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Kroll Bond Rating Agency Assigns Preliminary Ratings to JPMCC 2015-SGP

September 11, 2015 2:55 PM EDT

NEW YORK--(BUSINESS WIRE)-- Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to four classes to be issued in the $925.0 million J.P. Morgan Chase Commercial Mortgage Securities Trust 2015-SGP transaction (see ratings list below). JPMCC 2015-SGP is a CMBS single borrower transaction collateralized by a $925.0 million A-1 note that is part of a first lien mortgage loan provided by JPMorgan Chase Bank, National Association. In addition, there is a $50.0 million A-2-1 future funding note held by JPMorgan and a $50.0 million A-2-2 future funding note held by H/2 SO III Funding I LLC. If and when funded, the future funding notes will be pari passu with the A-1 note in terms of right to payment but will not be part of the trust collateral. All calculations are based on the full mortgage loan amount, including the $100.0 million future funding amount. The loan has an initial four-year term with two, one-year extension options.

Proceeds from the mortgage loan, along with $236.2 million of mezzanine financing, were used to facilitate Seritage Growth Properties’ (NYSE: SRG) $2.8 billion acquisition of 235 retail properties plus 50% joint venture equity interests in joint ventures that own 31 retail properties from Sears Holdings Corporation (NASDAQ: SHLD).

The loan is secured by the borrower’s fee simple interests in 234 properties, leasehold interest in one property (“Owned Properties”), and a pledge of the borrower’s equity interests in the joint venture members of three joint venture entities that own 31 retail properties with three mall owners/operators: Simon Property Group (NYSE: SPG), General Growth Properties (NYSE: GGP) and the Macerich Company (NYSE: MAC). The 31 JV Properties are not part of the loan collateral; only the borrower’s equity interests in the related JV members are loan collateral.

The 235 Owned Properties total approximately 37.1 million square feet on 2,706 acres across 68 MSAs, 49 states and Puerto Rico. Over 84% of the collateral properties by ALA are located in markets considered to be primary or secondary by KBRA. 140 of the Owned Properties (75.6%) totaling 26.7 million sf and representing $123.6 million in total rent are master leased to Sears Operations LLC and 84 properties (16.3%) totaling 8.9 million sf and $37.8 million in total rent are master leased to Kmart Operations LLC under a master lease with Sears Holdings Corporation. The remaining 11 Owned Properties (8.0%), accounting for 1.5 million sf and $11.4 million of total rent, are leased to third-parties under direct leases.

KBRA’s analysis of the transaction included a detailed evaluation of the properties’ cash flows using our CMBS Property Evaluation Guidelines, and the application of our CMBS Single Borrower & Large Loan Rating Methodology. For the purposes of our analysis, we determined KBRA net cash flow (KNCF) for each asset, and applied KBRA capitalization rates to each property’s KNCF to determine property value. The weighted average variance to the issuer’s NCF was 34.9%, and the weighted average value variance to each property’s third party appraisal values was 52.2%. The analysis produced an aggregate KBRA value of $1.0 billion and an in-trust KLTV of 95.3%.

For further details on KBRA’s analysis of the transaction, please see our Pre-Sale Report, entitled JPMCC 2015-SGP, which was published today 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: JPMCC 2015-SGP

Class   Expected Rating   Balance (US$)
A   AAA(sf)   $319,000,000
X-CP(1)   NR   $720,000,000(1)
X-EXT   NR   $925,000,000(1)
B   AA-(sf)   $125,300,000
C   A-(sf)   $116,600,000
D   BBB-(sf)   $121,100,000
E   NR   $88,200,000
F   NR   $154,800,000

(1) Notional amount

Representations & Warranties Disclosure:

All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available in the offering document when issuing credit ratings. KBRA’s disclosure for this transaction can be found in the report entitled JPMCC 2015-SGP Representations & Warranties Disclosure.

Related publications:

CMBS Presale Report: JPMCC 2015-SGP

CMBS Property Evaluation Guidelines, published March 3, 2015

CMBS Single Borrower and Large Loan Rating Methodology, published March 3, 2015

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).

Kroll Bond Rating Agency
Analytical:
Laura Wolinsky, 646-731-2379
Director
[email protected]
Dan Tegen, 646-731-2429
Associate Director
[email protected]
Robin Regan, 646-731-2358
Managing Director
[email protected]
Michael Brown, 646-731-2307
Senior Director
[email protected]
or
Follow us on Twitter!
@KrollBondRating

Source: Kroll Bond Rating Agency



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