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TMCNet:  KBRA Assigns Preliminary Ratings to UBS 2018-C10

[May 16, 2018]

KBRA Assigns Preliminary Ratings to UBS 2018-C10

Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to 15 classes of UBS 2018-C10 (see ratings list below), a $730.4 million CMBS conduit transaction collateralized by 56 commercial mortgage loans secured by 87 properties.

The collateral properties are located in 24 states, with two state exposures each representing more than 10.0% of the pool balance: New York (20.0%) and Florida (11.3%). The pool has exposure to all of the major property types, with four each representing 10.0% or more of the pool balance: office (30.6%), retail (22.0%), lodging (14.6%) and mixed use (13.1%). The loans have principal balances ranging from $882,000 to $50.0 million for the largest loan in the pool, NYC REIT Mixed-Use Portfolio (6.8%), which is comprised of four commercial condominium spaces totaling 120,225 sf, located across two properties in New York City's Manhattan borough. The five largest loans, which also include HTI Medical Office Portfolio (6.8%), 175 Park Avenue (5.5%), Re/Max Plaza (4.9%) and Premier Rochester Office Portfolio (4.1%), represent 28.1% of the initial pool balance, while the top 10 loans represent 46.2%.

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 5.9% 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, 41.1% less than third party appraisal values. The pool has an in-trust KLTV of 103.2% and an all-in KLTV of 104.0%. 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, UBS 2018-C10 published today at www.kbra.com. The report includes our UBS 2018-C10 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: UBS 2018-C10



       
Class     Initial Class Balance     KBRA Rating
A-1     $21,314,000     AAA(sf)
A-2     $23,134,000     AAA(sf)
A-SB     $34,712,000     AAA(sf)
A-3     See Footnote (1)     AAA(sf)
A-4     See Footnote (1)     AAA(sf)
A-S     $41,086,000     AAA(sf)
B     $33,782,000     AA(sf)
C     $37,434,000     A-(sf)
D     See Footnote (1)     BBB(sf)
D-RR     See Footnote (1)     BBB-(sf)
E-RR     $20,087,000     BB-(sf)
F-RR     $9,130,000     B(sf)
NR-RR     $33,782,806     NR
X-A     $511,295,000     AAA(sf)
X-B     $112,302,000     AAA(sf)
X-D     $31,956,000     BBB(sf)
 

1The exact initial certificate balances of the Class A-3, Class A-4, Class D and Class D-RR certificates will not be determined until final pricing. However, the aggregate certificate balance of the Class A-3 and A-4 certificates is expected to be approximately $432.135 million. Each class' initial certificate balance is expected to fall within the following ranges: Class A-3 - $125.0 million to $195.0 million; Class A-4 - $237.135 million to $307.135 million; Class D - $30.290 million to $31.956 million and Class D-RR - $11.869 million to $13.535 million. 2In 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. 3Notional balance.

Representations & Warranties Disclosure

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC (News - Alert) 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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