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

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.

Doc ID: 1006185

Analytical Contacts

Fred Perreten, Managing Director (Lead Analyst) +1 646-731-2454 fred.perreten@kbra.com

Jeremy Kugelman, Director +1 646-731-1228 jeremy.kugelman@kbra.com

Maulik Pareliya, Senior Analyst +1 646-731-1333 maulik.pareliya@kbra.com

Jack Kahan, Senior Managing Director, Head of Global RMBS +1 646-731-2486 jack.kahan@kbra.com

Nitin Bhasin, Senior Managing Director, Global Head of CMBS (Rating Committee Chair) +1 646-731-2334 nitin.bhasin@kbra.com

Business Development Contact

Daniel Stallone, Managing Director +1 646-731-1308 daniel.stallone@kbra.com