KBRA Assigns Preliminary Ratings to WFCM 2017-C42

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Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 14 classes of the WFCM 2017-C42 transaction (see ratings list below). WFCM 2017-C42 is a $744.8 million CMBS conduit transaction collateralized by 37 commercial mortgage loans secured by 66 properties.

The properties in the collateral pool are located in 21 states, with California (19.3%), New York (16.3%), and Michigan (14.0%) each representing more than 10.0% of the pool balance. The pool has exposure to most of the major property types, with three that each represent more than 15.0% of the pool balance: office (49.4%), retail (25.5%), and lodging (16.2%). The loans have principal balances ranging from $1.4 million to $70.0 million for the largest loan in the pool, One Ally Center (9.4%), a 976,095 sf Class-A office building located in the CBD of Detroit, Michigan. The five largest loans, which also include 16 Court Street (8.9%), Logan Town Center (7.4%), One Century Place (5.9%), and Moffett Towers II - Building 2 (5.4%), represent 37.0% of the initial pool balance, while the 10 largest loans represent 58.7%.

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 7.0% 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, 41.0% less than third party appraisal values. The pool has an in-trust KLTV of 101.4% and an all-in KLTV of 105.7%. 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 2017-C42 published today at www.kbra.com. The report includes our KBRA 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 2017-C42

Class       Initial Class Balance       Expected KBRA Rating
A-1       $13,377,000       AAA(sf)
A-2       $12,320,000       AAA(sf)
A-SB       $27,697,000       AAA(sf)
A-3       $205,000,000       AAA(sf)
A-4       $229,780,000       AAA(sf)
A-BP       $7,125,000       AAA(sf)
A-S       $40,686,000       AAA(sf)
B       $39,801,000       AA(sf)
C       $36,263,000       A-(sf)
D       $40,685,000       BBB-(sf)
E       $20,343,000       NR
F       $7,960,000       NR
G       $26,534,190       NR
X-A       $488,174,000¹       AAA(sf)
X-BP       $7,125,000¹       AAA(sf)
X-B       $116,750,000¹       AAA(sf)
X-D       $40,685,000¹       BBB-(sf)
X-E       $20,343,000¹       NR
X-F       $7,960,000¹       NR
RR Interest²       N/A       N/A
1   Notional balance.
2 To satisfy the US risk retention rules, each of Wells Fargo Bank, National Association, Barclays Bank PLC and Starwood Mortgage Funding II LLC or its majority-owned affiliate are expected to purchase the RR Interest, which is expected to be a “single vertical security” and an “eligible vertical interest. The RR Interest will represent at least 5.0% of each non-residual class of certificates.

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 Kroll Bond Rating Agency

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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Business Wire: 16:28 GMT Wednesday 6th December 2017

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