KBRA Places All Ratings of DBCG 2017-BBG on Watch Downgrade
3 May 2024 | New York
KBRA places the ratings of all classes of DBCG 2017-BBG, a CMBS SASB transaction, on Watch Downgrade. The Watch action considers the challenges the borrower will have in refinancing the debt given the term of the Bloomberg lease, in light of the weaker office demand, and the potential costs associated with the retention of the tenant or attracting new tenants if Bloomberg does not renew or downsizes its space. The servicer reports that the borrower has indicated they will not be able to refinance the loan by the June 2024 maturity date. If the loan is not paid off and it is transferred to the special servicer, KBRA will monitor the resolution and evaluate any forbearance, modification or extension to assess if rating actions are warranted.
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 analyzed the cash flow for the properties utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $50.4 million and a KBRA value of $671.6 million ($738 per sf). The resulting in-trust KLTV is 74.5%, a change from 64.6% at KBRA’s last review and 61.9% at securitization. KBRA identifies the loan as a K-LOC and adjusts the loan’s KPO to Underperform from Perform due to concerns regarding the loan’s upcoming June 2024 maturity.
KBRA will continue to monitor the transaction and loan performance and will seek to resolve or update the Watch Downgrade status within 90 days.
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