KBRA Assigns Preliminary Ratings to KREF 2018-FL1

Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to seven classes of KREF 2018-FL1, a $1.0 billion commercial real estate collateralized loan obligation (CRE CLO) securitization. The transaction will initially be collateralized by 23 similarly sized pari passu interests in mortgage loans and 1 pari passu interest in a mortgage and mezzanine loan, which are collateralized by 29 properties. The collateral consists of both non-controlling interests (21 loans, 87.4%) and controlling interests (3 loans, 12.6%) in the related mortgage loans.

The subject transaction includes a 24-month reinvestment period during which previously unidentified assets can be acquired. During the reinvestment period, principal proceeds received from the mortgage assets, along with cash contributed by the preferred shareholder, can be used to acquire reinvestment assets. In all cases, each reinvestment asset must satisfy the eligibility criteria and the reinvestment criteria.

KBRAs analysis of the transaction involved a detailed evaluation of the underlying cash flows using our U.S. CMBS Property Evaluation Methodology and the application of our U.S. CMBS Multi-Borrower Rating Methodology. The analysis resulted in KBRAs values to be, on average, 35.5% and 45.9% lower than the appraisers as-is values and stabilized values, respectively. The resulting in-trust KBRA Loan to Value (KLTV), assuming that all the future funding commitments are fully funded, was 124.0%. We also conducted scenario analyses to evaluate and incorporate the impact of the transactions various structural features in our ratings assignment process.

For complete details on the analysis, please see our pre-sale report, KREF 2018-FL1 published at www.kbra.com. 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: KREF 2018-FL1

Class     Initial Note Balance     Expected KBRA Rating
  A     $542,500,000       AAA(sf)
  A-S     $67,500,000       AAA(sf)
  B     $63,750,000       AA-(sf)
  C     $63,750,000       A-(sf)
  D     $72,500,000       BBB-(sf)
  E     $53,750,000       BB-(sf)
  F     $27,500,000       B-(sf)
  Preferred Shares     $108,750,000       NR

To access ratings, reports and disclosures, click 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 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.

Analytical Contacts:
Kroll Bond
Rating Agency
Fred Perreten, Senior Director
(646) 731-2454
[email protected]
Brown, Senior Director
(646) 731-2307
[email protected]
Bhasin, Senior Managing Director
(646) 731-2334
[email protected]
Keagle, Managing Director
(646) 731-3357
[email protected]