KBRA Downgrades Six Ratings and Affirms All Other Ratings for PKHL Commercial Mortgage Trust 2021-MF

KBRA downgrades the ratings for six classes and affirms all other ratings for PKHL Commercial Mortgage Trust 2021-MF, a CMBS SASB transaction. The rating actions follow a surveillance review of the transaction and are primarily driven by the loan’s foreclosure status with the special servicer, coupled with the collateral property exhibiting weak financial performance caused by elevated operating expenses and minimal growth in rental rates. This resulted in a reduction in KBRA value compared to last review and securitization. KBRA also considered the potential for interest shortfalls while the special servicer works to resolve the loan.

The transaction collateral is a non-recourse, first lien mortgage loan with a principal balance of $225.0 million ($418,216 per unit). The floating-rate loan was structured with an initial two-year term through July 9, 2023 with three, one-year extension options and requires monthly interest-only payments based on term SOFR plus 0.11448% plus a spread of 3.97%. There is a term SOFR floor of 0.10%. The loan was transferred to the special servicer in February 2023 for payment default. The borrower subsequently failed to pay off the loan or exercise its extension option at the July 2023 maturity date. According to the September 2024 remittance period, the mortgage loan status is non-performing matured balloon, the workout strategy is foreclosure, and there are approximately $12.5 million in outstanding principal and interest advances.

The loan is secured by the borrower’s fee simple interest in two adjacent, Class-A multifamily towers with a total of 538 units located in the Jamaica neighborhood of Queens, one of five New York City boroughs. The 16-story 89th Avenue building contains 481 units (89.4% of total unit count), and the eight-story 88th Avenue building contains 57 units (10.6%). According to the December 2023 rent rolls, the collateral was 92.2% leased, compared to 90.7% at last review and 79.6% at issuance.

KBRA analyzed the cash flow for the property utilizing information from the trustee and servicer to determine KNCF. The analysis produced a KNCF of $10.7 million and a KBRA value of $143.0 million ($265,885 per unit). The resulting in-trust KLTV increased to 157.3% from 143.2% at last review and 126.1% at securitization, which was based on a stabilized analysis. KBRA maintains the loan’s K-LOC designation and KPO of Underperform.

Details for the classes with ratings changes are as follows:

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