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TMCNet:  KBRA Assigns Preliminary Ratings to FORT CRE 2018-1

[November 08, 2018]

KBRA Assigns Preliminary Ratings to FORT CRE 2018-1

Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to eight classes of FORT CRE 2018-1, a $600.0 million managed commercial real estate collateralized loan obligation (CRE CLO) securitization, with a 2.75-year reinvestment period that includes a 150-day ramp-up period. FORT 2018-1 CRE CM LLC, an affiliate of Drawbridge Special Opportunities Fund LP, will serve as the transaction's collateral manager.

The transaction will initially be collateralized by 19 CRE whole loans (or senior participations therein) with an aggregate cut-off date balance of $408.1 million, along with $141.9 million in cash and borrowings of up to $50.0 million under the revolving Class A-R notes. The cash collateral can be used to acquire loans during the ramp-up period and the Class A-R notes can be drawn upon to acquire loans during the first two years of the transactions life. Previously unidentified whole loans and participations may be acquired during the ramp-up and reinvestment periods, subject to eligibility and reinvestment criteria. The eligibility criteria includes, among other things, maximum stabilized LTV and minimum stabilized DSC requirements; pool level concentration limits for loan size, property type, and geographic location; certain restrictions on participation interests and future funding assets; and that the rating condition must be satisfied with respect to KBRA. Furthermore, during the reinvestment period, the collateral manager is permitted to sell or exchange up to 10.0% of defaulted and impaired assets, subject to the eligibility criteria and other requirements.

The transaction also includes interest coverage (IC) and overcollateralization (OC) cash diversion tests which, in addition to structural subordination, provide credit enhancement to the rated notes. Should either of the tests not be satisfied, interest proceeds remaining after payment of Class D interest would be diverted to pay down the senior notes in a sequential manner.

All of the loans have floating interest rates indexed to one-month LIBOR. The loans are secured by the fee and leasehold interests in 19 properties. The initial pool's property-types include office (30.0% of the initial loan collateral of $408.1 million), lodging (21.3%), multifamily (20.1%), retail (18.4%), and mixed-use (10.2%). The eligibility criteria also permit the acquisition of industrial, manufactured housing and self-storage assets.

KBRA's analysis of the transaction involved evaluation of property cash flows and values within initial loan pool using our CMBS Property Evaluation Methodology. The results of the analysis yielded KBRA values that were, on a weighted average basis, 37.5% and 49.3% lower than the appraisers' as-is values and stabilized values, respectively, and a KBRA Loan to Value (KLTV) for the initial loan pool of 122.2%. The results of this analysis were utilized in the application of our US CMBS Multi-Borrower Rating Methodology. The analysis also included quantitative and/or qualitative review of the various structural features of the transaction, including ramp-up, reinvestment, and IC & OC tests, as well as a review of the legal documents, the results of which were incorporated into our ratings assignment process.

For complete details on the analysis, please see our pre-sale report, FORT CRE 2018-1, published at The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: FORT CRE 2018-1

Class       Initial Note Balance       Expected KBRA Rating
A-1       $241,000,000       AAA(sf)
A-R1       $50,000,000       AAA(sf)
A-2       $33,750,000       AAA(sf)
B       $39,750,000       AA-(sf)
C       $45,000,000       A-(sf)
D       $49,500,000       BBB-(sf)
E       $35,250,000       BB-(sf)
F       $20,250,000       B-(sf)
Income Notes       $85,500,000       NR

1Class A-R is a revolving class, with an initial balance of $0, and a maximum possible balance of $50 million.

To access ratings, reports and disclosures, click here.

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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.

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