That, at least, was the conclusion to be drawn from Kroll Bond Rating Agency's analysis of the $870.6 million conduit. Briefly, it is collateralized by 39 commercial mortgage loans secured by 46 properties including the Shops at Crystals in Las Vegas, the Vertix Pharmaceuticals headquarters and the Renaissance Dallas. In many respects it was a garden-variety CMBS with geographic and product diversity. Kroll's deep dive highlights such details as a higher-than-usual number of IO loans, a below-average number of lodging loans and a low tertiary market exposure. Again, garden variety details of what otherwise would be a garden-variety conduit.

Kroll, though, was clear about its significance. It wrote in its pre-sale report:

While the US risk retention rules may not yet be applicable, the subject transaction is nonetheless a landmark securitization because it will provide the marketplace with a much needed structural example of a vertical risk retention execution, and will also provide adequate time for market constituents, as well as regulators, to provide feedback on the structure that can be utilized in future transactions prior to the effective date of the US risk retention rules for CMBS.

In its report, Kroll looked at the features added to comply to the risk-retention rule, such as the eligible vertical interest the structure uses.

It wrote:

Morgan Stanley and Bank of America, as originators, are expected to retain a pro rata share of the RRI Interest equal to 25.2% and 35.5% respectively (based on the percentage of loans it contributed to the overall collateral pool) and Wells Fargo, acting as retaining sponsor, will retain the remainder of the RRI Interest in the amount of 39.4%. ...The RRI interest will have an initial balance of $43,527,883 and an effective interest rate equal to the WAC rate. It will be entitled to 5% of the net available funds on each distribution date.

Now that the conduit has hit the market, the industry starts phase two of the waiting. Will the B piece bite?

WASHINGTON, DC—The long-awaited risk retention rule mandated under Dodd Frank is set to go into effect on Dec. 24, 2016, but the industry always knew that from a practical perspective deals would have to be compliant by mid-year. And so the first conduit that complies with the rule has hit the market and contrary to most expectations, it isn't a capital market catastrophe in the making.

First, though, a quick look at why the commercial real estate market had been concerned about the rule.

The risk-retention requirement calls for CMBS loan originators to retain at least 5% of the credit risk using one of the following structures:

1. an eligible vertical interest, in which the sponsor retains 5% of the face value of each class of securities issued in the CMBS transaction.

2. an eligible horizontal interest in which the sponsor retains 5% of the most subordinate class of the fair value of all of the CMBS issued.

3. An L-shaped combination in which the retained interest consists of at least 5% of the value of the transaction held through a combination of the two aforementioned structures.

But how this would play out in an actual structure was unclear, especially as another big concern was how, or if, B piece buyers would be receptive to these new structures. The risk-retention rules also contain some challenging requirements for these investors as well.

Now WFCM 2016-BNK1 has hit the market, assuaging at least one fear, which was could such a deal be competitively structured? Yes, it appears it can.

That, at least, was the conclusion to be drawn from Kroll Bond Rating Agency's analysis of the $870.6 million conduit. Briefly, it is collateralized by 39 commercial mortgage loans secured by 46 properties including the Shops at Crystals in Las Vegas, the Vertix Pharmaceuticals headquarters and the Renaissance Dallas. In many respects it was a garden-variety CMBS with geographic and product diversity. Kroll's deep dive highlights such details as a higher-than-usual number of IO loans, a below-average number of lodging loans and a low tertiary market exposure. Again, garden variety details of what otherwise would be a garden-variety conduit.

Kroll, though, was clear about its significance. It wrote in its pre-sale report:

While the US risk retention rules may not yet be applicable, the subject transaction is nonetheless a landmark securitization because it will provide the marketplace with a much needed structural example of a vertical risk retention execution, and will also provide adequate time for market constituents, as well as regulators, to provide feedback on the structure that can be utilized in future transactions prior to the effective date of the US risk retention rules for CMBS.

In its report, Kroll looked at the features added to comply to the risk-retention rule, such as the eligible vertical interest the structure uses.

It wrote:

Morgan Stanley and Bank of America, as originators, are expected to retain a pro rata share of the RRI Interest equal to 25.2% and 35.5% respectively (based on the percentage of loans it contributed to the overall collateral pool) and Wells Fargo, acting as retaining sponsor, will retain the remainder of the RRI Interest in the amount of 39.4%. ...The RRI interest will have an initial balance of $43,527,883 and an effective interest rate equal to the WAC rate. It will be entitled to 5% of the net available funds on each distribution date.

Now that the conduit has hit the market, the industry starts phase two of the waiting. Will the B piece bite?