KBRA Monitoring CMBS Exposure to Law Firm Weil, Gotshal & Manges LLP

NEW YORK--(BUSINESS WIRE)--It is being widely reported that one of the U.S.’s top 30 law firms Weil, Gotshal & Manges LLP (Weil) intends to pursue an orderly wind-down process over the coming months after a flurry of recent high-profile senior partner departures and failed merger efforts.

Weil’s demise heightens credit risk for loans backed by office buildings where the firm is a major tenant. The firm’s website reports that they have 17 offices worldwide, including 10 in the U.S., six in Europe, and one in Hong Kong. KBRA identified three of Weil’s offices in buildings that are collateral for CMBS loans:

The General Motors (GM) Building

Weil’s most prominent lease is at the GM Building at 767 Fifth Avenue in Manhattan, where it is the largest tenant, leasing nearly 450,000 sf and paying annual rent of roughly $54 million (17.5% of the property’s total) under a lease that expires in 2034. Weil’s current rental rate ($121 per sf) is at or below current market rental rates for trophy buildings in the submarket, based on research by real estate brokerage firm Metro Manhattan. The GM Building is collateral for a $2.3 billion fixed-rate first mortgage loan that secures a $1.6 billion SASB, BXP Trust 2017-GM, as well as about $745 million spread across 10 conduit deals. The 10-year loan matures in June 2027.

The building is currently nearly 100% leased to more than two dozen tenants. Based on KBRA’s most recent surveillance analysis of the asset, the loan’s term KBRA Debt Service Coverage ratio (KDSC) is 2.3x and its KBRA debt yield is 8.0%. Based on Weil’s imminent departure from the building, and assuming the space cannot be leased up again, the KDSC and KDY could become 1.78x and 6.1%, respectively. While this does not lead to meaningful elevation of term default risk, it puts incremental pressure on the loan’s refinancing prospects next year when the asset’s existing interest rate of 3.43% will need to be reset to a current market rate. However, KBRA’s analysis is based on sustainability of cash flows and the ability of assets to be re-leased.

The GM Building is one of Manhattan’s top trophy office assets, in arguably one of the best office markets and submarkets in the country. The fact that Weil’s rent is not above market, combined with sound market fundamentals and the strong sponsorship of Boston Properties, suggests the landlord should be able to re-lease a portion or all of the space.

The Lyrik

Weil is the third-largest tenant by base rent (10.6% of the property total) in Boston’s Lyrik building, which is collateral for a $360 million five-year, fixed-rate loan that secures the BOS 2026-LYRK transaction. The loan matures in 2031.

The Lyrik is a 20-story, Class-A, LEED Gold certified building on the corner of Boylston Street and Massachusetts Avenue in Boston’s Back Bay area that was built in 2024. The building is currently 93.4% leased to 11 tenants and is owned by a partnership between Samuels & Associates and Jiaming Investment America Inc. Weil leases about 45,000 sf of the building’s 495,275 sf and pays nearly $77 per sf in rent, which is at or near market based on a recent appraisal. The lease ends in 2037.

Based on KBRA’s recent new issuance analysis of the asset, the loan’s KDSC is 1.45x (coupon of 5.70%) and its KBRA debt yield is 8.2%. When Weil ultimately stops paying rent, and assuming the space cannot be leased up again, the KDSC and KDY could become 1.41x and 8.1%, respectively.

1999 Avenue of the Stars

Weil also leases about 13,000 sf and generates 2% of annual base rent at 1999 Avenue of the Stars in Los Angeles, which backs a $425 million whole loan that includes $233 million of senior A notes split across two conduits and $192 million of B notes held by a third party. Weil’s departure here should have a negligible effect on cash flow.

KBRA will continue to monitor Weil’s situation and the performance of the aforementioned loans.

Recent Publications

• BOS 2026-LYRK Pre-Sale Report
• BXP Trust 2017-GM Surveillance Report

About KBRA

KBRA, one of the major credit rating agencies, is registered in the US, EU, UK, and Japan. KBRA is recognized as a Qualified Rating Agency in Taiwan and is also a Designated Rating Organization for structured finance ratings in Canada. As a full-service credit rating agency, investors can use KBRA ratings for regulatory capital purposes in multiple jurisdictions.

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