KBRA Downgrades All Ratings for MSSG 2017-237P

KBRA downgrades all outstanding ratings for MSSG 2017-237P, a CMBS SASB transaction. We also remove classes C, D, and E from Watch Downgrade (DN) where they were placed on May 21, 2024. The rating actions follow a surveillance review of the transaction, which has exhibited a marked decline in KBRA’s value for the collateral property since last review and securitization. The decline is attributable to the reduction in KBRA value to account for the downtime, lease up costs and free rent that will require funding to cover lease rollover in 2025 and 2027.

The trust collateral consists of four pari passu A notes totaling $132.6 million and four B notes totaling $345.2 million. The remaining portion of the $693.2 million whole mortgage loan consists of eight pari passu A notes totaling $215.4 million, which are not part of the trust collateral. The 10-year, fixed-rate whole loan is secured by the borrower’s fee and leasehold condominium interests in a 21-story, 1.3 million sf Class-A office building at 237 Park Avenue in Midtown Manhattan’s Grand Central submarket. Affiliates of RXR Realty LLC (RXR) and Walton Street Capital (Walton Street) are the loan sponsors.

KBRA analyzed the cash flow for the property utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $50.3 million and a KBRA adjusted value of $510.9 million ($408 per sf). The current KLTV of 135.7% is up from 107.2% at last review and 89.2% at issuance. KBRA identified the loan as a K-LOC and maintains its KPO of Underperform because of impending tenant rollover risk in 2025 and 2027.

Details concerning the classes with rating changes are as follows:

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