NEW YORK–(BUSINESS WIRE)–Kroll Bond Rating Agency (KBRA) announces the assignment of preliminary ratings to nine classes of BFLD 2020-EYP, a CMBS single-borrower securitization.
The collateral for the transaction is a $275.0 million non-recourse, first lien mortgage loan. The floating rate loan has an initial two-year term with three, one-year extension options, and requires monthly interest-only payments based on one-month LIBOR. The loan is secured by the borrower’s fee simple interest in Ernst & Young Plaza, a 938,067 sf, 41-story Class-A office tower located in downtown Los Angeles. The LEED Platinum certified tower includes 924,821 sf of office space, 6,810 sf of storage space, and a 6,466 sf retail suite. Additionally, the collateral includes an allocation of 1,105 onsite parking spaces contained within an adjacent 13-story parking garage.
As of July 2020, the property was 78.4% leased to 43 tenants. The five largest tenants include General Services Administration Secret Service (GSA Secret Service), an HQCWT; Ernst & Young U.S., LLP, an accounting and advisory services provider; Pillsbury Winthrop Pittman Shaw LLP, an AM Law 100 law firm; Jackson Lewis, an AM Law 100 law firm; and Great American Insurance (HQCWT), an insurance services company. Together, these five tenants account for 50.8% of total base rent and 38.0% of the total sf.
KBRA’s analysis of the transaction included a detailed evaluation of the properties’ cash flows using our U.S. CMBS Property Evaluation Methodology and the application of our U.S. CMBS Single Borrower & Large Loan Rating Methodology. In addition, KBRA also relied on its Global Structured Finance Counterparty Methodology for assessing counterparty risk in this transaction, to the extent deemed applicable.
The results of our analysis yielded a KBRA net cash flow (KNCF) of approximately $19.3 million. To value the property, we applied a capitalization rate of 7.75% to arrive at a KBRA value of approximately $248.8 million. The resulting in-trust KBRA Loan to Value (KLTV) is 110.5%. In our analysis of the transaction, we also reviewed and considered third party engineering, environmental, and appraisal reports; the results of our site inspection of the property, and legal documentation review.
- U.S. CMBS Property Evaluation Methodology
- U.S. CMBS Single Borrower and Large Loan Rating Methodology
- Methodology for Rating Interest-Only Certificates in CMBS Transactions
- Global Structured Finance Counterparty Methodology
Further information on key credit considerations, sensitivity analyses that consider what factors can affect these credit ratings and how they could lead to an upgrade or a downgrade, and ESG factors (where they are a key driver behind the change to the credit rating or rating outlook) can be found in the full rating report referenced above.
A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the U.S. Information Disclosure Form located here.
Information on the meaning of each rating category can be located here.
Further disclosures relating to this rating action are available in the U.S. Information Disclosure Form referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.
KBRA is a full-service credit rating agency registered as an NRSRO with the U.S. Securities and Exchange Commission. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) with the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe is registered with ESMA as a CRA.
Michael McGorty, Director (Lead Analyst)
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Michael Brown, Managing Director
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Mimi Ophir, Director
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Keith Kockenmeister, Senior Managing Director (Rating Committee Chair)
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