Kroll Bond Rating Agency Assigns Preliminary Ratings to MSCI 2015-420

NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency, Inc. (KBRA) is pleased to announce the assignment of preliminary ratings to two classes of MSCI 2015-420, a $245.0 million CMBS single borrower transaction (see ratings list below).

The $300.0 million whole loan is collateralized by the borrower’s leasehold interest in a 1.5 million sf, Class-A office property located in the Manhattan borough of New York City, New York. The loan was bifurcated into a $245.0 million A-Note portion that will be contributed to the trust and a $55.0 million B-Note held outside of the trust. The asset, which was built in 1927, is comprised of 1.4 million sf of office space, 49,692 sf of retail space, and 16,024 sf used for storage and the management office. As of December 2014, the property was 97.0% leased to approximately 200 tenants, however one of the tenants, Brixmor (New Plan Excel Realty), which represents 3.6% of the total sf and 2.8% of the base rent, exercised a termination option and will vacate its space in September 2015. Excluding Brixmor, the property’s occupancy is 93.4%. The largest tenants at the property include Metropolitan Transportation Authority, a High Quality Credit Worthy Tenant (HQCWT), SL Green Management, an affiliate of the sponsor, and New York Life Insurance (HQCWT). Together, these three tenants account for 28.2% of total base rent. The borrowers have a leasehold interest in the property pursuant to a current ground lease that expires on December 31, 2029 and a new 20-year ground lease that will commence immediately following the expiration of the current ground lease. The new ground lease provides for two 15-year extension options. The current annual ground rent of $11.2 million will increase to the greater of $12.3 million and 6.0% of the then-fair market value of the land at that time.

KBRA’s analysis of the transaction included a detailed evaluation of the property’s cash flow using our CMBS Property Evaluation Guidelines, and the application of our CMBS Single Borrower and Large Loan Rating Methodology. The results of our analysis yielded a KBRA net cash flow (KNCF) of $27.3 million. To value the property, we applied an 8.00% capitalization rate to arrive at a KBRA value of $339.1 million and a KBRA Loan to Value (KLTV) of 72.3%. In our analysis of the transaction, we also reviewed and considered third party engineering, environmental and appraisal reports; our own on-site inspection of the property and legal documentation.

For further details on KBRA’s analysis, please see our Pre-Sale Report, entitled MSCI 2015-420, which was published today at www.kbra.com.

The preliminary ratings are based on information known to KBRA at the time of this publication. Information received subsequent to this release could result in the assignment of final ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: MSCI 2015-420
Class	Rating	Balance ($US)	Rating Action
A	AAA(sf)	$148,300,000	Preliminary
X-A	AAA(sf)	$148,300,000^1	Preliminary
X-B	NR	$59,300,000^1	N/A
B	NR	$33,900,000	N/A
C	NR	$25,400,000	N/A
D	NR	$31,200,000	N/A
E	NR	$6,200,000	N/A
^1 Notional balance

17g-7 Disclosure
All Nationally Recognized Statistical Rating Organizations are required, pursuant to SEC Rule 17g-7, to provide a description of a transaction’s representations, warranties and enforcement mechanisms that are available to investors when issuing credit ratings. KBRA’s disclosure for this transaction can be found here.

Related Publications: (available at www.kbra.com)
CMBS Property Evaluation Guidelines, published February 23, 2012
CMBS Single Borrower and Large Loan Rating Methodology, published June 10, 2011

About Kroll Bond Rating Agency

KBRA is registered with the U.S. Securities and Exchange Commission as a Nationally Recognized Statistical Rating Organization (NRSRO). In addition, KBRA is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP).