KBRA Downgrades All Ratings for BFLD 2020-EYP
17 Jun 2024 | New York
KBRA downgrades the ratings of all classes of BFLD 2020-EYP, a CMBS SASB transaction. KBRA also simultaneously removes all ratings from Watch Downgrade (DN) where they were placed in March 2024. The rating actions follow a surveillance review of the transaction and are driven by a deterioration in collateral performance caused by declines in property occupancy, net cash flow and value. KBRA also considered the loan’s status with the special servicer, the fact that it is 90+ days delinquent as of June, the $15.2 million of outstanding servicer advances, and the appraisal reduction amount of $104.7 million. The weak office fundamentals in the Downtown Los Angeles submarket and the poor outlook for a rebound for office demand in the near term were also factors we considered. In addition, interest shortfalls are impacting classes E, F, G and HRR and have the potential to rise higher in the capital structure as the special servicer works to resolve the loan.
The transaction collateral is a $275.0 million ($283 per sf) non-recourse, first-lien mortgage loan. It was structured with an initial two-year term and three one-year extension options. The floating-rate loan requires monthly interest-only payments based on one-month term SOFR plus a spread of 2.857%. The loan sponsor, Brookfield DTLA Holdings LLC (Brookfield DTLA), an affiliate of Brookfield Property Partners, L.P. (Brookfield), notified the servicer in early April 2023 that it would cease paying debt service on the loan. The loan transferred to special servicing that same month and a receiver was appointed in May. The borrower also did not repay or extend the loan when it matured in October 2023. It is 90+ days delinquent and categorized as matured non-performing with total outstanding servicer advances of $15.2 million as of June 2024. The most recent appraised value (December 2023) was $210.7 million, resulting in an appraisal LTV of 130.5%.
The loan is secured by the borrower’s fee simple interest in Ernst & Young Plaza, a 41-story, 973,364-sf Class-A, LEED Platinum-certified office tower in downtown Los Angeles. According to the April 2024 rent roll, Ernst & Young Plaza was 71.5% leased, down from 73.3% at last review and 78.4% at issuance. Leases that generate 32.0% of total base rent will expire this year and next.
KBRA analyzed the cash flow for the property utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $15.5 million and a KBRA value of $172.1 million ($177 per sf). The resulting in-trust KLTV is 159.8%, compared to 144.2% at last review and 110.5% at securitization. KBRA maintains the loan’s K-LOC designation and KPO of Underperform.
Details concerning classes with rating changes are as follows:
Class A to AA- (sf) from AAA (sf)
Class B to A-(sf) from AAA (sf)
Class C to BB (sf) from A (sf)
Class D to B- (sf) from BBB (sf)
Class E to CCC (sf) from BB- (sf)
Class F to CC (sf) from B- (sf)
Class G to C (sf) from CCC (sf)
Class X-EXT to AA- (sf) from AAA (sf)
To access rating and relevant documents, click here.
Click here to view the report.