KBRA Assigns Preliminary Ratings to AREIT 2020-CRE4

NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of ratings to five classes of AREIT 2020-CRE4, a $607.4 million CRE CLO with the ability to reinvest principal proceeds for 36 months.

Initially, the transaction will be collateralized by 24 whole loans (or participations therein) with an in-trust balance of $607.4 million. During the 36-month acquisition period following the closing date, certain principal proceeds can be used to acquire funded, non-trust pari passu companion participations related to the closing date assets provided the acquisition criteria are satisfied.

The securitization structure includes an overcollateralization (OC) cash diversion test. If the test is not satisfied on any determination date, on the next payment date, interest proceeds remaining after interest is paid to the Class D notes will be used to pay down the principal balances of the Class A through D notes in sequential order until the test is satisfied or such classes of notes are paid in full.

KBRA’s analysis of the transaction involved evaluation of property cash flows and values within the loan pool using our U.S. CMBS Property Evaluation Methodology. The results of the analysis yielded KBRA values that were, on a weighted average basis, 37.0% and 50.3% lower than the appraisers’ as-is and stabilized values, respectively, and a KBRA Loan to Value (KLTV) of 134.3%. The results of this analysis were utilized in the application of our U.S. CMBS Multi-Borrower Rating Methodology. The analysis also included quantitative and/or qualitative review of the various structural features of the transaction as well as a review of the legal documents, the results of which were incorporated into our ratings assignment process.

Click here to view the report. To access ratings and relevant documents, click here.

Related Publications

• AREIT 2020-CRE4 KBRA Conduit KCAT
• U.S. CMBS Multi-Borrower Rating Methodology
• U.S. CMBS Property Evaluation Methodology
• Global Structured Finance Counterparty 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 U.S. Information Disclosure Form 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 U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

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

Contacts

Analytical


Michael McGorty, Director (Lead Analyst)

+1 (646) 731-2393

mmcgorty@kbra.com

Michael Brown, Managing Director

+1 (646) 731-2307

mbbrown@KBRA.com

Nitin Bhasin, Senior Managing Director (Rating Committee Chair)

+1 (646) 731-2334

nbhasin@kbra.com

Business Development


Michele Patterson, Managing Director

+1 (646) 731-2397

mpatterson@kbra.com