KBRA Downgrades Six Ratings and Affirms all Other Ratings for MSC 2021-230P

KBRA downgrades the ratings for six classes and affirms all other ratings for MSC 2021-230P, a CMBS SASB transaction. KBRA simultaneously removes the Watch Downgrade (DN) status for all of the rated classes where they were placed on May 21, 2024, due to the potential impact of ongoing deterioration in the office sector as well as the loan’s matured non-performing status with the special servicer. The rating actions follow a surveillance review of the transaction, which has exhibited a decline in KBRA’s value for the collateral property since last review and securitization. The decline is primarily attributable to the reduction in KBRA value to account for an increase in downtime, lease up costs and free rent that will be required to cover lease rollover through 2026. In addition, the downgrades reflect the potential for interest shortfalls, which are currently impacting Class G, will reach higher in the capital structure as the special servicer resolves the loan.

The transaction collateral is a non-recourse, first lien mortgage loan secured by the borrower’s fee simple interest in a 1.4 million sf, 34-story, Class-A LEED Gold Certified office building. The property, known as the Helmsley Building, is located at 230 Park Avenue between East 45th and East 46th Streets in the Grand Central submarket of New York City’s Manhattan borough. The loan had an initial maturity date of December 9, 2023, and it was not extended. The loan’s sponsors are affiliates of RXR Realty, LLC.

The loan transferred to the special servicer on October 19, 2023, for imminent maturity default and the borrower subsequently defaulted on the January 2024 payment. According to the August 2024 reporting, the floating rate loan has an outstanding balance of $670.0 million ($481 per sf), the mortgage loan status is non-performing matured balloon, it has approximately $8.9 million in outstanding cumulative servicer advances, and the workout strategy is modification. According to the servicer, the loan is currently subject to a forbearance agreement while the borrower completes due diligence relative to a change in optimal use for a portion of the building. This is expected to be completed in Q4 2024.

KBRA analyzed the cash flow for the properties utilizing information from the trustee and servicer to determine KNCF. According to the servicer, two top 10 tenants, Voya Financial (10.5% of base rent) and Clarion Partners (5.2%), will be leaving the property at lease expiration in 2025. KBRA removed the tenants from the cash flow and performed a stabilized analysis of KNCF and KBRA value. The analysis produced a KNCF of $45.0 million and a KBRA adjusted value of $510.1 million ($375 per sf). The current KLTV of 131.3% is up from 114.0% at last review and 107.8% at issuance. KBRA maintains the loan’s K-LOC status and KPO of Underperform due to the loan’s non-performing status with the special servicer.

Details for the classes with ratings changes are as follows:

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