KBRA Places All Ratings of Salus (European Loan Conduit No.33) DAC on Watch Developing
19 Dec 2024 | London
KBRA places all ratings of Salus (European Loan Conduit No.33) DAC, a single-borrower transaction, on Watch Developing. The Watch action is due to the loan’s impending final maturity date in January 2025. The borrower, Brookfield Asset Management (BAM), has marketed the asset for sale but may instead recapitalise the asset. At this point, it is not known whether BAM will be able to pay off the loan at its upcoming maturity or if a further extension will be required.
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 October 2024 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, an increase from 82.4% at KBRA's last review. The resulting contractual rent is expected to increase 18.6% to £36.8 million from £31.0 million at KBRA's last review.
The current total senior debt balance is £367.5 million (£521 per sf). There is also £91.9 million of outstanding mezzanine debt that is held outside the trust. 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 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 current hedging agreement has a 2.50% strike and expires 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.
Note: This release, dated 19 December 2024, was updated on 23 December 2024 to reflect: (i) updated analyst contact information.
To access ratings and relevant documents, click here.