Kroll Bond Rating Agency Assigns Preliminary Ratings to OMPT 2017-1MKT

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to ten classes of OMPT 2017-1MKT, a $975.0 million CMBS single borrower transaction (see ratings list below).

The collateral for the securitization consists of a $975.0 million single, non-recourse, first lien, fixed-rate mortgage loan that is secured by the borrower’s fee simple and partial leasehold interests in a Class-A office complex located in San Francisco’s South Financial District. The complex is comprised of a 27-story office tower (Steuart Tower), a 42-story office tower (Spear Tower), a six-story annex building and a two-story subterranean parking garage. The property was built in 1976, totals approximately 1.6 million sf, and consists of 1.5 million sf of office space, 54,240 sf of retail space, and 12,842 sf that is used as storage. As of February 2017, the property was 97.2% leased to 54 tenants, the five largest of which account for 52.9% of total base rent.

The five largest tenants at the property are: Google, a High Quality Credit Worthy Tenant (HQCWT); Morgan, Lewis, & Bockius; Autodesk (HQCWT); Visa (HQCWT); and Capital Research.

The sponsor is a joint venture between Paramount Group Operating Partnership LP (51.0% ownership) and Blackstone Property Partners LP (49.0% ownership).

KBRA’s analysis of the transaction included a detailed evaluation of the property’s cash flow using our CMBS Property Evaluation Methodology, 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 $81.5 million. To value the property, we applied an implied capitalization rate of 7.00% to arrive at a KBRA value of $1.1 billion, which includes a Proposition 13 adjustment. The resulting KBRA Loan to Value (KLTV) is 89.7%. In our analysis of the transaction, we also reviewed and considered third party engineering, environmental, and appraisal reports; the results of our site inspection of the property, and legal documentation review.

For further details on KBRA’s analysis, please see our Pre-Sale Report, OMPT 2017-1MKT, 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 ratings that differ from the preliminary ratings.

Preliminary Ratings Assigned: OMPT 2017-1MKT

                   
Class           Expected Rating           Balance (US$)
A           AAA (sf)           $463,732,000
X-CP           AAA (sf)          

$738,879,000

(1)

X-NCP           AAA (sf)          

$738,879,000

(1)

B           AA+ (sf)           $103,051,000
C           A+ (sf)           $77,289,000
D           BBB+ (sf)           $94,807,000
X-E           BB- (sf)          

$236,121,000

(1)

E           BB+ (sf)           $128,815,000
F           BB (sf)           $55,406,000
HRR(2)           BB- (sf)           $51,900,000
(1)   Notional balance
(2) To satisfy the US risk retention rules, a third party purchaser will purchase and retain an “eligible horizontal residual interest” consisting of the Class HRR certificates, representing 5.0% of the fair value of all interests issued by the issuer on the closing date, determined in accordance with GAAP.

Representations & Warranties 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 in the report entitled OMPT 2017-1MKT Representations & Warranties Disclosure.

Related Publications: (available at www.kbra.com)
CMBS Presale Report: OMPT 2017-1MKT
CMBS Property Evaluation Methodology
CMBS Single Borrower and Large Loan Rating Methodology
Methodology for Rating Interest-Only Certificates in CMBS Transactions

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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).

Contacts

Kroll Bond Rating Agency
Analytical:
Lynn D’Eugenio, Director
646-731-2487
ldeugenio@kbra.com
or
Michael Brown, Senior Director
646-731-2307
mbbrown@kbra.com
or
Dayna Carley, Senior Director
646-731-2391
dcarley@kbra.com
or
Stephanie Ruys de Perez, Analyst
646-731-2466
sruysdeperez@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical:
Lynn D’Eugenio, Director
646-731-2487
ldeugenio@kbra.com
or
Michael Brown, Senior Director
646-731-2307
mbbrown@kbra.com
or
Dayna Carley, Senior Director
646-731-2391
dcarley@kbra.com
or
Stephanie Ruys de Perez, Analyst
646-731-2466
sruysdeperez@kbra.com