KBRA Maintains Watch Developing Status for All Ratings of Salus (European Loan Conduit No.33) DAC
19 Mar 2025 | London
KBRA UK (KBRA) maintains its Watch Developing status for all ratings of Salus (European Loan Conduit No.33) DAC, a single-borrower transaction. The Watch action is due to the loan’s impending final maturity date in April 2025. The borrower, Brookfield Asset Management (BAM), has been marketing the asset for sale but may instead recapitalise the asset, according to the servicer. It is currently not known whether BAM will pay off the loan at its upcoming maturity or if it will request an extension.
The transaction collateral is a single limited recourse, first lien mortgage loan secured by the borrower’s freehold and long leasehold interests in City Point, a 705,356 sf office building on Ropemaker Street in the City of London. Based on the January 2025 Quarterly Investor Report, the occupancy was 88.3% and is expected to increase to 95.0% upon the commencement of a new lease for level 6. The property was 82.4% leased at KBRA's last review.
The current total senior debt balance is £363.3 million (£515 per sf). There is also £91.9 million of outstanding mezzanine debt that is held outside the trust. The sale of a retail unit was completed on 6 December 2024. As a result of the disposal, an amount equal to £4,205,884 was applied towards prepayment of the Senior Loan. The floating-rate loan had a three-year initial term with two one-year extension options, resulting in a fully extended maturity date of January 2024. An amendment was executed in December 2023 that extended the final loan maturity date to 20 January 2025. The senior borrower requested a further three-month extension to 20 April 2025. The floating-rate loan has an annual interest rate of SONIA and a credit adjustment spread of 0.1193% plus a new margin of 2.50%. The most recent hedging agreement had a 2.50% strike and expired in January 2025.
KBRA will continue to monitor the transaction and loan performance and will seek to resolve or update the Watch Developing status within 90 days.
Rating Sensitivities
For a discussion of rating sensitivities please see the December 2023 surveillance report: Salus (European Loan Conduit No. 33) DAC 2023 Surveillance Report
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