Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to 18 classes of Velocity Commercial Capital 2019-1 (VCC 2019-1) mortgage-backed certificates.
VCC 2019-1 is a $248.0 million securitization collateralized by 689 commercial loans, each of which is secured by a mortgage on a small balance residential rental or commercial real estate (CRE) property. With the exception of two fixed-rate loans (0.01% of the total pool balance), the pool is comprised of adjustable rate mortgages. The loans have an average outstanding principal balance of $359,912 which range from $73,156 (0.03%) to $3.0 million (1.2%). The weighted average appraisal loan-to-value ratio (LTV) and FICO score for the pool are 62.3% and 704, respectively.
The underlying properties are located in or near 101 Core Based Statistical Areas (CBSAs) across 35 states and the District of Columbia. The top-three CBSAs represent 50.3% of the portfolio and include New York-Newark-Jersey City, NY-NJ (25.8%), Los Angeles-Long Beach-Anaheim, CA (18.9%), and Miami-Fort Lauderdale-West Palm Beach, FL (5.6%). The three largest state exposures represent 60.1% of the portfolio and consist of California (29.7%), New York (19.9%), and Florida (10.5%).
The residential assets are comprised of 1-4 unit rental properties (397 assets, 42.7% of the total pool balance). The commercial properties are largely comprised of mixed use (93 assets, 31.5% of CRE), multifamily (55 assets, 20.1%), retail (49 assets, 17.4%) and office (58 assets, 14.9%) properties. The remaining commercial properties (37 assets, 16.2% of CRE) include industrial/warehouse, auto service centers, self-storage, and a daycare facility. The issuer assigned 19 assets (1.9%) a property type of commercial condominium. However, KBRA reclassified this property type as office, which is each assets core use.
KBRA relied on its RMBS and CMBS methodologies in order to analyze the transaction. In doing so, KBRA divided the pool into two distinct loan groupings to which we applied residential (sub-pool 1: 397 loans, 42.7% of the total pool balance) and commercial (sub-pool 2: 292 loans, 57.3%) analyses. KBRA determined losses at each rating category for each of the sub-pools, assuming a straight sequential payment structure, which were combined to reflect the quality of the collateral, diligence, and information quality relative to typical RMBS and CMBS transactions. The losses were subsequently incorporated into our cash flow modeling, which was used to evaluate the transactions credit enhancement levels in the context of its modified pro rata structure.
For complete details on the analysis, please see our pre-sale report, Velocity Commercial Capital 2019-1 published at www.kbra.com. The preliminary ratings are based on information known to KBRA at the time of publication. Information received subsequent to this release could result in the assignment of ratings that differ from the preliminary ratings.
Preliminary Ratings Assigned: VCC 2019-1
Initial Class Balance(2)
Expected KBRA Rating
Rated Final Distribution Date
|A||$163,542,000||Senior/ Exchangeable/Fixed Rate||34.05%||AAA (sf)||March 2049|
|A-S||$163,542,000||Senior/Initial Exchangeable/Fixed Rate||34.05%||AAA (sf)||March 2049|
|A-IO||$163,542,000||Senior/Interest-Only/Initial Exchangeable/Fixed Rate||N/A||AAA (sf)||March 2049|
|M-1||$24,550,000||Subordinate/Exchangeable/Fixed Rate||24.15%||AA (sf)||March 2049|
|M1-A||$24,550,000||Subordinate/Initial Exchangeable/Fixed Rate||24.15%||AA (sf)||March 2049|
|M1-IO||$24,550,000||Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate||N/A||AA (sf)||March 2049|
|M-2||$10,167,000||Subordinate/Exchangeable/Fixed Rate||20.05%||A (sf)||March 2049|
|M2-A||$10,167,000||Subordinate/Initial Exchangeable/Fixed Rate||20.05%||A (sf)||March 2049|
|M2-IO||$10,167,000||Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate||N/A||A (sf)||March 2049|
|M-3||$11,283,000||Subordinate/Exchangeable/Fixed Rate||15.50%||BBB (sf)||March 2049|
|M3-A||$11,283,000||Subordinate/Initial Exchangeable/Fixed Rate||15.50%||BBB (sf)||March 2049|
|M3-IO||$11,283,000||Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate||N/A||BBB (sf)||March 2049|
|M-4||$9,299,000||Subordinate/Exchangeable/Fixed Rate||11.75%||BB (sf)||March 2049|
|M4-A||$9,299,000||Subordinate/Initial Exchangeable/Fixed Rate||11.75%||BB (sf)||March 2049|
|M4-IO||$9,299,000||Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate||N/A||BB (sf)||March 2049|
|M-5||$5,208,000||Subordinate/Exchangeable/Fixed Rate||9.65%||B (sf)||March 2049|
|M5-A||$5,208,000||Subordinate/Initial Exchangeable/Fixed Rate||9.65%||B (sf)||March 2049|
|M5-IO||$5,208,000||Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate||N/A||B (sf)||March 2049|
|M-6||$11,531,000||Subordinate/Exchangeable/Fixed Rate||5.00%||NR||March 2049|
|M6-A||$11,531,000||Subordinate/Initial Exchangeable/Fixed Rate||5.00%||NR||March 2049|
|M6-IO||$11,531,000||Subordinate/Interest-Only/Initial Exchangeable/Fixed Rate||N/A||NR||March 2049|
|P||$100||Prepayment Premiums||N/A||NR||March 2049|
|XS||N/A||Monthly Excess Cashflow||N/A||NR||March 2049|
|1 All classes shown in the table above are offered, except Classes M-7, P, XS, and R.|
|2 Principal or notional amount, as applicable.|
|3 The Class M-7 certificates are principal-only and are not entitled to receive distributions of interest. This class will be retained by the depositor, the loan seller, or a majority-owned affiliate (MOA) of the loan seller, and may, to the extent necessary, be held in partial satisfaction of the U.S. risk retention rules.|
|4 The Class P certificates are solely entitled to receive prepayment premiums during the prepayment period plus $100 in principal and will be retained by the loan seller or an MOA in partial satisfaction of the U.S. risk retention rules.|
|5 The Class XS certificates are solely entitled to receive monthly excess cash flow, if any, and will be retained by the loan seller or an MOA in partial satisfaction of the U.S. risk retention rules.|
To access ratings, reports and disclosures, click here.
Related Publications: (available at www.kbra.com)
- Velocity Commercial Capital 2019-1 Pre-Sale Report
- U.S. RMBS Rating Methodology
- Residential Mortgage Default and Loss Model
- U.S. CMBS Property Evaluation Methodology
- U.S. CMBS Multi-Borrower Rating 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 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.
Kristymarie Cariello, Director
Griffin Flagg, Senior Analyst
Jack Kahan, Senior Managing Director