New York, January 28, 2021 -- Moody's Investors Service ("Moody's") has assigned a
provisional rating to one class of notes to be issued by LoanCore 2021-CRE4
Issuer Ltd. (the "Issuer" or "LNCR 2021-CRE4")
Cl. A, Assigned (P)Aaa (sf)
The Cl. A notes are referred to herein as the "Rated Notes."
RATINGS RATIONALE
The rationale for the rating is based on our methodology and considers
all relevant risks, particularly those associated with the CRE CLO's
portfolio and structure.
LNCR 2021-CRE4 is a cash flow commercial real estate CLO ("CRE
CLO") that does not have a reinvestment option; and 100% of
the assets are expected to be identified and closed by the transaction
closing date. The target pool is expected to be collateralized
by 16 commercial real estate senior loan interests; in the form of
whole loans and pari-passu participations on 22 properties.
The total par amount at closing is expected to be $600,354,515.
The portfolio of assets consists of 100% floating rate obligations
with a 3.21% weighted average spread (WAS). Additionally,
100% of the assets have LIBOR floors with a weighted average floor
of 1.6%; however the Issuer may modify the floor on
any asset at or above 0.0% during the life of the transaction.
Additionally, the transaction provides for one or more criteria-based
loan modifications that may include reducing the spread on up to eight
collateral assets to 225 basis points.
The transaction provides for a companion loan acquisition period of 3
years, whereby principal pre-payments, subject to collateral
and transaction performance metrics, may be used to purchase up
to $109 million of companion participations with respect to certain
eligible pari-passu participations associated with the closing
date collateral pool. After the companion participation acquisition
period expires, all principal pre-payments will be used to
pay down the notes in order of seniority.
The transaction is expected to close on or about February 5, 2021.
The expected closing date pool has a Moody's weighted average loan-to-value
(LTV) ratio of 133.8%. Approximately 33.74%
of the pool were acquisition financing loans and 66.26%
were refinancing loans (including recapitalization). The top property
type exposures are office at 36.41%, and multifamily
at 23.80%. The top ten assets (80.06%
of the initial loan pool) and their respective property type and Moody's
LTV are as follows: 1) One Whitehall -- Office -- 137.1%;
2) Uptown Worthington Commercial -- Office -- 137.1%;
3) AVE Florham Park II -- Multifamily -- 133.8%;
4) Horizon Sunnyvale -- Office -- 119.4%;
5) Lumina Apartments -- Multifamily -- 133.7%;
6) The Royal Worthington -- Multifamily -- 135.3%;
7) 15000 Aviation -- Office -- 116.9%; 8)
2221 Park Place -- Office -- 138%; 9) The Parking
REIT Portfolio -- Other -- 137.7%; and 10)
Equus Business Center -- Industrial -- 131.9%.
LoanCore 2021-CRE4 Issuer Ltd. will be administering the
CRE CLO. The Issuer is an indirect wholly-owned subsidiaries
of LoanCore Capital Credit REIT LLC. Situs Asset Management LLC.
will act as servicer, and Situs Holdings, LLC will act as
special servicer. They will provide servicing to the collateral
interests during the lifecycle of the transaction. LoanCore Capital
Credit REIT LLC will act as advancing agent. Wilmington Trust,
National Association will serve as trustee and Wells Fargo Bank,
National Association will serve as note administrator and backup advancing
agent on the underlying portfolio.
In addition to the Rated Notes, the Issuer will issue six classes
of subordinated notes; and one class of preferred shares.
The transaction incorporates par coverage tests which, if triggered,
divert interest proceeds to pay down the notes in order of seniority.
Moody's has identified the following parameters as key indicators of the
expected loss within CRE CLO transactions: weighted average rating
factor (WARF), a primary measure of credit quality with credit assessments
completed for all of the collateral, weighted average life (WAL),
weighted average recovery rate (WARR), number of asset obligors;
and pair-wise asset correlation. These parameters are typically
modeled as actual parameters for static deals and as covenants for managed
deals.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount: $600,345,515
Number of obligors: 16
Weighted Average Rating Factor (WARF): 4931
Weighted Average Recovery Rate (WARR): 56.38%
Weighted Average Life (WAL): 3.31 years
Weighted Average Spread (WAS): 3.21%
Weighted Average Coupon (WAC): n/a
Pair-wise asset correlation: 35.0%
Methodology Underlying the Rating Action:
The principal methodology used in this rating was "Moody's Approach to
Rating SF CDOs" published in July 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1231934.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Factors That Would Lead to an Upgrade or Downgrade of the Rating:
The performance of the Rated Notes is subject to uncertainty. The
performance of the Rated Notes is sensitive to the performance of the
underlying portfolio, which in turn depends on economic and credit
conditions that may change. The administrator's investment decisions
and management of the transaction will also affect the performance of
the Rated Notes.
Together with the set of modeling assumptions above, Moody's conducted
an additional sensitivity analysis, which was a component in determining
the rating assigned to the Rated Notes. This sensitivity analysis
includes increased default probability relative to the base-case.
Primary sources of assumption uncertainty are the extent of growth in
the current macroeconomic environment.
The coronavirus outbreak, the government measures put in place to
contain it, and the weak global economic outlook continue to disrupt
economies and credit markets across sectors and regions. Our analysis
has considered the effect on the performance of commercial real estate
from the current weak US economic activity and a gradual recovery for
the coming months. Although an economic recovery is underway,
it is tenuous and its continuation will be closely tied to containment
of the virus. As a result, the degree of uncertainty around
our forecasts is unusually high. Stress on commercial real estate
properties will be most directly stemming from declines in hotel occupancies
(particularly related to conference or other group attendance) and declines
in foot traffic and sales for non-essential items at retail properties.
We regard the coronavirus outbreak as a social risk under our ESG framework,
given the substantial implications for public health and safety.
Further details regarding Moody's analysis of this transaction may be
found in a related pre-sale report, soon to be available
on Moodys.com.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1263029.
The analysis relies on a Monte Carlo simulation that generates a large
number of collateral loss or cash flow scenarios, which on average
meet key metrics Moody's determines based on its assessment of the
collateral characteristics. Moody's then evaluates each simulated
scenario using model that replicates the relevant structural features
and payment allocation rules of the transaction, to derive losses
or payments for each rated instrument. The average loss a rated
instrument incurs in all of the simulated collateral loss or cash flow
scenarios, which Moody's weights based on its assumptions
about the likelihood of events in such scenarios actually occurring,
results in the expected loss of the rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
This rating is solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the UK and is endorsed
by Moody's Investors Service Limited, One Canada Square,
Canary Wharf, London E14 5FA under the law applicable to credit
rating agencies in the UK. Further information on the UK endorsement
status and on the Moody's office that issued the credit rating is
available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Jocelyn Delifer
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Deryk Meherik
Senior Vice President/Manager
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
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JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
