NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) announces the assignment of preliminary ratings to six classes of ILPT 2019-SURF, a CMBS single-borrower securitization.
The collateral for the transaction is a $390.0 million portion of a $650.0 million non-recourse, first lien mortgage loan secured by the borrower’s leased fee interests in approximately 9.3 million sf of land underlying 177 predominantly industrial properties and its fee simple interests in eight industrial properties (295,388 sf) and one surface parking lot (30,000 sf). The combined 9.6 million sf does not include 4.2 million sf associated with the overlying non-collateral improvements. Collectively, the 186 properties (“the portfolio”) has an appraised value of approximately $1.4 billion. The portfolio’s 10 largest properties account for approximately a quarter of the trust balance, and the largest fifteen properties represent 29.8%.
The portfolio consists of 172 industrial assets (89.8%), four retail properties (6.0%), eight land parcels (2.0%), one office property (1.9%), and one surface parking lot (0.4%). All of the assets are located in Honolulu, Hawaii. Overall, 179 (93.2%) of the 186 assets are situated in the two established industrial-commercial parks of Mapunapuna (67.3%) and Sand Island (25.9%) in proximity to the Honolulu International Airport and Honolulu Harbor, respectively. Of the remaining properties, four are located in Downtown Honolulu (3.9%), two (2.6%) in the Salt Lake neighborhood, and one property is situated in an industrial park in Waipahu (0.3%). As of December 2018, the subject properties were leased to more than 170 unique tenants, with only one vacant suite accounting for 900 sf.
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. The results of our analysis yielded a KBRA net cash flow (KNCF) for the portfolio of $61.5 million. To value the portfolio, KBRA applied a blended capitalization rate of 6.61% to arrive at a KBRA value of $930.5 million. The resulting KBRA Loan-to-Value (KLTV) is 69.9%. In our analysis of the transaction, we also reviewed and considered third party engineering, environmental, and appraisal reports; the results of our site visits of the properties; and legal documentation.
For further details on KBRA’s analysis, please see our pre-sale report, ILPT 2019-SURF, published at www.kbra.com. To access ratings, reports and disclosures, click here.
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: ILPT 2019-SURF
| Class | Initial Class Balance | Expected KBRA Rating | ||||||||
| A | $282,900,000 | AAA (sf) | ||||||||
| X-A | $282,900,0001 | AAA (sf) | ||||||||
| X-B | $50,400,0001 | AAA (sf) | ||||||||
| B | $50,400,000 | AA+ (sf) | ||||||||
| C | $34,000,000 | AA- (sf) | ||||||||
| HRR2 | $22,700,000 | A+ (sf) |
1Notional balance. 2In satisfaction of the U.S. risk retention rules, a third-party purchaser will purchase and retain an “eligible horizontal residual interest” consisting of the Class HRR certificates, representing at least 5.0% of the fair market value of all non-residual certificates issued.
Related Publications: (available at www.kbra.com)
- ILPT 2019-SURF Pre-Sale Report
- U.S. CMBS Property Evaluation Methodology
- U.S. CMBS Single Borrower & Large Loan 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.
