Kroll Bond Rating Agency Assigns Preliminary Ratings to DBCG 2017-BBG

NEW YORK--()--Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to six classes of DBCG 2017-BBG commercial mortgage pass-through certificates, a CMBS single asset, single borrower (SASB) securitization.

The collateral for the transaction is a $500.0 million non-recourse, first lien mortgage loan represented by two pari passu A notes. The floating-rate loan requires interest-only payments and has a three-year term with four 12-month extension options. The whole loan is secured by the borrower’s fee simple interest in two Class A office condominiums within 731 Lexington Avenue in New York City, which is commonly known as the Bloomberg Building.

Bloomberg L.P., which uses the subject as its global headquarters location, has leased much of the property since it was constructed in 2004. The property is a Class A mixed-use condominium complex that consists of a 57-story tower connected by a curved glass courtyard to a nine-story building that totals 1.3 million sf. Of this amount, 909,369 sf of office and storage space serves as loan collateral. The Bloomberg lease, which expires five years beyond the fully extended loan term, accounts for 889,099 sf (97.8% of the total sf, 98.8% of total base rent).

The property also includes two retail condominiums that do not serve as loan collateral. The retail includes 150,000 sf of multi-level space, which is anchored by The Container Store, Home Depot, and H&M. A portion of the retail is also used to operate the Le Cirque restaurant. In addition, 105 luxury residential condominium units occupy floors 30 to 54.

The loan sponsor is Alexander’s, Inc. (NYSE ticker: ALX), a real estate investment trust (REIT) that is engaged in leasing, managing, developing, and redeveloping its properties. Alexander’s, Inc. is managed by Vornado Realty Trust (NYSE ticker: VNO).

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 $56.5 million. To value the property, we applied a capitalization rate of 7.00% to arrive at a KBRA value of $807.5 million and a KBRA Loan to Value (KLTV) of 61.9%. 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 DBCG 2017-BBG, 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: DBCG 2017-BBG

           
Class       Expected Rating       Balance (US$)
A       AAA (sf)       $393,000,000
X-CP       AAA (sf)       $138,272,000*
X-EXT       AAA (sf)       $138,272,000*
B       AA (sf)       $59,000,000
C       AA- (sf)       $22,900,000
HRR Interest**       A+ (sf)       $25,100,000
 

*Notional balance

** 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 at least 5.0% of the fair value of all non-residual interests issued by the issuer on the closing date.

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 DBCG 2017-BBG 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

Kroll Bond Rating Agency
Analytical Contacts:
Daniel Tegen, Director
(646) 731-2429
dtegen@kbra.com
or
Michael Brown, Senior Director
(646) 731-2307
mbbrown@kbra.com
or
Erika Hinman, Associate
(646) 731-2418
ehinman@kbra.com
or
Stephanie Ruys de Perez, Senior Analyst
(646) 731-2466
sruysdeperez@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Daniel Tegen, Director
(646) 731-2429
dtegen@kbra.com
or
Michael Brown, Senior Director
(646) 731-2307
mbbrown@kbra.com
or
Erika Hinman, Associate
(646) 731-2418
ehinman@kbra.com
or
Stephanie Ruys de Perez, Senior Analyst
(646) 731-2466
sruysdeperez@kbra.com