KBRA is pleased to announce the assignment of preliminary ratings to 16 classes of Benchmark 2023-B38, a $656.9 million CMBS conduit transaction collateralized by 25 commercial mortgage loans secured by 42 properties.

The collateral properties are located throughout 20 MSAs, of which the three largest are Detroit (12.8%), Los Angeles (11.8%), and Seattle (9.1%). The pool has exposure to all major property types, except for multifamily. When mixed-use portfolios and properties are broken into their underlying uses, three property types represent more than 10.0% of the pool balance: retail (45.6%), office (28.8%), and industrial (16.3%). The loans have principal balances ranging from $3.9 million to $65.6 million for the largest loan in the pool Pacific Design Center (10.0%), which is secured by a 1.1 million sf mixed-use showroom, office, and lab space located in West Hollywood, California. The five largest loans, which also include 1201 Third Avenue (9.1%), CX – 250 Water Street (8.1%), Green Acres (7.6%), and Great Lakes Crossing Outlets (7.6%), represent 42.4% of the initial pool balance, while the top 10 loans represent 68.5%.

KBRA’s analysis of the transaction incorporated our multi-borrower rating process that begins with our analysts' evaluation of the underlying collateral properties' financial and operating performance, which determine KBRA’s estimate of sustainable net cash flow (KNCF) and KBRA value using our U.S. CMBS Property Evaluation Methodology. On an aggregate basis, KNCF was 13.2% less than the issuer cash flow. KBRA capitalization rates were applied to each asset’s KNCF to derive values that were, on an aggregate basis, 43.0% less than third party appraisal values. The pool has an in-trust KLTV of 87.8% and an all-in KLTV of 90.7%. The model deploys rent and occupancy stresses, probability of default regressions, and loss given default calculations to determine losses for each collateral loan that are then used to assign our credit ratings.

To access ratings and relevant documents, click here.

Click here to view the report.

Related Publications

• Benchmark 2023-B38 KBRA Conduit KCAT
• U.S. CMBS Multi-Borrower Rating Methodology
• U.S. CMBS Single Borrower & Large Loan Rating Methodology
• U.S. CMBS Property Evaluation Methodology
• Methodology for Rating Interest-Only Certificates in CMBS Transactions
• Global Structured Finance Counterparty Methodology
• ESG Global Rating Methodology

Disclosures

Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. 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.

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