KBRA affirms Olympic Tower 2017-OT ratings after leasing lifts performance

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KBRA affirms Olympic Tower ratings

Highlights

KBRA affirms all outstanding ratings for Olympic Tower 2017-OT after recent leasing lifts performance, citing no warranted rating actions at this time.
Occupancy rises to 98.9%, driving a KNCF of $58.4 million and KBRA value of $806.0 million ($1,534 per square foot) for the Midtown Manhattan asset.
In-trust KLTV improves to 94.3% from 101.6% since the prior review, though it remains above the 80.0% level at securitization.

Surveillance review and property metrics

As reported by Kroll Bond Rating Agency, all outstanding ratings for Olympic Tower 2017-OT are affirmed following a surveillance review that finds better performance since the prior assessment. KBRA says the improvement is driven primarily by recent leasing, although the change in its value assessment and in-trust KLTV does not warrant rating actions at this time.

The collateral consists of a $480.0 million portion of a $760.0 million non-recourse, first lien mortgage loan backed by the borrower’s leasehold interest in a 525,372 square foot Class-A retail and office complex in Midtown Manhattan’s Plaza District. A 99-year ground lease encumbers most of the property and expires in September 2074, while an additional 2,200 square foot parcel is leased under a sub-ground lease that expires in January 2067.

The property is also subject to a condominium regime that includes one commercial unit serving as loan collateral and 230 residential units that are not collateral. The borrower holds a 46.7% interest in the general common elements, and the loan sponsors include OPG Investment Holdings (US), LLC, Crown Retail Services LLC, Centurian Management Corporation, and Crown 600 Broadway LLC, affiliates of OMERS Administration Corporation, doing business as Oxford Properties Group, and Crown Acquisitions.

Occupancy gains and leverage trend

KBRA says it analyzes property cash flow using information from the trustee and servicer to determine KNCF. That review produces a KNCF of $58.4 million and a KBRA value of $806.0 million, or $1,534 per square foot.

The resulting in-trust KLTV stands at 94.3%, improving from 101.6% at KBRA’s last review but remaining above the 80.0% level recorded at securitization. Recent leasing lifts occupancy to 98.9%, prompting KBRA to revise the loan’s KPO to Perform from Underperform, a sign of stronger asset operations even as the agency keeps ratings unchanged.

In our earlier article, we covered AM Best’s affirmation of USAA’s top-tier financial strength and issuer credit ratings across its insurance subsidiaries and USAA Capital Corporation, all with stable outlooks. We noted the agency’s view that USAA’s balance sheet strength and operating performance have improved, supported by underwriting actions, rate increases, and lower catastrophe losses, alongside continued growth and profitability in the life business.

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