KBRA Downgrades Three Ratings and Affirms All Other Ratings for Olympic Tower 2017-OT

KBRA downgrades the ratings of three classes and affirms all other outstanding ratings for Olympic Tower 2017-OT, a CMBS SASB transaction. KBRA simultaneously removes the Watch Downgrade (DN) status for the Class C, D, and E certificates where the ratings were placed on May 21, 2024. The rating actions follow a surveillance review of the transaction and are driven by a decline in collateral performance stemming from a decrease in occupancy, coupled with increasing expenses and weakness in retail leasing activity at the property. In addition, KBRA considered the strength of the in-place tenancy and limited lease roll in the near to intermediate term.

The collateral consists of a $480.0 million portion of a $760.0 million non-recourse, first lien mortgage loan secured by the borrower’s leasehold interest in a 525,372 sf, Class-A retail and office complex in Midtown Manhattan’s Plaza District. A 99-year ground lease, which expires in September 2074, encumbers the majority of the property, while an additional 2,200 sf parcel is leased by the borrower pursuant to a sub-ground lease that expires in January 2067. The property is also subject to a condominium regime consisting of one commercial unit that is loan collateral and 230 non-collateral residential units. The borrower holds a 46.7% interest in the general common elements. The loan sponsors are OPG Investment Holdings (US), LLC; Crown Retail Services LLC; Centurian Management Corporation; and Crown 600 Broadway LLC, which are affiliates of OMERS Administration Corporation (dba Oxford Properties Group, 67.0% ownership) and Crown Acquisitions (33.0%).

KBRA analyzed the cash flow for the properties utilizing information from the trustee and servicer to determine KNCF. As the property’s occupancy has reached a stabilized level, KBRA is no longer utilizing a stabilized analysis to derive property value and KLTV. KBRA’s analysis produced a KNCF of $56.7 million and a KBRA value of $781.5 million ($1,488 per sf). The resulting in-trust KLTV is 97.2%, a change from 87.8% at KBRA’s last review and 80.0% at securitization. KBRA has identified the loan as a K-LOC and revised its KPO to Underperform from Perform based on a decline in collateral performance since issuance.

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