KBRA Assigns Preliminary Ratings to MED 2024-MOB
24 Apr 2024 | New York
KBRA announces the assignment of preliminary ratings to three classes of MED 2024-MOB, a CMBS single-borrower securitization.
The collateral for the transaction is a $450.5 million floating rate, interest-only mortgage loan. The loan has an initial two-year term with three, one-year extension options and requires monthly interest-only payments based on a SOFR cap of 5.50%. The loan is secured by 34 medical office properties, including the borrower's fee simple interest in 28 properties (84.1% of loan balance) and the leasehold interests in six properties (15.9%), which together total 1.9 million sf. The portfolio properties are located in 13 states, of which the three largest are New York (29.4%), Texas (20.4%), and Indiana (10.1%). As of March 2024, the assets are 88.2% leased to over 160 unique tenants, including the largest tenant, Crystal Run Healthcare, LLP (HQCWT) which generates 28.0% of the portfolio's base rent. No other tenant comprises more than 6.5% of the portfolio's base rent. The majority of the portfolio's base rent (53.2%) is generated by HQCWT's or a subsidiary of an HQCWT.
KBRA’s analysis of the transaction included a detailed evaluation of the properties’ cash flows using our U.S. CMBS Property Evaluation Methodology and the application of our U.S. CMBS Single Borrower & Large Loan Rating Methodology. In addition, KBRA also relied on its Global Structured Finance Counterparty Methodology for assessing counterparty risk in this transaction, and its ESG Global Rating Methodology, to the extent deemed applicable.
The results of our analysis yielded a KBRA net cash flow (KNCF) for the portfolio of approximately $42.4 million, which is 7.1% below the issuer’s NCF, and an aggregate KBRA value of approximately $474.1 million ($244 per sf), which is 33.1% less than the appraiser’s aggregate as-is appraised value of $709.2 million. The resulting in-trust KBRA Loan to Value (KLTV) is 95.0%. In our analysis of the transaction, we also reviewed and considered third-party engineering, environmental, and appraisal reports, the results of our site inspections of 12 (53.5%) of the portfolio properties, and legal documentation review.
Note: This press release was updated since its initial publication on April 24, 2024, to reflect the omission of the Methodology for Rating Interest-Only Certificates which were not included in the final structure.
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