Kroll Bond Rating Agency Assigns Preliminary Ratings to 245 Park Avenue Trust 2017-245P

NEW YORK--()--Kroll Bond Rating Agency (KBRA) is pleased to announce the assignment of preliminary ratings to eight classes of 245 Park Avenue Trust 2017-245P, a $500.0 million CMBS single borrower transaction (see ratings list below).

The collateral for the securitization consists of a $500.0 million portion of a $1.2 billion single, non-recourse, first lien, fixed-rate mortgage loan that is secured by the borrower’s fee simple interest in 245 Park Avenue, a 1.7 million sf, 44-story, Class A office tower on Park Avenue between East 46th and 47th Streets. The property, which was constructed in 1967, is primarily comprised of office space, but also includes 40,138 sf of retail space. As of April 2017, the property was 91.1% leased to 19 tenants, the five largest of which account for 84.4% of total base rent.

The five largest tenants by base rent at the property are JPMorgan Chase & Co., a High Quality Credit Worthy Tenant (HQCWT); Major League Baseball, Angelo Gordon & Co., Rabobank Nederland (HQCWT), and Ares Capital Corporation. Both JPMorgan Chase & Co. and Major League Baseball sublease a large majority of their space to various subtenants, including Société Générale (HQCWT), which uses the subject as its Americas headquarters and subleases 562,347 sf (32.6% of total sf).

The loan sponsor is HNA Group, a Chinese conglomerate founded in 1993 with business lines that span multiple industries including hospitality, real estate, retail and logistics supply.

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 $101.7 million. To value the property, we applied a capitalization rate of 6.75% to arrive at a KBRA value of $1.5 billion and a KBRA Loan to Value (KLTV) of 79.6%. 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, entitled 245 Park Avenue Trust 2017-245P, 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: 245 Park Avenue Trust 2017-245P

 
Class       Expected Rating       Balance (US$)
A       AAA (sf)       $260,000,000
X-A       AAA (sf)       $260,000,000*
B       AA- (sf)       $39,000,000
X-B       AAA (sf)       $39,000,000*
C       A (sf)       $31,000,000
D       BBB (sf)       $50,000,000
E       BBB- (sf)       $90,000,000
HRR Interest**       BB+ (sf)       $30,000,000

*Notional balance
** The HRR Interest is intended to constitute an eligible horizontal residual interest for purposes of the US risk retention rules and will be retained a third party purchaser. It will have a balance equal to at least 5.0% of all non-residual certificates issued by the trust.

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 245 Park Avenue Trust 2017-245P Representations & Warranties Disclosure.

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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

Analytical:
KBRA
Michael McGorty, 646-731-2393
Associate Director
mmcgorty@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com
or
Stephanie Ruys de Perez, 646-731-2466
Senior Analyst
sruysdeperez@kbra.com
or
Follow us on Twitter!
@KrollBondRating

Contacts

Analytical:
KBRA
Michael McGorty, 646-731-2393
Associate Director
mmcgorty@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com
or
Stephanie Ruys de Perez, 646-731-2466
Senior Analyst
sruysdeperez@kbra.com
or
Follow us on Twitter!
@KrollBondRating