KBRA Assigns Preliminary Ratings to Velocity Commercial Capital 2024-5 (VCC 2024-5)
2 Oct 2024 | New York
KBRA assigns preliminary ratings to 12 classes of Velocity Commercial Capital 2024-5 (VCC 2024-5) mortgage-backed certificates.
VCC 2024-5 is a $300.4 million securitization collateralized by 832 small balance commercial loans secured by mortgages on 922 residential rental or commercial real estate (CRE) properties. The pool is comprised of 818 fixed rate mortgages and 14 floating rate mortgage. The loans have an average outstanding principal balance of $361,046 and range from $48,736 (<0.1%) to $3.7 million (1.2%). The weighted average appraisal loan-to-value (LTV) ratio and FICO score for the pool are 60.9% and 700, respectively.
The underlying properties are located in or near 156 Core Based Statistical Areas (CBSAs) across 39 states plus the District of Columbia. The top-three CBSAs represent 33.4% of the portfolio and include New York-Newark-Jersey City, NY-NJ-PA (17.7%), Los Angeles-Long Beach-Anaheim, CA (10.1%), and Washington-Arlington-Alexandria, DC-VA-MD-WV (5.5%). The three largest state exposures represent 44.1% of the portfolio and consist of California (23.7%), New York (10.8%), and Florida (9.7%).
KBRA relied on its RMBS and CMBS methodologies to analyze the transaction. In doing so, KBRA divided the pool into two distinct loan groupings, as follows: Sub-pool 1 (550 loans, 54.3% of the total pool balance) is comprised of investor loans secured by residential rental properties with four or less units. Sub-pool 2 (282 loans, 45.7%) consists of loans secured by commercial real estate assets. This sub-pool is largely comprised of mixed-use properties (70 assets, 11.5%), industrial properties (31 assets, 7.3%), multifamily properties (40 assets, 6.4%), retail properties (47 assets, 6.2%), office properties (43 assets, 6.1%), automotive service properties (25 assets, 4.0%), commercial condominium properties (23 assets, 2.9%), hospitality (one asset, 0.9%), and manufactured housing community (two assets, 0.4%). KBRA reclassified the mixed-use and commercial condominium property types to each asset’s respective core use and classified automotive service properties as retail for our analysis.
The RMBS and CMBS portfolio credit model results were combined, on a WA basis, to determine KBRA’s modeled expected losses at each rating category and reflect the quality of the collateral, diligence, and information quality relative to typical RMBS and CMBS transactions. The losses were subsequently incorporated into our cash flow modeling, which was used to evaluate the transaction’s credit enhancement levels in the context of its modified pro rata structure.
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Methodologies
- RMBS: U.S. RMBS Rating Methodology
- CMBS: North American CMBS Property Evaluation Methodology
- CMBS: North American CMBS Multi-Borrower Rating Methodology
- CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
- Structured Finance: Global Structured Finance Counterparty Methodology
- ESG Global Rating Methodology