Aug 7, 2012, 7:42pm

Kroll Bond Rating Agency (KBRA) assigned its final ratings to fourteen classes of WFRBS Commercial Mortgage Trust 2012-C8, a $1.3 billion CMBS multi-borrower transaction collateralized by 80 fixed rate commercial mortgage loans that are secured by 122 properties. Concurrently, we have withdrawn our preliminary ratings on the certificates, which were assigned on July 16, 2012 (see our ratings listed below).

Five mortgage loan sellers originated the loans. The sellers and their respective contribution to the pool balance are as follows: Wells Fargo Bank, National Association (36 loans, 48.6%), The Royal Bank of Scotland (24 loans, 39.5%), C-III Commercial Mortgage LLC (12 loans, 5.1%), Liberty Island Group I LLC (3 loans, 5.1%) and Basis Real Estate Capital II LLC, (5 loans, 1.7%). The majority of the loans (64 loans, 75.4% of the pool balance) were used to refinance existing debt, while the proceeds from 16 loans (24.6%) were used for property acquisitions.

The five largest loans by balance represent 36.9% of the pool and include 100 Church Street (11.5%), Brennan Industrial Portfolio (7.9%), Northridge Fashion Center (6.9%), Town Center at Cobb (5.4%) and the BJ’s Portfolio (5.2%), while the top ten loan exposures represent 53.8%. The properties are geographically diverse and located across 31 states with three states representing more than 10% of the pool balance: California (18.6%), New York (12.1%) and Washington (10.3%). The pool has exposure to three property types with concentrations in excess of 10%: retail (37.2%), office (29.6%) and industrial (13.7%).

KBRA’s analysis of the transaction incorporated our multi-borrower rating process that begins with our analysts' evaluation of underlying collateral properties' financial and operating performance, which determine KBRA’s estimate of sustainable net cash flow (KNCF) and KBRA value. The analysis included a detailed evaluation of the underlying collateral properties’ financial and operating performance using our CMBS Property Evaluation Guidelines to determine Kroll Net Cash Flow (KNCF), which on an aggregate basis was 3.10% less than the issuer cash flow. KBRA capitalization rates were applied to each asset’s KCNF to derive individual property values that, on an aggregate basis, were 26.6% less than third party appraisal values. The weighted average KBRA capitalization rate for the transaction was 9.2%. The pool has an in-trust KLTV of 93.5% and an all-in LTV of 94.4%.

KNCF and KBRA capitalization rates were among the key inputs used in our credit modeling process. The model deploys rent and occupancy stresses, probability of default regressions, and loss given default calculations to determine losses for each collateral loan that were used by KBRA to assign our credit ratings for this transaction.

Final Ratings Assigned: WFRBS 2012-C8

Class

Expected Ratings

Balance ($)

A-1

AAA(sf)

$97,008,000

A-2

AAA(sf)

$187,668,000

A-3

AAA(sf)

$414,057,000

A-SB

AAA(sf)

$96,932,000

A-FL

AAA(sf)

$115,000,000

A-S

AAA(sf)

$113,833,000

X-A1

AAA(sf)

$1,024,498,000

X-B1

AAA(sf)

$66,674,000

B

AA(sf)

$66,674,000

C

A(sf)

$43,907,000

D

BBB+(sf)

$26,019,000

E

BBB-(sf)

$45,533,000

F

BB(sf)

$22,767,000

G

B(sf)

$26,019,000

1 Notional balance

Related publications (available at www.krollbondratings.com):

CMBS Presale Report: WFRBS 2012-C8
CMBS: WFRBS 2012-C8 17-g7 Disclosure Report
CMBS: U.S. CMBS Multi-Borrower Rating Methodology, published February 23, 2012
CMBS Property Evaluation Guidelines, published June 10, 2011

About Kroll Bond Rating Agency

Kroll Bond Rating Agency, Inc. (www.krollbondratings.com) is registered with the SEC as a nationally recognized statistical rating organization (NRSRO). Kroll Bond Rating Agency was established in 2010 to restore trust in credit ratings by establishing new standards for assessing risk and by offering accurate, clear, and transparent ratings.