.5%). The loans have
principal balances ranging from $3.6 to $60.0 million for the largest
loan in the pool, Aventura Mal (8.4%), which is secured by 1.2 million
sf of Aventura Mall, a 2.2 million sf, super-regional mall located in
Aventura, Florida, approximately 18 miles north of the Miami CBD. The
five largest loans, which also include Bank of America Center (7.0),
Westside NYC Multifamily Portfolio (5.9%), 175 Park Avenue (4.9%), and
Zenith Ridge (4.9%), represent 31.0% of the initial pool balance, while
the top 10 loans represent 52.8%.

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
5.5% 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, 40.7% less than third party appraisal values. The pool has an
in-trust KLTV of 96.2% and an all-in KLTV of 105.8%. 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, CD
2018-CD7
published at www.kbra.com.
The report includes our CD
2018-CD7 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: CD 2018-CD7

         
Class   Initial Class Balance   Expected KBRA Rating
A-1   $15,321,000   AAA(sf)
A-2   $5,757,000   AAA(sf)
A-SB   $32,486,000   AAA(sf)
A-3   $200,000,000   AAA(sf)
A-4   $248,645,000   AAA(sf)
A-M   $60,086,000   AAA(sf)
B   $31,388,000   AA(sf)
C   $33,182,000   A(sf)
D   $20,444,000   BBB+(sf)
E-RR1   $15,428,000   BBB(sf)
F-RR1   $17,039,000   BB(sf)
G-RR1   $7,175,000   B+(sf)
H-RR1   $30,491,712   NR
X-A2   $562,295,000   AAA(sf)
X-B2   $64,570,000   AAA(sf)
X-D2   $20,444,000   BBB+(sf)
1In satisfaction of the US Risk Retention rules, these
classes are expected to be purchased and retained by RREF III-D AIV
RR H, LLC, 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. 2Notional balance as calculated as
set forth in the Legal Analysis section.

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
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.

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