NEW YORK–(COMMERCIAL THREAD) – Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to 18 classes of mortgage-backed certificates Velocity Commercial Capital 2021-2 (VCC 2021-2).
VCC 2021-2 is a $ 205.2 million securitization secured by 541 low balance commercial loans secured by 615 residential rental properties or commercial real estate (CRE). The pool is made up of 531 fixed rate mortgages (98.1% of the total pool) and 10 variable rate mortgages (1.9%). The loans have an average outstanding principal balance of $ 379,256, which ranges from $ 54,750 (0.03%) to $ 4.4 million (2.1%). The weighted average valuation loan to value ratio (LTV) and the FICO score for the pool are 67.3% and 726, respectively.
The underlying properties are located in or near 125 Central Statistical Areas (CBSAs) in 35 states and the District of Columbia. The top three CBSAs represent 46.6% of the portfolio and include New York-Newark-Jersey City, NY-NJ (23.5%), Miami-Fort Lauderdale-West Palm Beach, Florida (12.4%) and Los Angeles -Long Beach -Anaheim, California (10.7%). The three largest state exposures represent 61.2% of the portfolio and consist of California (24.5%), Florida (18.7%) and New York (18.0%).
KBRA relied on its RMBS and CMBS methodologies to analyze the transaction. In doing so, KBRA has divided the pool into two separate loan groups, as follows: Sub-pool 2 (200 loans, 46.3%) consists of commercial real estate assets. This sub-pool is largely made up of mixed use (70 assets, 29.4% of CREs), industrial / warehouse (23 assets, 21.8%), multi-family buildings with five or more dwellings ( 34 workers, 18.1%), shops (44 workers, 15.0%), offices (24 workers, 9.0%) and automobiles (six workers, 3.5%). The issuer sold 11 assets (3.2% of CRE) to a property of the commercial co-ownership type. However, KBRA has reclassified this type of property as industrial / warehouse, office or retail, which represents the primary use of each asset.
The results of the RMBS and CMBS portfolio credit models were combined, on a WA basis, to determine KBRA’s modeled expected losses for each rating category and to reflect the quality of collateral, due diligence and quality of the credit. information on typical RMBS and CMBS transactions. The losses were subsequently incorporated into our cash flow modeling, which was used to assess the credit enhancement levels of the transaction in the context of its modified pro rata structure.
Further information on key credit considerations, sensitivity analyzes that examine the factors that may affect these credit ratings and how they might lead to an upgrade or downgrade, and ESG factors (when they are a key factor in changing the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially significant sources that were used to prepare the credit rating and information about the method (s) (including significant models and sensitivity analyzes of the relevant key rating assumptions, if any) used to determine the credit rating are available in the information disclosure form (s) located here.
Information on the meaning of each rating category can be located here.
Further information relating to this rating measure is available in the information disclosure form (s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures can be found at www.kbra.com.
Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the United States Securities and Exchange Commission as NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a credit rating agency with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a credit rating agency with the UK Financial Conduct Authority under the temporary registration regime. In addition, KBRA is appointed as the designated rating agency by the Ontario Securities Commission for issuers of asset-backed securities to file a simplified prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a credit rating provider.