KBRA Credit Profile (KCP) Releases Special Report: KCP WeWork Exposure Update — A Deeper Dive

NEW YORK--()--Kroll Bond Rating Agency (KBRA) releases a special report, KCP WeWork Exposure Update — A Deeper Dive, which examines the credit risks associated with the individual loans and properties with exposure to WeWork. The report is a continuation of an October 2019 release, KCP Special Alert – WeWork CMBS Exposure, and spotlights loans and properties with the riskiest credit profiles across a variety of commercial real estate metrics, including projected DSCR, economic lease value, and tenant location profitability. Among the loans examined, slightly more than half were projected to have a below-breakeven DSCR in the event WeWork ceases operations and is unable to meet its lease obligations. The shared workspace provider continued to accumulate headlines throughout the fourth quarter of 2019. It announced significant job cuts, equal to 19% of its workforce, and reports emerged that it was attempting to break leases for up to 100 properties. SoftBank, WeWork’s primary investor, committed to provide $9.5 billion in funding to WeWork in late October 2019, but is dealing with complications in securing the funds.

KCP updated its WeWork exposure group as of November 2019 based on updated leasing activity as well as new securitizations. Across 76 transactions, there are 50 loans secured by 51 properties, $6.29 billion by allocated loan amount (ALA), with exposure to WeWork. Each of these loans is current and with the master servicer. By MSA, New York has the highest exposure with 19 properties totaling $2.34 billion, including two properties with an ALA of $69.4 million located in Brooklyn, NY. Los Angeles and San Francisco account for the next highest MSA concentrations, comprising 20.9% and 9.8%, respectively. Given the non-homogenous nature of office properties with exposure to WeWork as a tenant, additional scrutiny of the individual CMBS loans secured by these properties is required to develop views on credit risks.

To read the full report, click here.

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

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About KBRA Credit Profile

KCP is a research service and nothing herein or otherwise provided by KCP shall be construed as a rating. Any rating opinions, analysis, projections, observations, data or other items constituting part of any information provided or distributed by KCP or KBRA are and must be construed solely as statements of opinion and not statements of fact.

About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical:
Daniel Levit, Analyst
(215) 882-5891
dlevit@kbra.com

Marc McDevitt, Director
(215) 882-5857
mmcdevitt@kbra.com

Mike Brotschol, Senior Director
(215) 882-5853
mbrotschol@kbra.com

Business Development:
Marc Iadonisi, Senior Sales Director
(215) 882-5877
miadonisi@kbra.com

Contacts

Analytical:
Daniel Levit, Analyst
(215) 882-5891
dlevit@kbra.com

Marc McDevitt, Director
(215) 882-5857
mmcdevitt@kbra.com

Mike Brotschol, Senior Director
(215) 882-5853
mbrotschol@kbra.com

Business Development:
Marc Iadonisi, Senior Sales Director
(215) 882-5877
miadonisi@kbra.com