KBRA Assigns Preliminary Ratings to MSC 2019-NUGS

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to eight classes of MSC 2019-NUGS, a CMBS single-asset, single-borrower transaction.

The collateral for the transaction is a $277.1 million senior A Note portion of a $327.7 million non-recourse, first lien mortgage loan. The floating rate loan is structured with an initial two-year term with three, one-year extension options and requires monthly interest-only payments. The loan is secured by the borrower’s fee simple interest in a 1.2 million sf office property in Denver, Colorado.

The Wells Fargo Center was constructed in 1983 and recently underwent a multi-year renovation program that began in 2012. The collateral property is situated on 1.9 acres and is comprised of a 52-story Class-A office buildings totaling 1.2 million sf and a 12-story parking garage. The building is LEED Platinum certified and features panoramic views from its upper floors, a 12-story parking garage with 996 spaces, an eight-story atrium with five 86-foot tall LED panels, and amenity space which includes a group fitness studio, conference rooms, and a tenant lounge with a full kitchen. Following the Wells Fargo’s downsizing, to be effective January 2020, the property will be 87.2% leased to 36 tenants. The five largest tenants are Wells Fargo Bank, Whiting Petroleum, WeWork, Bryan Cave, and Climarex. Together, these five tenants account for 60.8% of the total sf and 73.1% of total base rent.

KBRA’s analysis of the transaction included a detailed evaluation of the properties’ cash flows using our U.S. CMBS Property Evaluation Methodology and the application of our U.S. CMBS Single Borrower & Large Loan Rating Methodology. In addition, KBRA also relied on its Global Structured Finance Counterparty Methodology for assessing counterparty risk in this transaction, to the extent deemed applicable.

The results of our analysis yielded a KBRA net cash flow (KNCF) for the existing collateral property of $24.6 million. We applied a capitalization rate of 8.25% and arrived at a KBRA value of $297.6 million. In order to account for the upfront reserve for future leasing costs, KBRA made an upward adjustment. The KBRA value after the adjustment is $305.6 million, resulting in a KBRA Loan to Value (KLTV) of 107.2%.

In our analysis of the transaction, we also reviewed and considered third party engineering, environmental and appraisal reports; management agreement; the results of our site inspection; and legal documentation review.

For further details on KBRA’s analysis, please see our pre-sale report, MSC 2019-NUGS, 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 final ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: MSC 2019-NUGS

Class

     

Initial Class Balance

     

Expected KBRA Rating

A

     

$122,550,000

     

AAA (sf)

B

     

$28,025,000

     

AA+ (sf)

C

     

$23,845,000

     

A+ (sf)

D

     

$28,025,000

     

BBB+ (sf)

E

     

$49,400,000

     

BB (sf)

F

     

$11,400,000

     

BB- (sf)

X-CP

     

$122,550,0001

     

AAA (sf)

X-ENT

     

$122,550,0001

     

AAA (sf)

1 Notional balance.

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. KBRA is also 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.

Contacts

Analytical:
Caitlin Parrella, CFA, Associate

(646) 731-3310

cparrella@kbra.com

Michael Brown, Managing Director

(646) 731-2307

mbbrown@kbra.com

Susannah Keagle, Senior Director

(646) 731-3357

skeagle@kbra.com

Keith Kockenmeister, Senior Managing Director

(646) 731-2349

kkockenmeister@kbra.com

Business Development:
Michele Patterson, Managing Director

(646) 731-2397

mpatterson@kbra.com

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