Kroll Bond Rating Agency Assigns Preliminary Ratings to MSSG 2017-237P

NEW YORK--()--Kroll Bond Rating Agency (KBRA) has assigned preliminary ratings to seven classes of MSSG 2017-237P commercial mortgage pass-through certificates, a CMBS single asset, single borrower (SASB) securitization.

The collateral for the securitization consists of a $477.8 million portion of a $693.2 million non-recourse, first lien mortgage whole loan. The fixed-rate whole loan has a 10-year term and requires interest-only monthly payments throughout its term. The whole loan is secured by the borrower’s fee simple interest in a 1.3 million sf office building located at 237 Park Avenue in New York City’s Manhattan borough, as well as its leasehold interest in the condominium units that it owns.

As of June 2017, the property was 95.6% leased to eight tenants, of which the five largest represent 97.9% of the total base rent. The five largest tenants by base rent are New York and Presbyterian Hospital, a High Quality Credit Worthy Tenant (HQCWT); JP Morgan Chase & Co. (HQCWT), J. Walter Thompson Worldwide (HQCWT), Jennison Associates, and the Government of Canada (HQCWT).

Affiliates of RXR Realty LCC (RXR) and Walton Street Capital (Walton Street) collectively serve as the loan sponsor. RXR is a vertically integrated private real estate investment company that is engaged in investment management, property management, development, design, construction, leasing, and financing of commercial properties. Walton Street focuses on investment opportunities in institutional quality commercial real estate assets which are undervalued due to the complexity or illiquidity of the existing ownership or capital structure.

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 $53.0 million. We applied a capitalization rate of 6.75% and arrived at a KBRA value of $777.3 million and a KBRA Loan to Value (KLTV) of 89.2%. 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 MSSG 2017-237P, 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.

                   
Class     Rating     Balance (USD)     Rating Action
A     AAA (sf)     132,600,000     Preliminary
X-A     AAA (sf)     132,600,000*     Preliminary
X-B     AAA (sf)     82,000,000*     Preliminary
B     AA- (sf)     82,000,000     Preliminary
C     A- (sf)     61,500,000     Preliminary
D     BBB- (sf)     75,300,000     Preliminary
E     BB- (sf)     98,800,000     Preliminary
HRR**     NR     27,600,000     N/A
*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 MSSG 2017-237P.

Related Publications: (available at www.kbra.com)

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:
Daniel Tegen, 646-731-2429
Director
dtegen@kbra.com
or
James Wang, 646-731-2450
Senior Director
jwang@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical:
Daniel Tegen, 646-731-2429
Director
dtegen@kbra.com
or
James Wang, 646-731-2450
Senior Director
jwang@kbra.com
or
Michael Brown, 646-731-2307
Senior Director
mbbrown@kbra.com
or
Robin Regan, 646-731-2358
Managing Director
rregan@kbra.com