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BofA readies $1.1B CMBS with heavy exposure to retail

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Bank of America is marketing $1.1 billion of commercial mortgage bonds with heavy exposure to retail properties.

BANK 2018-BNK15 is a conduit transaction backed by 67 loans secured by 126 properties. Like most conduits, the deal’s overall credit metrics are boosted by the inclusion of a number of loans (17, 33% of the trust balance) that, while unrated, have characteristics commensurate with investment grade.

These include a slice of a larger loan secured by the Aventura Mall, a super regional mall in Miami that represents the largest asset in the trust, at (9.2%). There is also a slide of a loan on the Millennium Partners Portfolio (third largest asset, 6.9%), a mixed-use office/retail portfolio spread across five primary markets, and 685 Fifth Avenue, a retail building in Manhattan (fourth largest, 5.5%).

In fact, the deal’s retail exposure totals 45.2% consists of 30 properties located in 19 different markets, making it the most heavily represented property type.

The majority of the retail exposure by balance (12 properties, 25.9%) is made up of anchored or shadow anchored assets, four (7.1%) of which are tenanted, anchored, or shadow anchored by a needs-based tenant such as a grocery store or a pharmacy. Five retail properties (1.1%) are leased to single tenants.

The overall pool has a weighted average loan-to-value ratio, based on assets held in the trust, of 86.1%, as calculated by Kroll. This is the second lowest among the 18 CMBS conduits rated by Kroll this year, which ranged from 85.4% to 104.1% with an average of 97.6%. It is also notably lower than the annual averages for the KBRA rated conduits since 2013.

Additionally, the pool’s exposure to loans with LTVs in excess of 100% (19 loans, 31.5%) is the lowest among the conduits rated by Kroll this year, which ranged from 45.9% to 75.2% with an average of 56.3%. It is also the fifth lowest among all deals Kroll has rated since 2013.

Moody's puts the LTV even lower, at 95.8%, though this would be higher, at 107.8%, excluding loans with investment-grade characteristics. But even that figure is substantially lower than transactions it rated over the past four quarters, which had an average LTV ratio, as measured by Moody's, of 114.5% inclusive of higher quality loans.

Both Kroll and Moody's expect to assign triple-A ratings to the super senior tranches of notes, which benefit from 30% credit enhancement. However, the senior support tranche, which has just 17.5% credit support is split-rated: Kroll expects to assign an AAA, while Moody's views it as a Aa1.

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