Fitch Assigns Final Ratings to CD 2018-CD7 Mortgage Trust.
--$15,321,000 class A-1 'AAAsf'; Outlook Stable;
--$5,757,000 class A-2 'AAAsf'; Outlook Stable;
--$32,486,000 class A-SB 'AAAsf'; Outlook Stable;
--$200,000,000 class A-3 'AAAsf'; Outlook Stable;
--$248,645,000 class A-4 'AAAsf'; Outlook Stable;
--$562,295,000a class X-A 'AAAsf'; Outlook Stable;
--$60,086,000 class A-M 'AAAsf'; Outlook Stable;
--$31,388,000 class B 'AA-sf'; Outlook Stable;
--$33,182,000 class C 'A-sf'; Outlook Stable;
--$64,570,000ab class X-B 'AA-sf'; Outlook Stable;
--$20,444,000ab class X-D 'BBB-sf'; Outlook Stable;
--$20,444,000b class D 'BBB-sf'; Outlook Stable;
--$15,428,000bc class E-RR 'BBB-sf'; Outlook Stable;
--$17,039,000bc class F-RR 'BB-sf'; Outlook Stable;
--$7,175,000bc class G-RR 'B-sf'; Outlook Stable.
The following class is not rated:
--$30,491,712bc class H-RR.
(a) Notional amount and interest-only.
(b) Privately placed and pursuant to Rule 144A.
(c) Horizontal credit risk retention interest.
Since Fitch issued its expected ratings on July 30, 2018, the rating on class X-B has been updated to 'AA-sf' from 'A-sf' to reflect the rating of the lowest referenced tranche whose payable interest has an impact on the IO payments, consistent with Fitch's Global Structured Finance Rating Criteria dated May 15, 2018. The classes above reflect the final ratings and deal structure.
The certificates represent the beneficial ownership interest in the trust, primary assets of which are 42 loans secured by 72 commercial properties having an aggregate principal balance of $717,442,713 as of the cutoff date. The loans were contributed to the trust by Cantor Commercial Real Estate Lending, L.P., German American Capital Corporation, Starwood Mortgage Funding II LLC and Citi Real Estate Funding Inc.
Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 73.4% of the properties by balance, cash flow analysis of 84.2% and asset summary reviews on 100% of the pool.
KEY RATING DRIVERS
Higher Fitch Leverage than Recent Transactions: The pool exhibits higher leverage than recent Fitch-rated multiborrower transactions. The Fitch LTV of 104.6% is above the 2017 and 2018 YTD averages of 101.6% and 103.5%, respectively. Additionally, the pool's Fitch DSCR of 1.14x is worse than 2017 and 2018 YTD averages of 1.26x and 1.23x, respectively.
Investment-Grade Credit Opinion Loans: Two loans, representing 14.2% of the pool have investment-grade credit opinions. Aventura Mall (8.4%) has an investment-grade credit opinion of 'Asf' on a stand-alone basis. Westside NYC Multifamily Portfolio (5.9%) has an investment-grade opinion of 'BBB-sf' on a stand-alone basis. Net of these loans, the pool's Fitch DSCR and LTV are 1.11x and 110.6%.
Property Type Diversity: The largest property type concentration is office at 26.1%, followed by retail at 25.9% and multifamily at 22.6%. This pool's multifamily concentration is above the YTD 2018 average of 12.1%. Office and retail properties have an average probability of default in Fitch's multiborrower model, while multifamily properties have a lower probability of default, all else equal.
For this transaction, Fitch's net cash flow (NCF) was 18.5% below the most recent year's net operating income (NOI) for properties for which a full-year NOI was provided, excluding properties that were stabilizing during this period. Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans and in potential rating actions on the certificates.
Fitch evaluated the sensitivity of the ratings assigned to the CD 2018-CD7 certificates and found that the transaction displays average sensitivities to further declines in NCF. In a scenario in which NCF declined a further 20% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'A-sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on page 11.
USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10
Fitch was provided with Form ABS Due Diligence-15E (Form 15E) as prepared by PricewaterhouseCoopers LLP. The third-party due diligence described in Form 15E focused on a comparison and re-computation of certain characteristics with respect to each of the mortgage loans. Fitch considered this information in its analysis and the findings did not have an impact on our analysis or conclusions. A copy of the ABS Due Diligence Form 15-E received by Fitch in connection with this transaction may be obtained via the link at the bottom of the related rating action commentary.
REPRESENTATIONS, WARRANTIES AND ENFORCEMENT MECHANISMS
A description of the transaction's representations, warranties and enforcement mechanisms (RW&Es) that are disclosed in the offering document and which relate to the underlying asset pool is available by accessing the appendix referenced under 'Related Research' below. The appendix also contains a comparison of these RW&Es to those Fitch considers typical for the asset class as detailed in the Special Report titled "Representations, Warranties and Enforcement Mechanisms in Global Structured Finance Transactions," dated May 31, 2016.
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||Dec 3, 2018|
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