KBRA Withdraws One Rating and Affirms All Other Ratings for CGCMT 2015-GC27
31 Jan 2025 | New York
KBRA withdraws one rating and affirms all other outstanding ratings for CGCMT 2015-GC27, a $138.7 million CMBS conduit transaction. The rating withdraw on Class X-B is done in accordance with KBRA's Methodology for Rating Interest-Only Certificates as the transaction has 10 or fewer loans remaining following payoffs received during the January 2025 remittance period. In addition, the affirmations follow a surveillance review of the transaction and are based on the performance and expected payoff and recoveries on the transaction's ten remaining loans. As of the January 2025 remittance, two loans (73.6%) are specially serviced and KBRA has identified all loans as K-LOCs as they have all failed to payoff at their maturity or anticipated repayment dates. The details of the two specially serviced loans are outlined below.
393-401 Fifth Avenue (Largest, 68.5%, K-LOC, Specially Serviced)
- The loan is collateralized by a 218,162 sf, which is comprised of two adjoining Class-B office buildings located in the Midtown area of New York City’s borough of Manhattan. The development is comprised of two, eight-story buildings that feature contiguous floor plates between the second and sixth floors, 12,460 sf of ground-floor retail space, and 24-hour security. Brookfield Office Properties Inc. is the loan sponsor.
- KBRA maintains the loan’s K-LOC designation and KPO of Underperform due to its matured non-performing status and news that the largest tenant, American Eagle (88.2% of GLA, 96.3% base rent) will be vacating its space at the property to move into a 338,000 sf lease at 63 Madison Avenue, which is also located in the Midtown South submarket. The loan transferred to special servicing in May 2024 for imminent monetary default ahead of the January 2025 loan maturity. This loan is paid through December 2024. The entire property is listed for lease as of January 2025. There are ongoing discussions with the mezzanine note holder regarding loan extension options.
- The servicer-reported occupancies and DSCs are: 88.9% / 1.48x (YTD September 2024), 91.0% / 1.96x (FY 2023); at closing, these were 79.9% / 1.68x. KBRA's analysis resulted in an estimated loss of $38.7 million (24.2% estimated loss severity) on the loan balance of $95.0 million based on a value of $58.1 million ($266 per sf). The value derived from a direct capitalization approach using a KNCF of $6.2 million, a capitalization rate of 8.5% and a downward adjustment to account for TI/LC costs to re-tenant the American Eagle space.
Kohl's Westerville (5th largest, 5.1%, K-LOC, Specially Serviced)
- The loan is collateralized by a 99,380-sf, single-tenant retail property located in Westerville, Ohio, which is located just outside of Columbus, OH. The subject was built in 1974 and later renovated in 2011. The single tenant, Kohl's, operates pursuant to a lease scheduled to expire in October 2026.
- KBRA maintains the loan's K-LOC designation and KPO of Underperform due to its foreclosure status and failure to pay off at its December 2024 maturity. During the May 2023 remittance, the loan became 30-day delinquent following a downward trend in financial performance. February 2024 commentary notes that the special servicer has initiated the foreclosure proceedings. A court-appointed receiver has been put in place and the servicer is analyzing the option of a receivership sale. The foreclosure sale date is pending.
- The servicer-reported occupancies and DSCs are: 100% / 1.18x (YTD June 2023), 100% / 0.95x (FY 2022); at closing, these were 100% / 1.50x. An appraisal dated April 2024 valued the asset at $9.4 million ($95 per sf), which is 16.0% below the $11.2 million ($112 per sf) value at issuance. At this time, KBRA does not estimate a loss on the $7 million loan.
The remaining eight loans (26.4%) have all been identified as K-LOCs as they have failed to pay off at maturity or their anticipated repayment date. Based on the year-end 2023 or most recent servicer-reported NCF and a refinance of the current balance with an assumed IO loan at a rate of 6.50% to 7.50%, depending on property type, there is one loan, Kohl’s Westerville (5.1%), that has a DSC of less than 1.00x, which has failed to pay off at maturity in December 2024. At this time, KBRA does not estimate a loss on this asset.
Rating Sensitivities
Future rating actions will be dependent upon the ongoing assessment of the timing and likelihood of ultimate payment of principal and accrued interest on the rated certificates. The assessment will consider the expected and actual losses on the remaining assets in the transaction, as well as the continuing magnitude and extent of interest shortfalls on the certificates.
Details concerning the class with the rating change is as follows:
- Class X-B to WR from AAA (sf)
To access ratings and relevant documents, click here.
Related Publication
Methodologies
- Structured Finance: Global Structured Finance Counterparty Methodology
- CMBS: Methodology for Rating Interest-Only Certificates in CMBS Transactions
- CMBS: North American CMBS Property Evaluation Methodology
- CMBS: North American CMBS Single Borrower & Large Loan Rating Methodology
- ESG Global Rating Methodology