KBRA Updates the Status of the Ratings of DBCG 2017-BBG to Watch Developing

KBRA updates the status of the ratings of all classes of DBCG 2017-BBG, a CMBS SASB transaction, to Watch Developing from Watch Downgrade. The ratings were previously put on Watch Downgrade due to the challenges the borrower would have in refinancing the debt given the term of the Bloomberg lease. The Watch Developing action is based on reports that Bloomberg, which currently leases 98.8% of the collateral square footage, has extended its lease term from 2029 to 2040. However, at this time KBRA does not have the details of the lease extension including the new rent terms and landlord concessions.

The floating-rate loan requires interest-only payments and had an initial three-year term with four one-year extension options that have all been exercised. The loan is currently scheduled to mature in June 2024 and the servicer has stated as of the April 2024 remittance report that the borrower does not expect to refinance the loan by the maturity date. However, the lease extension puts the borrower in a better position to refinance the loan and also potentially negotiate a loan modification to give them more time to obtain financing. If the refinancing does not occur, and the transaction is not paid off in full, KBRA will take the appropriate rating actions as needed.

The collateral for the transaction is a non-recourse, first lien mortgage loan with an outstanding balance of $500.0 million as of April 2024. The mortgage loan is secured by the borrower’s fee simple interests in two office condominium units totaling 909,369 sf located at 731 Lexington Avenue, in the Manhattan borough of New York City, New York. The property was constructed in 2004 and consists of a 57-story Class-A, mixed-use tower connected by a curved glass courtyard to a nine-story building that together are referred to as the Bloomberg Building. The loan sponsor is Alexander’s, Inc., a REIT that is engaged in leasing, managing, developing, and redeveloping its properties. Alexander’s, Inc. is managed by Vornado Realty Trust. Alexander’s Management LLC has subcontracted its duties as property manager to Vornado Office, Inc., an affiliate of the borrower.

KBRA will continue to monitor the transaction and loan performance and will seek to resolve or update the Watch Developing status within 90 days.

Details for the classes with ratings changes are as follows:

To access rating and relevant documents, click here.

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