CHICAGO--(BUSINESS WIRE)--Fitch Ratings has issued a presale report on New York Housing Development Corporation Multi-Family Mortgage Revenue Bonds (8 Spruce Street), Series 2014.
Fitch expects to rate the transaction and assign Rating Outlooks as follows:
--$276,900,000 class A 'AAAsf'; Outlook Stable;
--$65,900,000 class B, 'NR';
--$3,300,000 class C 'NR;
--$45,700,000 class D 'NR';
--$50,100,000 class E 'NR';
--$108,100,000 class F 'NR'.
The expected ratings are based on information provided by the issuer as of Sept. 16, 2014.
The New York City Housing Development Corporation Multi-Family Mortgage Revenue Bonds (8 Spruce Street), Series 2014 represent the beneficial interests in the mortgage loan securing the fee interest in and associated rents from New York by Gehry located at 8 Spruce Street, New York, NY. Collateral for the loan includes the residential component located on floors 7-76, inclusive of 899-units that are 99% leased as of June 30, 2014; the multifamily amenities located on floors 6-8; and a small retail location on the ground floor. The property was completed in 2011 and designed by architect Frank Gehry.
The issuance includes $346.1 million of taxable bonds (classes A, B and C) and $203.9 million of tax-exempt bonds (classes D, E and F). The property is subject to a regulatory agreement with the issuer, New York City Housing Development Corp., requiring, among other things, the property to preserve the tax-exempt status of the bonds, preservation of the 421-a real estate tax abatement and that all units continue to be subject to the New York City Rent Stabilization Law.
The loan was originated by the New York City Housing Development Corporation and underwritten by Merrill Lynch, Pierce, Fenner & Smith Inc. (Bank of America Merrill Lynch), Barclays and Citigroup.
KEY RATING DRIVERS
Trophy Multifamily Collateral in Prime Manhattan Location: New York by Gehry is an 899-unit residential condominium, designed by world-renowned architect Frank Gehry, within a 76-story, four-condominium development that was completed in 2011. Fitch inspected the property on July 25, 2014 and assigned a property quality grade of 'A'. The property is well-located at 8 Spruce Street in Manhattan's financial district.
Strong Initial Leasing Momentum & Current Occupancy: The property was approximately 70% leased as of December 2011, increasing to 92% as of Jan. 31, 2013 and is 99.1% leased as of June 30, 2014.
Institutional Sponsorship and Property Management: The sponsorship includes Forest City Enterprises, Inc., Teachers Insurance and Annuity Association (TIAA) and National Real Estate Advisors (NREA). Forest City's multifamily portfolio includes over 25,500 units contained within 77 properties throughout the United States. FirstService Residential New York, Inc. manages the property in addition to over 500 properties comprising over 70,000 units in the New York City area and is one of the largest managers of residential communities in North America, managing more than 6,000 properties and over 1.5 million residential units.
RATING SENSITIVITIES
Fitch performed several stress scenarios in which the Fitch net cash flow (NCF) was stressed.
Fitch determined that a 39.6% reduction in Fitch's NCF would cause the notes to break even at a 1.0x debt service coverage ratio (DSCR), based on the actual debt service.
Fitch performed a break-even analysis to determine the transaction could withstand a 74.8% decline in value (based on the $1.1 billion appraised value at issuance) and an approximately 46.9% decrease to the Fitch adjusted property value of $521 million to experienced $1 of loss to the 'AAAsf' rated class.
Fitch evaluated the sensitivity of the ratings for class A and a 9.0% decline in Fitch NCF would result in a one-category downgrade, while a 32.5% decline would result in a downgrade to below investment grade.
The Rating Sensitivity section in the presale report includes a detailed explanation of additional stresses and sensitivities.
Key Rating Drivers and Rating Sensitivities are further described in the accompanying presale report. The presale report is available to all investors on Fitch's web site 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (August 2014);
--'Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions' (Sept. 2014);
-- Counterparty Criteria for Structured Finance and Covered Bonds (May 2014);
-- Rating Criteria for U.S. Commercial Mortgage Servicers (May 2014).
Applicable Criteria and Related Research: New York City Housing Development Corporation Multi-Family Mortgage Revenue Bonds (8 Spruce Street), Series 2014 (US CMBS)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=789548
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Criteria for Analyzing Large Loans in U.S. Commercial Mortgage Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=772328
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=900455
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